Making Decisions

Question 1

decision

Answer 1

choice between two or more alternatives

Question 2

decision making process

Answer 2

1) identify problem (A problem is ___ . Don’t confuse symptoms with cause) and decision criteria
2) allocate weights to criteria (give most important 10 and rank others relative to this)
3) identify and evaluate alternatives
3) select and implement the highest weighted alternative - convey decision to those affected and get commitment by allowing them to participate in decision making
4) evaluate decision effectiveness - is problem solved? if not, was it IDing wrong problem, evaluating alternatives or poor implementation?
5) re-assess environment for changes, especially for LT decisions - e.g. entering new market

Question 3

problem

Answer 3

• discrepancy between an existing and desired condition that makes it hard to achieved a desired goal
• characteristics:

1) manager must be aware of it
2) pressure to solve
3) manager has authority, info and resources to solve

Question 4

decision making in the managerial functions

Answer 4

planning - LT objectives and strategies, individual goals

organising - span of control, centralisation, job design

leading - motivation, contingent leadership styles

controlling - how to monitor performance, what kind of MIS to use

Question 5

5 approaches to decision making

Answer 5

1. rationality
2. bounded rationality
3. intuition
4. evidence-based mgmt
5. crowdsourcing

Question 6

rationality

Answer 6

assumes that choices are logical, consistent and maximise value

other assumptions:

1) unambiguous problems
2) single, specific goal
3) all alternatives and consequences known
4) preferences clear
5) decisions made in the best interest of the organisation
6) no time or cost constraints exist

Question 7

bounded rationality

Answer 7

managers make decisions rationally while being limited by their ability to process information. assumes:

1) will not seek out or know all alternatives
2) will satisfice rather than maximise outcome - choose the first alternative that satisfactorily solves the problem instead of considering all alternatives

Question 8

intuitive decision making

Answer 8

making decisions on the basis of experience, feelings and accumulated judgement

can complement both rational and bounded rational decision mkaing as managers with experience with certain types of situations can act quickly with otherwise limited info

can be:

1) experience based
2) affect-initiated (feelings)
3) congnitive based (knowledge and skills)
4) subconscious mental processing
5) ethics-based (personal or org)

Question 9

evidence-based mgmt (EBMgt)

Answer 9

systematic use of best available, relevant and reliable evidence to operationalise rationality, e.g. computer data, expert opinions or experience of colleagues

1) expertise of decision maker
2) opinions of stakeholders in decision
3) relevant organisational factors e.g resources and members
4) external evidence

Question 10

crowdsourcing

Answer 10

using a network of people outside the org’s appointed decision-makers to solicit ideas via the internet

useful for getting diverse external inputs and innovative solutions to problems, as well as decisions like what products and who to promote

e.g. Hershey

Question 11

types of decisions

Answer 11

structured problems - use programmed decisions

unstructured problems - use non-programmed decisions

Question 12

structured problems and programmed decision

Answer 12

straightforward, familiar and easily defined problems and info about the problem and how to overcome it is available and complete e.g. customer making a return to store

PD - repetitive decisions that can be handled by a routine approach; involved decision process not required. 3 types:

1) procedure
2) rule
3) policy

Question 13

procedure vs rule vs policy

Answer 13

procedure - series of sequential steps to respond to an identified structured problem

rule - explicit statement limiting what can and cannot be done while carrying out the steps of a procedure

Question 14

policy

Answer 14

general guidelines and parameters for decision making that typically involve some ambiguity and interpretation - e.g. employee wages should be ‘competitive’ - does not specify higher or lower

Question 15

unstructured and non-programmed decisions

Answer 15

new or unusual problems with ambiguous and incomplete information that require judgement and creativity for custom solutions

NPD - unique and non-recurring that involve custom-made solutions

Question 16

types of problems and decisions VS level in the org

Answer 16

lower level - highly structured problems and programmed decisions

top level - more unstructured problems and unprogrammed decisions

lower level managers handle routine ones, including through delegation by top level, so top level can handle more complex ones e.g. strategic planning

Question 17

comparison

Answer 17

type of problem

managerial level

frequency

information

goals

time-frame

solution relies on

Question 18

individual decision making dimensions and styles

Answer 18

way of thinking - rational or intuitive

tolerance for ambiguity - high or low

1) analytical - highly rational and high ToA; best for coping with new situations
2) conceptual - highly intuitive and high ToA - broad outlook, consider many alternatives and good at creative long-term solutions
3) directive - highly rational and low ToA; make decisions quickly, focused on the SR and consider few alternatives
4) behavioural style - highly intuitive and low ToA; work well with others, care about peer achievement and are receptive to suggestions and information. Tries to avoid conflict

most managers have a dominant style and backup styles that may shift depending on the situation

Question 19

12 decision making biases and errors

Answer 19

1. overconfidence
2. immediate gratification
3. anchoring effect
4. selective perception bias
5. confirmation bias
6. framing bias
7. availability bias
8. representation bias
9. randomness bias
10. sunk costs error
11. self-serving bias
12. hindsight bias

these are the result of using heuristics to make sense of complex and ambiguous decisions

can be avoided by (1) being aware of them and not using them, helped by training; (2) identify heuristics used and their appropriateness and (3) ask trusted individuals to identify weaknesses in decision making style

Question 20

ways to improve decision making

Answer 20

1) design thinking
2) big data and AI

Question 21

design thinking

Answer 21

approaching management problems as designers approach design problems by considering how processes can be redesigned

problem identification should be collaborative, should understand situation well and look at both rational and emotional elements (difference between traditional style and DT)

Question 22

big data, AI and analytics

Answer 22

BD - huge, complex sets of data that traditional data-processing systems cannot deal with.

e.g. cloud-computing can process in seconds to make complex decisions

AI - using computers to replicate the reasoning functions of humans, using machine learning (systems can learn from data, identify patterns and make decisions with little human assistance) and deep learning (creating artificial neural networks that stimulate human cognitive functions and process data non-linearly)

Analytics - using maths, stats and machine learning to find meaningful patterns in data sets

with this tech, managers will be less reliant on intuition and incomplete data thus moving towards rational outcomes; because of AI decisions can reflect the values and goals of decision makers and the org