Managerial Decision Making

Question 1

decision

Answer 1

a choice made from available alternatives

Question 2

decision making

Answer 2

the process of identifying problems and opportunities and then resolving them

Question 3

programmed decisions

Answer 3

a decision made in response to a situation that has occurred often enough to enable decision rules to be developed and applied in the future

Question 4

non-programmed decisions

Answer 4

a decision made in response to a situation that is unique, or poorly defined and largely unstructured and has important consequences for the organisation

Question 5

types of decision-making models

Answer 5

• classical model
• administrative model
• political model

Question 6

classical model

Answer 6

a decision-making model based on the assumption that managers should make logical decisions that will be in the organisation’s best economic interests

Question 7

normative

Answer 7

an approach that defines how a decision maker should make decisions and provides guidelines for reaching an ideal outcome for the organisation

Question 8

administrative model

Answer 8

a decision-making model that describes how managers actually make decisions in situations characterised by non-programmed decisions, uncertainty and ambiguity

Question 9

descriptive

Answer 9

an approach that describes how managers actually make decisions rather than how they should

Question 10

political model

Answer 10

a decision-making model that is useful for making non-programmed decisions when conditions are uncertain, information is limited and there is disagreement among managers

Question 11

characteristics of classical model

Answer 11

• clear-cut model and goals
• condition of certainty
• full information about alternatives and their outcomes
• rational choice for maximising outcomes

Question 12

characteristics of administrative model

Answer 12

• vague problem and goals
• condition of uncertainty
• limited information about alternatives and their outcomes
• satisfying choice for resolving problems using intuition

Question 13

characteristics of political model

Answer 13

• pluralistic; conflicting goals
• condition of uncertainty
• inconsistent viewpoints; ambiguous information
• bargaining and discussion among coalition members

Question 14

decision-making steps

Answer 14

1. recognition of decision requirement
2. diagnosis and analysis of causes
3. development of alternatives
4. selection of desired alternative
5. implementation of chosen alternative
6. evaluation and feedback

Question 15

types of personal decision styles

Answer 15

• directive style
• analytical style
• conceptual style
• behavioural style

Question 16

directive style

Answer 16

used by people who prefer simple, clear-cut solutions to problems

Question 17

analytical style

Answer 17

used by people who like to consider complex situations based on as much data as they can gather

Question 18

conceptual style

Answer 18

Similar to the analytical style, it is also used by people who also like to consider a broad amount of information. However, they are more socially oriented than those with an analytical style and like to talk to others about the problem and possible alternatives for solving it.

Question 19

behavioural style

Answer 19

used by people who have a deep concern for others as individuals

Question 20

reasons managers make poor judgements

Answer 20

• being influenced by initial impressions
• justifying past decisions
• seeing what they want to see
• perpetuating the status quo
• being influenced by emotions
• overconfidence

Question 21

overconfidence bias

Answer 21

believing one’s estimates to be more accurate than they are

Question 22

what happens to firms led by overconfident CEOs

Answer 22

• pay less heed in general to external indications of error
• be less likely to comprehensively investigate the causes of major errors
• be more likely to repeat major errors

Question 23

groupthink

Answer 23

involves members of a group agreeing a position on a decision or issue to avoid conflict or disagreement. The tendency for group members to censor their personal opinions and being reluctant to criticise the opinion of others leads to a reduction in decision-making quality

Question 24

escalating commitment

Answer 24

continuing to invest time and money in a decision despite evidence that it is failing

Question 25

postmortem/ after-action review

Answer 25

a disciplined procedure whereby managers review the results of decisions to evaluate what worked, what didn’t, and how to do things better

Question 26

heuristics

Answer 26

intuitive shortcuts learned from experience

Question 27

advantages of heuristics

Answer 27

• save limited time and attention

- cope with incomplete or too complex information

Question 28

disadvantages of heuristics

Answer 28

• bring hidden traps and lead to systematic decision making mistakes

Question 29

de-biasing

Answer 29

a means of reducing group think and the effects of cognitive bias

For groups:
Be aware of groupthink
Assign a devil’s advocate (rotating) – Invite outside experts
Encourage a ‘culture of difference’

Leaders might:
Set up subgroups sometimes
Allow anonymous feedback
Try to be impartial

For individuals:
Be aware of key biases that might be influencing your decision
Have a reliable devil’s advocate, whom you trust

Question 30

strategies to frame clashes and negative emotions

Answer 30

• practicing inclusiveness (everyone gets a voice)
• establishing bridges, showing compatibility, synergy, etc.
• attending to and regulating negative emotions (not ignoring them)