Chapter 5: decision making

Dialectical Inquiry

- a decision making method which decision makers state the assumptions of underlying potential solutions -5 steps to establishing a dialectical inquiry 1. generate a possible solution 2. Identify assumptions underlying the potential solution 3. generate conflicting counter proposal based on opposite assumptions 4. have advocates of each position present their arguements and debate infront of decision makers 5. decide to use, change, or not use the potential solution

Rational decision making

- a systematic process of defining problems, evaluating alternatives, and choosing optimal solutions that provide maximal decisions to the organization

Step 1: define the problem

- define the problem -a problem exists when there is a gap between the desired state (what you want) and the exisiting state (situation at hand) -To make decisions about problems managers must 1. be aware of the problem 2. be motivated to fixing the problem 3. have the knowledge, skills, and resources to fix the gap

Step 4: generate alternative courses of action

- generate alternative courses of action -identify all possible course of action that can produce a solution to a problem -idea here is to generate as many alternatives as possible

Groupthink

- pitfall to groups -occurs in highly cohesive groups when group members feel intense pressures to agree with eachother so the group can approve a proposed solution Groupthink occurs when 1. the group is insulated from others with different perspectives 2. group leader begins by expressing a strong preference for a particular decison 3.group has no procedure for defining the problem, and alternatives 4. members have similar backgrounds and experiences

decision making

- the process of choosing a solution from available alternatives

Limits to rational decision making

-a decision making process restricted in the real world by: -limited resources -incomplete and imperfect information -managers limited decision making capabilities -fully rational decision makers MAXIMIZE decisions by choosing optimal options -Limiting resources and attention, memory, and expertise problems make optimal and maximizing decisions IMPOSSIBLE so they SATISFICE: choose a "good enough" decision

Step 6: compute the optimal decison

-compute the optimal decison by determining the optimal value of each alternative. -multiplying rating of each criterion (step 5) and by the weight for that criterion (step 3) -Then summarize the scores for each alternative course

Step 2: Identify decision Criteria

-identify decision criteria - standards used to guide judgments and decisions -the more criteria a potential solution meets, the better the solution should be

Over reliance on Intution

-intuition plays a part in many managerial decisions -intuition works best for experienced managers -overrelience can lead to carelessness and inconsistent decision making

maximize and satisfice

-maximize: choose the best alternative -due to limiting resources: incomplete info, managers capabilities, and attention and memory & expertise problems, it makes it iMPOSSIBLE to maximize optimal alternatives -so manager SATISFICE: they choose the "good enough" alternative

Step 5: Evaluate each alternative

-systematically evaluate each alternative against each criteria -bc of the amount of information that must be collected, this step can take much longer and cost more than the other steps

Availability Bias

-the tendency of decision makers to give preference to recent information, vivid images that evoke emotions, and specific acts and behaviors that they personally observed

Avoid Escalation of Commitment

-the tendency to stick with the wrong decision -often leads to greater commitment of resources -we pour more time, effort, and money into our ideas to try and bring them back on track -protecting against escalation - avoid being married to your own ideas -progress reports -outside audits - change managers

Step 3: weigh the criteria

-weigh your decision criteria -deciding what criteria are more or less important two methods to use 1. Absolute comparison: rating the criteria on merit with itself. each criterion is compared to a standard or rank on its OWN merit 2. Relative comparison: rating the criteria on importance scale with every other criteria. Each criteria is compared directly to other criterion

Representative Bias

-when decision makers judge the liklihood of an events occurence based on its similarity to previous events and their liklihood of occurence -when we believe the future will be like our past

6 steps to rational decision making

1. define the problem 2. identify decision criteria 3.weight the decision criteria 4. generate alternative courses of actions 5. evaluate each alternative 6. compute the optimal decision

Devil's advocacy

5 steps to establishing devils advocacy 1. generate a possible solution 2. assign a devils advocacy in the group to disagree with everything 3. present critique of soltuion to decison makers 4. gather additional information 5. decide to use, change, or not use originally proposed solution

Delphi technique

A decision-making technique in which group members do not meet face-to-face but respond in writing to questions posed by the group leader. -somewhat like NGT but uses experts 5 steps 1. assemble panel of experts 2. create a questionaire of open ended questions 3. summarize the responses and feed back to the panel until the members reach an agreement 4. create a brief report and send to panel for agreemenet/disagreeement 5. continue feedback process until panel reaches an agreement

Multivariable Testing

A systematic approach of experimentation to analyze and evaluate potential solutions Improves decision making by: -Conducting experiments and letting the data decide -Saving time and money by using a mathematical shortcut to test variables

Nominal Group Technique (NGT)

a structured approach to group decision making that focuses on generating alternatives and choosing one - 6 steps to NGT 1. during quiet time group members write down as many problems and solutions as possible 2. each members shares one idea at a time 3. ideas are posted on a flipchart until all ideas are shared 4. group discusses advantages/ disadvantages 5. ideas are ranked during 2nd quiet time 6. members read rankings outloud and the idea with the highest rank is selected ** this decision making technique produces poorer decisions than devil advocacy and dialectical