Chapter 7 Flashcards
8 STEPS IN THE DECISION-MAKING PROCESS
1) Identifying a Problem
2) Identifying Decision Criteria
3) Allocating Weights to the Criteria
4) Developing Alternatives
5) Analyzing Alternatives
6) Selecting an Alternative
7) Implementing the Alternative
8) Evaluating Decision Effectiveness
4 Managerial Functions
1) Planning
2) Organizing
3) Leading
4) Controlling
4 Perspectives on how Managers make decisions
1) Rationality
2) Bounded Rationality
3)The Role of Intuition
4)The Role of Evidence-Based Management
a decision maker who is fully objective and logical.
rational decision maker
Managers make decisions rationally, but are limited (bounded) by their ability to process information.
bounded rationality
making decisions on the basis of experience, feelings, and accumulated judgment.
intuitive decision making
5 aspects of intuition
1) experience-based 2) affect-initiated 3) cognitive-based 4) values or ethics-based 5) subconscious mental processing
the systematic use of the best available evidence to improve management practice.
evidence-based management
series of sequential steps a manager uses to respond to a structured problem.
procedure
an explicit statement that tells a manager what can or cannot be done.
rule
a guideline for making a decision
policy
straightforward problem– goal is clear, problem is familiar, information is easily defined and complete
structured problems
repetitive decision that can be handled by a routine approach.
programmed decision
new or unusual problems and for which information is ambiguous/incomplete; managers will rely on nonprogrammed decisions
unstructured problems
decisions that are unique, nonrecurring, and involve custom-made solutions.
nonprogrammed decisions
A manager can make accurate decisions because the outcome of every alternative is known.
Certainty
Conditions in which the decision maker is able to estimate the likelihood of certain outcomes.
Risk-Taking
Not certain about the outcomes and unable to make reasonable probability estimates
Uncertainty
“maximizing the maximum possible payoff”
Maximax Choice
“maximizing the minimum possible payoff”
Maximin Choice
minimize his maximum “regret”
Minimax Choice
Thinking style in which a person’s preference for external data/facts and processing them via logical thinking.
Lineart Thinking Style
Thinking style in which a person’s preference for internal sources (feelings/intuition) and processing them via internal insights, feelings, and hunches to guide decisions and actions.
Nonlinear Thinking Style
Tendency to think they know more than they do or hold unrealistically positive views of themselves and their performance
Overconfidence Bias
Tendency to want immediate rewards and to avoid immediate costs – quick payoffs are more appealing than those with payoffs in the future
Immediate Gratification Bias
Fixation on initial information as a starting point, but failing to adequately adjust for subsequent information – emphasis on first impressions/ideas/prices/estimates
Anchoring Effect
Selective organization and interpretation of events based on biased perceptions
Selective Perception Bias
Seeking out information that reaffirms past choices and discount information that contradicts past judgments
Confirmation Bias
Selecting and highlighting certain aspects of a situation while excluding or downplaying others – creation of incorrect reference points
Framing Bias
Tendency to remember events that are most recent and vivid in memory – results in distorted judgments and probability estimates
Availability Bias
Assessing the likelihood of an event based on how closely it resembles other events or sets of events
Representation Bias
Trying to create meaning out of random events – trouble dealing with chance
Randomness Bias
Fixation on past expenditures in assessing choices rather than on future consequences – forgetting that current choices can’t correct the past
Sunk Costs Error
Quickly taking credit for own successes and blaming failure on outside factors
Self-Serving Bias
Tendency to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known
Hindsight Bias
