Chapter 5

Question 1

define the term “decision”

Answer 1

a choice about future action

Question 2

what is the act of decision making?

Answer 2

selecting a future course of action

Question 3

Define decision alternatives

Answer 3

the options a decision maker considers before selecting a future course of action
- quatifiable characteristic, attribute, outcome.

Question 4

what is the term given when putting a deicison into action

Answer 4

implementing the decision.

Question 5

With reference to decision making, what is a problem?

Answer 5

a difficulty or question that needs resolution; a problem represents a perceived gap between an existing state and a desired state.

Question 6

What is problem solving?

Answer 6

a process that consists of a series of steps beginning with the recognition of a need for action and ending with the generation of a resolution or recommendation for action.

Question 7

define decision analysis

Answer 7

a formal process for defining a decision problem and evaluating decision alternatives and it encompasses all efforts and activities leading up to a decision.

Question 8

Decision analysis must take into account two types of restrictions on a decision: decisioncriteria and decision constraints. define these

Answer 8

criteria: simple to understand rules a decision maker uses to evaluate decision alternatives. ie: minimize new cost, select highest cost savings,
constraints: praticle limitations that affect the selection of decision alternatives.
- oe: budgets, staff limitations, regulatory requirements.

Question 9

Simply describe the approach to decision making

Answer 9

1. identify and define a problem or need
2. identify decision alternatives
3. analyze decision alternatives
4. make a decision
5. implement the decision
6. monitor decision outcomes.

Question 10

What are 6 factors that contribute to simple decisions?

Answer 10

1. resources constraints are absent or minimal
2. few decision alternatives
3. underlying problem or task is simple, and the environment provides reliable decision-support information
4. few poeple are involved in the decision process
5. low cost and low risk are involved in the outcome
6. stable circumstances surround the decision

Question 11

What are the factors that contribute to the complexity of a decsioin process?

Answer 11

1. tight time constraints to make and implement the decision
2. high complexity of the underlying problem or task with unclear and uncertain decsiion-support infromation
3. chaos or turbulence in the environement where outcomes from the deicsion will manifest
4. large number of people affected by the decision
5. large number of people participating in the decision making.
6. high potential risk of loss or potential for gains as a result of the decision

Question 12

define the term risk

Answer 12

refers to a potential for unexpected future outcomes.

Question 13

what are the 3 reasons for the greater overall complexity of decision s in financial services organizations

Answer 13

1. Many people may be involved in analyzing a decsiion
2. many people may be affected by the outcome of a decision
3. the monetary and other risks of a decision may be great

Question 14

explain heirarchy of decisions

Answer 14

decisions made at each level of management,- strategic, functional, or operational- refelct the propoer focus of that level of managment.
corporate level > strategic decisions
business level > business decisions
functional level > functional decisions
Operational level > operational decisions.

Question 15

4 styles of decisions processes are popular in business organizations. name them

Answer 15

1. authoritarian decision style
2. democratic decision style
3. collaborative decision style
4. consensus decision style

Question 16

define an authoritarian decision process

AKA: autocratic or paternalistic process

Answer 16

relies on one decision maker to dictate a choice.

• quick decisions,
• secure and secret decision making
• con: must f/u with telling others and persuade others of its correctness.

Question 17

Define a democratic decision process

Answer 17

involves whole group in a structured-choice format with a binding commitment to implement the majority choice under a one-person. or one-vote selection process.

• can ensure majority of acceptance and lead to quick resolution.
• does not allow for building of acceptance.
• used for decsiions with limited potential for loss,

Question 18

define collaborative decision process

Answer 18

leader obtains group contributions, but allows the leader to select a dexision that has reasonable acceptance in the relevant group.

• group building,
• more time
• supports a decision analysis process that follows dictates of logic and scientific research.

Question 19

define a consensus decision process.

Answer 19

involves all group members in the decision process.

• all group members must understand and accept the decision.
• lengthy deliberation process.

Question 20

What are the benefits to delaying the selection of a decision alternative?

Answer 20

1. delay extends the time available for deliberation and gathering information
2. during a delay the decision environemnt might provide more information and could even offer up new decisions
3. during a delay, the preferences of stakeholders could change.

Question 21

What are some potential loses to delaying the selection of a decision alternative?

Answer 21

1. company could lose competitive advantage
2. one or more decision alternatives could slip away
3. analytical team could lose clarity of purpose as to the decision and reach a poreer decision as a result.
4. continuing to pursue decision-suppor information automatically drives us the cumulative cost of decsision-support information.

Question 22

What is an intuitive decision making process?

Answer 22

mental process that leads to a satisfactory choice, but it differs from other decision processes in several respects.

Question 23

Define the scientific method to decision approaches.

Answer 23

an approach to obtaining useful information by following systematic and rigorous research procedures.

Question 24

What are the important principles of research according to the scientific method?

Answer 24

1. experimentation that, when repeated, will support the same conclusion
2. direct observation
3. reliance on numerical expression and mathematical proofs
4. a fully quantificable and empirically testable research hypothesis.
5. fully quantifiable research conclusions

Question 25

not all problems are sufficiently quantifiable to support identifying a valye of perfect information. in such cases analyst take another reasonable approach, which consists of weighing the relative expected values of what features?

Answer 25

1. cost and time of acquiring additional information
2. probability that new information gained will prove decisive or relevant to the decision-making process
3. the likely benefit the company will receive from pursuing a decision alternative to the decision question.

Question 26

What is the evidence-based management approach?

Answer 26

this asks the decision maker to look at the readily available objective evidence and make a reasonable decision in a reasonable time frame.
- decision analysist collects the available facts, validates data,, uses conclusion to support decision.

Question 27

What must a decision participant do, in order to practive the discipline needed for supporting an evidence-based management approach in the financial services?

Answer 27

1. maintaina neutral, objective outlook throughout the analytical process
2. critique and review all old and new ideas.
3. employ collaborative deliberations instead of autocratic approaches
4. approach other participants in the decsiion process ith openness, directness,, honesty and impersonal critiques.
5. fail quickly; embrace failures as learning ops.