Chapter 12 Flashcards
decision
the choice made from two or more alternatives
rational
refers to choices that are consistent and value-maximizing within specified constraints
rational decision making model
six step decision making model that describes how individuals should behave in order to maximize some outcome
ASSUMPTIONS: have all info, identify relevant options without bias, chooses option with highest utility
Six-Step Rational Model
- Define the problem
- Identify criteria
- allocate weights to criteria
- develop alternatives
- evaluate the alternatives
- select the best alternative
bounded rationality
limitations on a person’s ability to interpret, process and act on information
- construct simplified models that extract essential features from problems avoiding complexity
satisficing
provide a solution that is both satisfactory and sufficient
Intuitive decision making
unconscious experience created from distilled experience
- relies on associations, fast and engages emotions
- hard to measure and analyze
- “unacceptable as proof, but good for setting up a hypothesis”
Common Decision Biases and Errors
- Overconfidence Bias
- Anchoring Bias
- Confirmation Bias
- Availability Bias
- Escalation of Commitment
- Randomness Error
- Risk Aversion
- hindsight bias
overconfidence bias
error in judgement that arises from being too optimistic about one’s own performance
- when people said they were 90% confident, they were only right about 50% of the time
- individuals with weak intellectual and interpersonal abilities are most likely to overestimate
anchoring bias
tendency to fixate on initial information, from which one then fails to adequately adjust for subsequent information
confirmation bias
tendency to seek out info that reaffirms past choices and discount information that contradicts past judgements
availability bias
tendency for people to base their judgements on info that is readily available to them rather than complete data
escalation of commitment
an increased commitment to previous decision despite negative information
randomness error
tendency of individuals to believe that they can predict the outcome of random events
risk aversion
tendency to prefer a sure gain of a moderate amount over a riskier outcome , even if the riskier outcome might have a higher expected payoff
hindsight bias
tendency to believe falsely, after an outcome of an event is actually known, that one coulee have accurately predicted that outcome
How to reduce risks and biases?
- Focus on goals
- look for information that disconfirms beliefs
- don’t create meaning out of random events
- increase your options
Strengths of Group Decision Making
- more complete information
- diversity of views
- accuracy
- creativity
- decision quality
- degree of acceptance
Weaknesses of Group decision making
- time consuming
- dominated by a few members
- ambiguous responsibility
Effectiveness (Group vs. Individual)
- depends on how you define effectiveness
- groups = more accurate than average individual but less accurate than judgements of most accurate individual
- individuals = faster
- groups = more creative
- groups = more acceptance
Efficiency (Group vs. Individual)
- group work consumes more hours
- when determining whether to use group or individual, assess whether increases in effectiveness offset the reductions in efficiency
Groupthink
a phenomenon in which group pressures for conformity prevent the group from critically appraising unusual, minority or unpopular views
Symptoms of Groupthink
- Illusion of invulnerability
- assumption of mortality
- rationalized resistance
- peer pressure
- minimized doubts
- illusion of unanimity
How to minimize groupthink?
- Monitor group size (as group size increases people become more hesitant)
- Encourage group leaders to play an impartial role (actively seek input from all members)
- Appoint one group member to play the role of devil’s advocate
- Stimulate active discussion of diverse alternatives to encourage dissenting views and more objective evaluations
Groupshift
a phenomenon where initial positions of individual group members become exaggerated because of the interactions of the group
Group Decision Making Techniques
- Interactive Groups
- Brainstorming
- Nominal Group Technique
Interactive Groups
typical groups in which members interact with one another face to face
PROBLEMS: often censor, conformity
brainstorming
idea generation process that specifically encourages any and all alternative while withholding any criticism of those alternatives
- 6-12 people, think unusual and produce ideas
PROBLEMS: doesn’t generate ideas efficiently, production blocking,
Nominal group technique
individual members meet face to face to pool their judgements in a systematic but independent fashion
- physically present, but operate independently
a) before discussion members write down their own ideas
b) each member presents idea to group with no discussion
c) group discusses clarity and evaluates
d) each group member silently and independently ranks the ideas
OUTCOME: outperform brainstorming groups
Creativity
the ability to produce novel and useful ideas
Three Stage Model of Creativity
- Causes of Creative Behaviour
- Creative behvaiour
- Creative Outcomes
Creative Behaviour
- Problem Formulation
- Information Gathering
- Idea generation
- Idea evaluation
Problem Formulation
stage that involves identifying a problem or opportunity that requires a solution as yet unknown
Information Gathering
stage when possible solutions to a problem incubate in an individual’s mind
Idea generation
process that involves developing possible solutions to a problem from relevant information and knowledge
Idea evaluation
process involving the evaluation of potential solutions to problems to identify the best one
Causes of Creative Behaviour
- Creative Potential
2. Creative Environment
Creative potential
high in openness = high in creativity
- proactive, self-confidence, risk-taking, tolerance for ambiguity, and perseverance
- expertise is the foundation for all creative work
Creative environment
- Motivation
- reward and recognize creative work
- good leadership
- teamworks and diverse perspectives
Creative Outcomes
ideas/solutions/innovations judges to be novel and useful by relevant stakeholders
- novelty
- usefulness
Four Ethical Decision Criteria
- utilitarianism
- rights
- justice
- care
whistle blower
individuals who report unethical practises by their employer to outsiders
utilitarianism
a decision focused on outcomes or consequences that emphasizes the greatest good for the greatest number
Rights
make decisions consistent with liberties and privileges set forth by constitution
- protecting individuals and freedoms
Justice
- impose and enforce rules fairly and impartially
- protects interests of underrepresented and less powerful
Care
aware of needs, desires and well being of those we are closely connected to
behavioural ethics
analyzing how people actually behave when confronted with ethical dilemmas
Broken Windows Theory
the idea that decayed and disorderly urban environments may facilitate criminal behaviour as they signal antisocial norms
- Recognize that the environment can send signals that employees interpret
- Encourage conversation about moral issues
- Be aware of our own moral blind spots
Corporate Social Responsibility
organizations responsibility to consider the impact of its decisions on society
What percentage of people believe that businesses should be involved with charity?
45% believe individual stakeholders should make personal decisions about giving to charities
35% believe corporations should donate to charities
What do MBA students think about CSR?
80% of MBA believe business professionals should take into account social and environmental impacts when making decisions
Cultural Differences
Canada = focus on accepting situations as they are Thailand/Indonesia = focus on accepting situations as they are Japan = more group oriented in decision making (value conformity and cooperation)
Creativity and Culture
- scoring higher on Hofstedes individuality indicates increased creativity
Western countries = more individualistic = more creative
Eastern (Iran, Colombia,China) = collectivist = less creative
Ethics and Culture
- no global standard for ethics exist
- Japanese exchange expensive gifts when doing business, but that would be considered unethical in West
