Chapter 7- Exam 2

disadvantages of group decision making

a few people may dominate or intimidate, groupthink, satisficing, goal displacement

3 key attributes among analytics competitors

1) use of modeling- going beyond simple descriptive statistics 2)having multiple applications, not just one 3)support form the top

6th implementation principle

slow the spread of bad practice- practice evidence based misbehavior- ignore orders you know to be wrong or delay their implementation.

intuition model

"it just feels right" -cant afford in-depth marketing research so they make decisions based on hunches- subconscious. -"going with your gut"- intuition- making a choice without the use of conscious thought of logical inference. -stems form expertise: a persons explicit and tacit knowledge about a person, situation, object or decision opportunity known as holistic hunch. - based on feelings- involuntary emotional response to those same matters = automated experience.

satisfying ( non-rational model)

-bounded rationality and satisficing model: "satisfactory is good enough"- bounded rationality- concept suggest that the ability of decision makers to be rational is limited by numbers of constraints- complexity, time and money, cognitive capacity, values, skills, and unconscious reflexes. - because of constants, managers don't make an exhaustive search for best alternative. - satisficing model- managers seek alternatives until they find that is satisfactory, not optimal. - making snap decisions can back fire.

drawback to intuition

-difficult to convince others that your hunch makes sense -intuition is subject to biases -intuition is fine for start-ups but often deceives CEO's as businesses become more complex.

4 steps of rational decision making are:

1) identify the problem or opportunity 2)think up alternative solutions 3)evaluate alternatives and select a solution 4)implement and evaluate the solution chosen

parts of the decision tree

1) is the proposed action legal? 2) if yes; does the proposed action maximize the shareholders value?; if yes, should you do it? not necessarily? 3) if yes; is the proposed action ethical? there main obligation is to mange "for the best interest of the corporation", which includes the interest of the larger community. 4) if no; would it be ethical not to take the proposed action? not building tan overseas plant might be harmful to there stakeholders, such as employees or customers.

bias that tend to effect how the decision makers process information

1- availability 2-represenativeness 3-confirmation 4-sunk cost 5-anchoring and adjustment 6-over confidence 7-hindsight 8-framing 9-overconfidence

what makes it hard to be evidence based:

1- too much evidence 2-not enough good evidence 3-all evidence doesn't quite apply 4-people are trying to mislead you 5-you are trying to mislead you 6-side effects outweigh the cure 7-stories are more persuasive

7 implementation principles are

1- treat your organization as an unfinished prototype 2-no brag, just facts 3-see yourself and organization as outsiders 4- evidence 5-you still need to sell it 6-slow the spread of bad practice 7-what happens when people fail?

disadvantage 1 of group decision making

a few people may dominate or intimidate- sometimes a handful of people will talk the longest and the loudest and the rest of the group will give in. or one individual , such as a strong leader, will exert disproportional influences, sometimes by intimidation. this cuts down on the variety of ideas.

anchoring and adjustment bias

being influenced by an initial figure; the tendency to make decisions based on an initial figure. -managers will often give their employees a standard percentage raise in salary, basing the decision on whatever the workers made the preceding year.

advantage 4 of group decision making

better understanding of decision rationale- if you participate in making a decision, you are more apt to understand the reasoning behind the decision, including the pros and cons leading up to the final step

best decision for the organization

confident of the best future course of action, you cooly choose the alternative that you believe will most benefit the organization.

2nd effective reaction

credibility- "how believable is the information about the situation?" you need to evaluate how much is known about the possible threat or opportunity. Is the source of the information trust worthy? is there credible evidence?

advantage 2 of group decision making

different perspectives-because different people have different perspectives, marketing, production, legal, and so on they see the problem from different angles.

4th implementation principle

evidence- based management isn't just for senior executives- best organizations are when everyone is guided by responsibility to gather and act on quantitative and qualitative data and share results

non-rational models of decision making

explain how managers make decisions. They assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisions. - descriptive rather than prescriptive: describe how managers actually make decisions rather than how they should.

representativeness bias

faultily generalizing from a small sample or a single event; tendency to generalize from a small sample or a single event. -the bias here is that just because something happens once doesn't mean it is representative- that it will happen again or will happen to you.

escalation of commitment bias

feeling overly invested in a decision; where by decision makers increase their commitment to a project despite negative information about it. -prospect theory- suggest that decision makers find the notion of an actual loss more painful than giving up the possibility of a gain.

advantage 1 of group decision making

greater pool of knowledge- greater pool of information from which to draw. if one person doesn't have the pertinent knowledge and experience, someone else might

2nd key attribute among analytics competitors

having multiple applications, not just one: analytics competitors " don't gain advantages from 1 killer app, but rather from multiple applications supporting many parts of the business.

logical, unemotional analysis

having no prejudices or emotional blind spots, you are about to locally evaluate the alternatives, ranking them from best to worst according to your personal preferences.

hindsight bias

i-knew-it-all-along effect; the tendency of people to view events as being more predictable than they really are. -when we look back on a decision and try to reconstruct why we decided to do something.

step 4 of rational decision making

implement and evaluate the solution chosen: for implementation to be successful you need to: - plan carefully- if actions will be difficult, you need to make careful plans for implementation. some require written plans. -be sensitive to those effected: consider how the people affected may feel about the change- inconvenienced, insecure, even fearful, which can trigger resistance. evaluation: 1 law of economics is the law of united consequences- things happen that weren't planned. you need to follow up and evaluate the results of the decision. - what to do if the action isn't working: -give it more time: give it enough time to get used to the new action -change it slightly: maybe its correct but needs some tweaking - trying another alternative- plan a isn't working, snap it for another -start over- no plan is working, go back to the drawing board.

an ethics officer

is someone trained about matters of ethics in the workplace, particularly about reasoning ethical dilemmas. - managers must try to make sure their decisions are lawful and ethical.

The rational model of decision making ( classical model)

it explains how managers should make decisions; assumes managers will make logical decisions that will be the optimum in furthering the organizations best interest.

4th ineffective reaction

panic"this is so stressful, I've got to do something,anything, to get rid of the problem" : a manager is so frantic to get rid of the problem that he or she can't deal with the situation realistically. - action is especially apt to occur in crisis situations -situation in which the manager has completely forgotten the idea of behaving with grade under pressure, of staying cool and calm. - judgement may be so clouded that you won't be able to accept help in dealing with the problem or to realistically evaluate the alternatives.

step 1 of rational decision making

problems- difficulties that inhibit the achievement of goals ex: customer complaints, supplier breakdown, staff turnover opportunities. opportunities: situations that present possibilities for exceeding existing goals -whether confronted with a problem or opportunity, the decision you're called on the make is who to make improvement. -improvement: how to change conditions from the present to the desirable. this is a matter of diagnosis. -diagnosis- analyzing the underlying causes.

1st ineffective reaction

relaxed avoidance- "theres no point in doing anything; nothing bad going to happen". a manager decides to take no action in the belief that there will be no great negative consequences. it is a form of complacency; either don't see or disregard the signs of danger.

2nd ineffective reaction

relaxed change- " why not just take the easiest way out"- a manager realizes that complete in action will have negative consequences but opts for the 1st available alternatives that involves low risk. - for of satisficing- the manager avoids exploring a variety of alternatives in order to make the best decision.

3rd implementation principle

see yourself and organization as outsiders- most managers are afflicted with "rampant optimism" with inflated views of their own talents and prospects for success- causes them to downplay risk and continue on a path despite evidence that things aren't working.

sunk cost bias or the sunk cost fallacy

seeking information to support ones point of view; is when managers add up all the money already spent on a project and conclude it is too costly to simply abandon it. - if large sums of money have already been spent they may continue to push on with an iffy-looking project to justify the money already sink into it.

confirmation bias

seeking information to support ones point of view; is when people seek information to support their point of view and discount data that does not. - though this bias would seem obvious, people practice it all the time.

framing bias

shaping how a problem is presented- tendency of decision makers to be influenced by the way a situation or problem is presented to them -important because how a problem is presented to us may influence us to consider a certain solution simply because of the way it was framed

big data

stores of data so vast that conventional database management systems cant handle them and so very sophisticated analysis software and super computing level hardware are required. - includes not only data in corporate databases but also web-browsing data trails, social network communications, sensor data, and surveillance data.

3rd key attribute among analytics competitors

support from the top: a company wee embrace of analytics, impels changes in culture, processes, behavior and skills from many employees. it requires leadership from executives at the top who have a passion for the quantitative approach.

2 kinds of thinking ( 2 types of decision making)

system 1: intuitive and largely unconscious: pirates automatically and quickly. fast, automatic, intuitive, and largely unconscious made; as we detect hostility in a voice or object is made more distant than another. system 2: analytical and conscious- our slow, deliberate, analytical, and consciously effortful mode of reasoning. swings into action when we have to fill out a tax form or park a car in a narrow space.

analytics

term used for sophisticated forms of business data analysis. - portfolio analysis- which an investment advisor evaluates the risk of various stocks -time series forecast- predicts future data based on patterns of historical data

big data analytics

the process of examining large amounts of data of a variety of types to uncover hidden patterns, unknown correlations and other useful information. - can be used to tackle large-scale problems such as how to make electricity grids and traffic flow more effective, also specific, practical uses in business. - potential to more accurately predict market fluctuations or react faster to shifts in consumer sentiment or supply chain uses.

decision making is

the process of identifying and choosing alternative courses of action

step 2 of rational decision making

thinking of alternative solutions- obvious and creative: employees during with bright ideas are an employers greatest completive resource. - after you identify the problem or opportunity and diagnosed its causes, you need to come up with an alternative solution.

availability bias

using only the information available; managers use information readily available from memory to make judgements. -the bias is that readily available information may not present a complete picture of a situation. -the availability bias may be stoked by the news media, which tends to favor news that is unusual or dramatic.

7th implementation principle

what happens when people fail?- theres no learning without failure. learn what happened and why and keep using those facts to make the system better. forgive and remember people who make mistakes, not be trapped by preconceived notions and confront the best evidence and hard facts.

5th implementation principle

you still need to sell it- use vivid stories to grab management attention.

a decision is

a choice made from among available alternatives

the decision tree is

a graph of decisions and their possible consequences; used to create a plan to reach a goal; used to aid in decision making.

over confidence bias

blind to ones own blindness; is the bias in which peoples subjective confidence in their decision making is greater than their objective accuracy. - we should not take assertive and confident people at their own evaluation unless we have independent reasons to believe they know what they are talking about.

advantage 5 of group decision making

deeper commitment to the decision- if you've been part of the group that has brought into the final decision, you're more apt to be committed to seeing that the course of action is successfully implemented.

3rd ineffective reaction

defensive avoidance-" theres no reason for me to explore other solution alternatives"- a manager can't find a good solution and follows by a) procrastinating, b)passing the buck, or c) denying the risk of any negative consequences. - by procrastinating- you put off making a decision -in passing the buck- you let someone else take the consequences of making the decision. -in denying the risk that there will be any negative consequences, you are engaging in rationalizing.

step 3 of rational decision making

evaluate alternatives and select a solution- ethics, feasibility and effectiveness: you need to evaluate each alternative not only according to cost and quality but: is it ethical? is it feasible ? is it ultimately effective?

advantages of group decision making

greater pool of knowledge, different perspectives, intellectual stimulation, better understanding of decision rationale, deeper commitment to the decision.

3 effective reactions: deciding to decide:

importance, credibility, and urgency

the greatest pressure on top executives

maximize shareholder value, deliver the greatest return on investment to make the owners of their company. -beneficial to shareholders- harmful to employers

2nd implementation principle

no brag, just facts- an antidote for the over the top assertions about forth coming products

2 non-rational models are

satisfying and intuition

4 ineffective reactions:

there are 4 defective problems- recognition and problem solving approaches that act as barriers when you must make an important decision in a situation of conflict; 1- relaxed avoidance 2-relaxed change 3-defensive avoidance 4-panic

evidence based management

translation of principles based on evidence into organizational practice, bringing rationality to the decision making process.

complete information, no uncertainty

you should obtain complete, error free information about all alternative courses of action and the consequences that would follow from each choice.

1st implementation principle

treat your organization as an unfinished prototype- can't be ruined by dangerous, new ideas or impossible to change because of employee or management resistance.

3rd effective reaction

urgency- "how quickly must I act on the information about the situation?" Is the threat immediate? will the window of opportunity stay open long? can actions to address the situation be done gradually?

1st key attribute among analytics competitors

use of modeling- going beyond simple descriptive statistics: - companies look beyond basics statistics, using data mining and predictive modeling to identify potential and most profitable customers. - predictive modeling- a data mining technique used to predict future behavior and anticipate the consequences of change.

2 benefits to intuition

1) it can help speed up decision making, useful when deadlines are tight 2) helpful when resources are limited

1st effective reaction

importance- "how high priority is this situation"- you need to determine how much priority to give the decision situation if it is a threat, how extensive might prospective losses or damages be? if an opportunity, how beneficial might the possible gains be?

advantage 3 of group decision making

intellectual stimulation-a group of people can brainstorm or otherwise bring greater intellectual stimulation and creativity to the decision- making process that is usually possible with one person acting alone.