Ch 5- Decision Making

What is the 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 -May overlook "rational data"

WHat is anchoring and adjusting bias?

-The tendency of decision makers to use an initial value or experience as a basis of comparison -Judgement (good-bad, large-small, yes-no,etc) is "anchored" by an initial value

what is the evaluate each alternative in the steps to rational decision making?

-This step can take much longer and be more expensive than other steps in the process -Each alternative is systematically evaluated against each criterion -Include all KEY ideas

what is relative comparisons?

Each criterion is compared directly to every other criterion

what is absolute comparisons?

Each criterion is compared to a standard or ranked on its own merits

What is a problem?

Exists when there is a gap between a desired state (what managers want) and an existing state(the situation that managers are facing)

What is the weight the criteria in the steps to rational decision making?

1. Absolute Comparisons 2. Relative Comparisons

what is the delphi technique?

A decision making method in which a panel of experts respond to questions and to each other until reaching an agreement on an issue

what is multivariable testing?

A systematic approach of experimentation to analyze and evaluate potential solutions

what is decision making?

The process of choosing a solution from available alternatives

Consumer reports uses nine criteria when it rates and recommends new cars. Predicted reliability, Current owners' satisfaction, predicted depreciation, ability to avoid an accident, This is an example of what type of comparison?

absolute comparison

WHat are the limits to rational decision making?

-Bounded rationality -A decision-making process restricted in the real world by: a. limited resources b. incomplete and imperfect information c. managers' limited decision-making capabilities -fully rational decision makers maximize decisions by choosing the optimal solution. In practice, limited resources make it impossible for managers to maximize decisions. Consequenty, most managers "satisfice". Satisficing is choosing a "good enough" alternative.

what happens once the anchor is "dropped"?

1. All subsequent experiences are judged by their similarity to the anchor 2. All possible decision alternatives tend to cluster around the anchor

What are the 6 steps to rational decision making?

1. Define the problem 2. Identify decision criteria 3. Weight the criteria 4. Generate alternative courses of action 5. Evaluate each alternative 6. Compute the optimal decision

what are the steps to establish a dialectical inquiry process?

1. Geberate a potential solution 2. Identify the assumptions underlying the potential solution 3. Generate a conflicting counter proposal based on opposite assumptions 4. Have advocates of each position present their arguments and engage in a debate in front of decision makers 5. Decide whether to use, change, or not use the originally proposed solution

What is the define the problem step to a rational decision making?

3 things must occur for managers to make a decision to solve the problem: 1. Managers have to be aware of the gap. They have to know there is a problem before they can begin solving it. 2. Being aware of the gap between a desired state and an existing state isn't enough to begin the decision-making process. You also have to be motivated to reduce the gap. 3. It's NOT enough to be aware of a problem and be motivated to solve it. You must also have the knowledge, skills, abilities, and resources to fix the problem

What is generate alternative courses of action in the steps to rational decision making?

Identify possible courses of action that could solve the problem. In general, the idea is to generate as many alternatives as possible.

WHat is representative bias?

When decision makers judge the likelihood of an event's occurrence based on its similarity to previous events and their likelihood of occurence

WHat is devil's advocacy?

-Creates c-type cinflict by assigning an individual or a subgroup the role of critic

how does multi variable testing improve decision making?

-conducting experiments and letting the data decide -Saving time and money by using a mathematical shortcut to test variables

What are the steps to establish nominal group technique

1. During a "quiet time", group members write down as many problems and solutions as possible 2. Each member shares one idea at a time 3. Ideas are posted on flip charts until all ideas are shared 4. Group discusses advantages/ disadvantages 5. Ideas are ranked during a second "quiet time" 6. Members read rankings aloud, and the idea with the highest average rank is selected

What is rational decision making?

A systematic process of defining problems, evaluating alternatives, and choosing optimal solutions

WHat is the avoid escalation of commitment?

-the tendency to stick with a "wrong" decision -Often leads to a greater commitment of resources -Protecting against escalation: a. Avoid being married to your own ideas b. progress reports c. outside auditors d. change managers

WHat are the steps to establish delphi technique?

1. Assemble a panel of experts 2. Create a questionnaie of open-ended questions 3. summarize the responses and feedback to the panel until the members reach an agreement 4. create a brief report and send to the panel members for agreement/ disagreement 5. COntinue the feedback process until panel reaches agreement

WHat are the 5 steps to establish a devil's advocacy program?

1. Generate a potential solution 2. Identify the assumptions underlying the potential solution 3. Generate a conflicting counter proposal based on opposite assumptions 4. Have advocates of each position present their arguments and engage in a debate in front of decision makers 5. Decide whether to use, change, or not use the originally proposed solution

what is dialectical inquiry?

Creates c-type of conflcit by forcing decision makers to state the assumptions of a proposed solution (thesis) an to then generate a solution that is the opposite (antithesis) of the proposed solution

What is the compute the optimal decision in the steps to rational decision making?

-Done by multiplying the rating for each criterion (step 5) by the weight for that criterion (step 3)and then summing those scores for each alternate course of action(step 4). Those weights are then multiplied by the ratings in each category.

WHen does groupthink occur?

-In highly cohesive groups when group members feel intense pressure not to disagree with each other, so that the group can approve a proposed solution. -Group members have similar backgrounds -There is no established procedure for defining problems and exploring alternatives -Usually results in poor decisions

WHat is the overreliance on intuition?

-Intuition plays a part in many managerial decisions -Intuition works best for experienced managers -Overreliance can lead to careless and inconsistent decision making

WHat is nominal group technique?

-Receives its name bc it begin with "quiet time", in which group members independently write down as many problem definitions and alternative solutions as possible.

WHat is the identify decision criteria in the steps to rational decision making?

-Standards used to guide judgments and decisions -The more criteria a potential solution meets, the better that solution should be

What are the steps to establish a devil's advocacy program?

1. generate a potential solution 2. Assign a devil's advocate to criticize and question 3. Present the critique of the solution to key decision makers 4. Gather additional info 5. Decide whether to use, change, or not use the originally proposed solution