chapter 11: decision making Flashcards
define decision making
the processof developing a commitment to some course of action
can also be described as a process of problem solving
what does decision making involve?
Making a choice among several actions alternatives
Making a commitment of resources (time, money or personnel)
when does a problem exist?
exists when a gap is perceived between some existing state and some desired state
Well-structured problems
the existing state and desired states are clear
how to get from one state to the other is fairly obvious
the solutions do not create much controversy
They are repetitive & familiar
They can be programmed
what is the most standardized way of solving a well-structured problem
by programing them
what does programing a well-structured problem do?
enable the decision maker to go directly from problem identification to solution
give rules, routines, standard operating procedures, rules of thumb
provide a useful means of solving well structured problems
what is a bad programmed solution?
a bad solution to a well-structured problem
Ill-structured problems
existing and desired states are unclear
the method of getting to the desired state is unknown
often risky decisions
They are unique and unusual problems that have not been encountered before
They tend to be complex and involve a high degree of uncertainty
They frequently arouse controversy & conflict
can Ill-structured problems be solved with programmed decisions?
nah boy
what do you need to make a perfectly rational decision?
you need to have all of the relevant information:
cost effectively
low cost
no cost
what is perfect rationality
decision strategy that is:
Completely informed
perfectly logical
oriented toward economic gain
what is the rational decision-making model?
- identify the problem
- search for relevant info
- develop alternative solutions
- evaluate alternative solutions
- choose the best solution
- implement the chosen solution
- monitor and evaluate the chosen solution
what is an economic person
can gather information without cost and is completely informed
Is perfectly logical, and has only one criterion for decision making: economic gain
do the perfectly rational characteristics of perfect rationality exist in real decision makers?
nah boy
bounded rationality
since rational characteristics of Economic Person do not exist in real decision makers, administrators use bounded rationality
While they try to act rationally, they are limited in their capacity to:
Acquire and process information
Time constraints
Political considerations
what illustrates bounded rationality?
Framing & cognitive biases
the impact of emotions & mood on decisions
what is framing
huge impact of the way we interpret situations
refers to aspects of the presentation of information about a problem that are assumed by decision makers
true or false
How problems and decisions are framed can have a powerful impact on resulting decisions
true
Cognitive biases
tendencies to acquire & process information in a particular way that is prone to error
why is it that cognitive biases lead to error?
They involve assumptions & shortcuts
their goal is to improve decision making efficiency
frequently lead to error instead
basically, being on slack mode
what do framing and cognitive biases illustrate?
the operation of bounded reality
what are the difficulties in problem identification that stem from bounded rationality?
Perceptual defence
Problem defined in terms of functional specialty (people fix problems by using their specific knowledge)
Problem defined in terms of solution
Problem diagnosed in terms of symptoms (think on cold and sniffing)
what is the role of framing in problem identification?
When a problem is identified, it is framed in some way
the people in charge of decision making should try out alternative frames
how much access to information does the perfectly rational decision maker have?
he has free and instantaneous access to all information necessary to clarify the problem and develop alternative solutions
what does sounded rationality suggest about information search and access?
it can be slow and costly
true or false
Decision makers can have too little or too much information
true
what contributes to having too little information?
Several cognitive biases contribute to this
ex: when you use whatever information is most readily available
ex: the tendency to be overconfident which is exacerbated by confirmation bias
confirmation bias
confirmation bias
the tendency to seek out information that conforms to one’s own definition of or solution to a problem
what contributes to having too much information?
Information overloadis the reception of more information than is necessary to make effective decisions
People have a cognitive bias to value advice for which they have paid over free advice of equal quality
maximization
he choice of the decision alternative with the greatest expected value
The perfectly rational decision maker exhibits maximization
are all of the alternative solutions and the probabilities of success known when a decision maker is working under bounded rationality?
no, they are not all known
how are people in general at statisticians?
People are especially weak intuitive statisticians
frequently violate standard statistical principles
they are poor at revising estimates of probabilities & values as they acquire additional information
small or large samples are better?
Large samples warrant more confidence than small samples
do decision makers rarely believe or strongly believe that complex chain of events will occur when taking.a decision or not?
Decision makers often overestimate the odds of complex chains of events occurring
a decision maker working under bounded rationality usually satisfices or maximizes?
satisfices
satisficing
the decision maker establishes an adequate level of acceptability for a solution to a problem
then screens solutions until he or she finds one that exceeds this level
When this occurs, evaluation of alternatives ceases, and the solution is chosen for implementation
when to people tend to make risky business decisions
When people view a problem as a choice between losses
when do people tend to make conservative decisions
When people frame the alternatives as a choice between gains
what are the cons of being dependent on others when decision makers try to have their decisions implement?
it might be difficult to anticipate their ability or motivation to do so (implementors)
implementors and decisions makers are not the same people
what type of teams can help the problems created between decision makers and the implementors?
Cross-functional teams
how should a rational decision maker be able to evaluate the effectiveness of a decision?
with calm and objective detachment
bounded decision maker might bug big time at this stage
why can bounded decisions makers bugs at the stage of evaluating a solution?
People are overconfident about the adequacy of their decision
Substantial dissonance can be aroused when a decision turns out to be faulty
The decision maker may devote his or her energy to trying to justify a faulty decision
how do you prevent substantial dissonance when evaluating decisions?
decision makers avoid careful tests of the adequacy of the
decision
what hindsight?
the tendency to review the decision-making process that was used to find what was done right or wrong
tendency of people to overestimate their ability to have predicted an outcome that could not possibly have been predicted
tendency to take personal responsibility for successful decision outcomes while denying responsibility for unsuccessful outcomes
Escalation of commitment
the tendency to invest additional resources in an apparently failing course of action
People often “throw good resources after bad,” acting as if they can recoup sunk costs
are groups or individuals more prone to escalation of commitment?
groups
Reasons for escalation of commitment
Dissonance reduction.
Social norms for consistent behaviour.
Motivation to not appear wasteful.
The way the problem is framed.
Personality, moods, and emotions.
Preventing escalation of commitment
Encourage continuous experimentation with reframing the problem
Shift the frame to saving rather than spending
Set specific goals for the project in advance that must be met if more resources are to be invested
Place and emphasis in evaluating managers on how they made decisions and less on decision outcomes.
Separate initial and subsequent decision making
How do Emotions and moods affect decision making
Strong emotions frequently figure in the decision-making process that corrects ethical errors
strong emotion has also been implicated in creative decision making & the proper use of intuition to solve problems
what is a con regarding strong emotions in decision making
people experiencing strong emotions are often self-focused and distracted from the actual demands of the problem at hand
what is a benefit of strong emotions when properly controlled
can lead to successful shot-circuiting of the steps in the rational model when speed is of the essence
how do moods influence decision making
Mood affects what& howpeople think in making decisions
it has the greatest impact on uncertain, ambiguous decisions of the type that are especially crucial for organizations
how do people with POSITIVE moods generally act in organizations
tend to remember positive information
tend to evaluate objects, people, and events more positively
tend to overestimate the likelihood that good events will occur and underestimate the occurrence of bad events
promote more creative, intuitive decisions making
what can happen if excess optimism is controlled?
those in a good mood can make creative decisions
what can happen if excess pessimism is controlled?
those in a negative mood can process info carefully &
effectively
in the problem identification stage (1), how do individuals with perfect rationality act?
easy, accurate perception of gaps that constitute problem
in the problem identification stage (1), how do individuals with bounded rationality act?
perceptual defense
jump to solutions
attention to symptoms rather than problems
mood affects memory
in the information research stage (2), how do individuals with perfect rationality act?
free
fast
right amount obtained
in the information research stage (2), how do individuals with bounded rationality act?
slow
costly
reliance on flawed memory
obtain too little or too much info
in the development of alternative solutions stage (3), how do individuals with perfect rationality act?
can conceive all of them
in the development of alternative solutions stage (3), how do individuals with bounded rationality act?
not all of them are known
in the evaluation of alternative solutions stage (4), how do individuals with perfect rationality act?
ultimate value of each alternative solution known
probability of each alternative solution knows
only criterion is economic gain
in the evaluation of alternative solutions stage (4), how do individuals with bounded rationality act?
potential ignorance of miscalculation of values on probabilities
criteria include political factors
affected by mood
in the solution choice stage (5), how do individuals with perfect rationality act?
maximizing
in the solution choice stage (5), how do individuals with bounded rationality act?
satisfices
in the solution implementation stage (6), how do individuals with perfect rationality act?
considered the evaluation of alternatives
in the solution implementation stage (6), how do individuals with bounded rationality act?
may be difficult due to reliance on others
in the solution evaluation stage (7), how do individuals with perfect rationality act?
objectively
in the solution evaluation stage (7), how do individuals with bounded rationality act?
may involve justification
escalation due to sunk costs
faulty hindsight
Why use groups for organizational decisions?
decision quality
decision acceptance and commitment
diffusion of responsibility
how can groups make higher quality decisions than individuals?
Groups are more vigilant than individuals.
Groups can generate more ideas than individuals
Groups can evaluate ideas better than individuals
how can groups increase acceptance and commitment
A group decision will be more acceptable to those involved
Acceptability is especially important in getting a decision implemented
how can groups help with diffusion of responsibility? How can they share burden of the negative consequences of a poor decision?
No one person will be singled out for punishment
When this happens, individual group members often “abandon ship” and exhibit biased hindsight
what are the disadvantages of group decision making
time
conflict
domination
groupthink
how can time be a problem with group decision making?
Groups rarely work quickly or efficiently compared with individuals due to process losses
The time problem increases with group size
how can group decision making lead to conflict?
Participants in group decisions may have their own personal axes to grind or their own resources to protect
Groups will make better decisions when their members feel psychologically safe
how can domination be a problem with group decision making?
When meetings are dominated by a single individual or a small coalition, the advantages of group decision making will not be realized
Domination is not likely to lead to group acceptance and commitment.
If the dominant person is misinformed, the group decision is likely to be ineffective
how does groupthink affect group decision making?
damages the mental efficiency, reality testing, and moral
judgment of decision-making groups.
Unanimous acceptance of decisions is stressed over quality of decisions
what are the factors that lead to groupthink?
high group cohesiveness.
Strong identification with the group
Concern for approval from the group
Isolation of the group from other sources of information. (keep info to not disturb the
others or change the course of action)
The promotion of a particular decision by the group leader
what is the strongest factor that contributes to groupthink?
The promotion of a particular decision by the group leader
what are the groupthink symptoms
Illusion of invulnerability
Illusion of unanimity
Illusion of morality
Rationalization
Stereotypes of outsiders
Pressure for conformity
Self-censorship
Mindguards
Illusion of invulnerability
Members are overconfident and willing to assume great risks
they ignore obvious danger signals
“Because everybody agree, everybody cant be wrong.
Illusion of unanimity
Members perceive that unanimous support exists for their chosen course of action
Illusion of morality
The decisions the group adopts are perceived as morally correct
“We think we are the right ones.”
Rationalization
We try to justify somehow
Stereotypes of outsiders
The group constructs unfavourable stereotypes of those outside the group who are the targets of their decisions
“If we are right, the others might be wrong.”
Pressure for conformity
Members pressure each other to fall in line and conform with the group’s view
people can have a different point of view, but they shut their mouth up
Self-censorship
Members convince themselves to avoid voicing opinions contrary to the group
Mindguards
Some group members may adopt the role of “protecting” the group from information that goes against its decisions
what are strategies to prevent groupthink?
Leaders should establish norms that encourage and even reward responsible dissent
Outside experts should be brought in from time to time to challenge the group’s views
what is a risky shift?
tendency for groups to make riskier decisions than the average risk initially advocated by their individual members
what is a conservative shift?
the tendency for groups to make less risky decisions than the average risk initially advocated by their individual members
what are two main factors that explain the occurrence of risky and conservative shifts?
Group discussion generates ideas & arguments that individual members have not considered before
Group members try to present themselves as basically similar to other members but “even better”
which types of groups polarize more than face to face groups?
Groups that communicate via computer
