MGT 551- Chapter 8
Groupthink
Pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision
Nominal Group Technique
Provides a more structured way to generate alternatives in writing and gives each manager more time and opportunity to come up with potential solutions - Useful when an issue is controversial and when different managers might be expected to champion different courses of action
The Rational Approach
State the situational goal Identify the problem Determine the decision type Generate alternatives Evaluate alternatives Choose an alternative Implement the plan Control: measure and adjust
Characteristics of Non-Programmed Decisions
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Characteristics of Programmed Decisions
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Potential Advantages to Group Decision Making
- Able to draw on combined skills of group members - Improve ability to generate feasible alternatives - Choices less likely to fall victim to bias
Potential Disadvantages to Group Decision Making
- Can take much longer than individuals to make decisions - Can be difficult to get two or more managers to agree because of different interests and preferences - Can be undermined by biases
Heuristics
- Rules of thumb that simplify the process of making decisions. - Decision makers use heuristics to deal with bounded rationality.
Delphi Technique
- Written approach to creative problem solving. - Group leader writes a statement of the problem to which managers respond - Questionnaire is sent to managers to generate solutions - Team of managers summarizes the responses and results are sent back to the participants - Process is repeated until a consensus is reached
Six Steps in Non- Programmed Decision Making
1. Recognize the need for a decision 2. Generate alternatives 3. Assess alternatives 4. Choose among alternatives 5. Implement the chosen alternative 6. Learn from feedback
Decision Making Approach:
1. Understand the Goal 2. Identify the Problem 3. Generate Alternatives (Realistically) 4. Evaluate Alternatives (Realistically) 5. Choose Best Alternative for the Situation 6. Implement the Plan 7. Evaluate Results 8. Adjust or Repeat Process if Necessary
The Administrative Model
A descriptive model approach to decision making that explains why decision making is inherently uncertain and risky and why managers can rarely make decisions in the manner prescribed by the classical model
Classical Model of Decision Making (Rational Approach)
A prescriptive model of decision making that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action.
Problem Solving
A special form of non-programmed decision-making in which the issue is unique—it requires developing and evaluating alternatives
Decision Rule
A statement that tells a decision-maker which alternative to choose based on the characteristics of the decision situation
Prior Hypothesis Bias
Allowing strong prior beliefs about a relationship between variables to influence decisions based on these beliefs even when evidence shows they are wrong
Prospect Theory
Argues that when people make decisions under a condition of risk they are more motivated to avoid losses than they are to seek gains
Condition of Risk
Certainty of an outcome is unknown but there is enough information to estimate probabilities of various outcomes
Escalating Commitment
Committing considerable resources to a project and then committing more even if evidence shows the project is failing
Reactor
Decisions are a last option process that occurs due to some other event
Defender
Decisions are made only in defense
Intrapreneurs
Individuals (managers, scientists, or researchers) who work inside an existing organization and notice an opportunity for product improvements and are responsible for managing the product development process
Entrepreneurs
Individuals who notice opportunities and take the responsibility for mobilizing the resources necessary to produce new and improved goods and services.
Ambiguous Information
Information whose meaning is not clear allowing it to be interpreted in multiple or conflicting ways.
Satisficing
Is examining alternatives only until a solution that meets minimal requirements is found.
Sub-Optimizing
Knowingly accepting less than the best possible outcome to avoid unintended negative effects on other aspects of the organization.
Condition of Amiguity
Neither the problem nor the alternatives are clear.
Agency Theory
Occurs when one person or entity (agent) is able to make decisions on behalf of, or that impact, another person or entity (principal). The dilemma exists because sometimes the agent is motivated to act in his own best interests rather than those of the principal
Non-Rrogrammed Decision
One that recurs infrequently and for which there is no previously established decision rule
Programmed Decision
One that recurs often enough for a decision rule to be developed
Condition of Certainity
Outcomes of each alternative are known
Reason for Making Decision:
Survival Necessity Standard Requirement Comfort or Cosmetic Perceived Duty
Creativity
The ability to generate new ideas or to conceive of new perspectives on existing ideas
Representativeness
The decision maker incorrectly generalizes a decision from a small sample or a single episode
Decision Making
The process by which managers respond to opportunities and threats that confront them by analyzing options and making determinations about specific organizational goals and courses of action.
Illusion of Control
The tendency to overestimate one's own ability to control activities and events
Condition of Uncertainty
There is insufficient information to estimate the probability of possible outcomes
Bounded Rationality
Time and Cost Restraints Perception of Information Information Condition Reason for Decision Decision Strategy
Reasoned Judgment
decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives
Intuition
feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering and result in on-the-spot decisions
Group Decision Making (Collaborative Decision Making)
is a situation where individuals collectively make a choice from the alternatives before them.
Analyzer
observes prospectors and moves when they feel the decision has been shown to be correct and the time is right
Prospector
pioneer, risk taker, first mover, leader
A decision is needed because __________
there is a discrepancy between an existing and a desired state of affairs.