Decision making process

Question 1

What is identifying the problem?

Answer 1

Step 1. Managers need to have managerial ability to find the real problem. The accurate definition of it affects all steps that follow.

Question 2

What is identifying the decision criteria?

Answer 2

Step 2. Define the characteristics of a problem and what is important in order to resolve the problem

• Scale 1-10
• Choose the highest
• Compare the rest
• Discard everything -30%

Question 3

Allocating weights to the criteria

Answer 3

Step 3. Use the same scale in all of the criteria. Grade criteria based on relevance. Between 5-7 criteria.

Question 4

Developing the alternatives

Answer 4

Step 4. List viable options that could resolve the problem.

Question 5

Analyzing the alternatives

Answer 5

Step 5. Decide the relative merits of each alternative and evaluate each one.

Question 6

Selecting an alternative

Answer 6

Step 6. Choose the best alternative. In a tie:

• New alternative
• New criteria
• Re-allocate weights
• Re-grading
• Reformulate the problem

Question 7

Implementing the alternative

Answer 7

Step 7. Putting the decision into action.

Question 8

Evaluating decision effectiveness

Answer 8

Step 8. Evaluating the outcome of the decision to see if the problem was resolved.

Question 9

Rational decision making

Answer 9

Type of decision that make logical and consistent choices to maximize value, within limitations.

Question 10

Assumptions rational decisions

Answer 10

1. The problem would be clear and unambiguos. (step 1)
2. A single well defined goal (step 7)
3. All alternatives and consequences are known (step 4,5)
4. Preferences are clear (step 2)
5. Preferences are constant and stable (step 2)
6. No time or constraints exist (all steps)
7. Final choice maximize pay off (step 7,8)

Question 11

Bounded rationality

Answer 11

It is a decision that is rational but limited bounded by an individual´s ability to process information.

Question 12

Escalation of commitment

Answer 12

It is an increased commitment to a previous decision despite evidence that it may have been wrong.

Question 13

Intuitive decision making

Answer 13

It is making decisions on the basis of experience, feelings and accumulated judgment.

Question 14

Elements intuitive decisions

Answer 14

• Experience based decisions
• Affect iniated decisions
• Cognitive based decisions
• Subconscious mental processing
• Values or ethics based decisions

Question 15

Evidenced based management (EBMgt)

Answer 15

It is the systematic use of the best available evidence to improve the management practise.

Question 16

Type of decisions

Answer 16

• Stuctured problems (really easy to determine) usually have programmed decisions (repetitive decision)
• Unstructured problems (uneasy and unclear to determine) usually have nonprogrammed decisions (unique and nonrecurring decisions)

Question 17

Problem

Answer 17

It is an obstacle that makes it difficult to achieve a desided goal or purpose.

Question 18

Satisfice

Answer 18

It is accept solutions that are good enough.

Question 19

Rule

Answer 19

It is an explicit statement that tells managers what can or cannot be done. No flexible.

Question 20

Policy

Answer 20

A guideline for making decisions. Can be flexible.

Question 21

Procedure

Answer 21

A series of sequential steps used to respond to a well-structured problem.

Question 22

Decision making matrix

Answer 22

1. Analitical 2. Conceptual
2. Directive 4. Behavioral

Question 23

Decision making biases and errors

Answer 23

1. Overconfidence
2. Inmediate gratification
3. Anchoring effect
4. Selective perception
5. Confirmation
6. Framing
7. Availability
8. Representation
9. Randomness
10. Sunk cost error
11. Self serving
12. Hindsight

Question 24

Decisions making conditions

Answer 24

• Certainty: A situation in wich a mamanger can make accurate decisions because all outcomes are known
• Risk: A situation in wich the decision maker is able to estimate the likelihood of certain outcomes
• Uncertainty: A situation in which a decision maker has little information about the problem and it is not able to estimate the outcome.

Question 25

Decision making in Todays World

Answer 25

1. Understand cultural differences
2. Know when its time to call it quits
3. Use an effective decison making process
4. Build an organization that can spot the unexpected and quickly adapt to the changed environment.

Question 26

Decision

Answer 26

A choice among two or more alternatives.

Question 27

Heuristics

Answer 27

Rules of thumb that managers use to simplify decision making.