ORG Week 3 Section 1

Barriers to Individual Decision Making

-information-related barriers -circumstance and time-related barriers -cognitive biases: confirmation bias, framing bias, hindsight bias, anchoring bias, halo effect, overconfidence bias, status quo bias, & pro-innovation bias

Dean lives in Silver Spring, MD. His 15-year-old car has broken down, and he thinks he needs a new car. He remembers that the first step of the rational decision-making process is "define the problem." What should he consider?

Dean should consider all of his transportation options before deciding to buy a new car

Predictive Analytics

If current trends are identified and projected to continue in the future, decision makers will have access to rich insight that can aid their cause. This work of projecting future trends is known as _____, and although it still obviously remains only a best guess about the future, it is grounded in objective facts and trends and can provide a greater degree of likelihood as a result.

Evidence Based Decision Making

Proof of Success Data collection, sharing, and analytics

Experts disagree how quickly self-driving cars will arrive in showrooms or how many customers will want them. Managers at General Motors must choose a path where GM does reasonably well in all scenarios. This is called

Robust decision making

Descriptive Analytics

The focus of this type of analytics is simply to understand and describe what has taken place as revealed by data sets. The analyst attempts to explain what the data reveals about the events that have occurred, the relationships between different events and market forces, and why the numbers are what they are.

Bounded Rationality

This concept revolves on a recognition that human knowledge and capabilities are limited and imperfect. Three specific limitations are generally enumerated: Decision makers do not have access to all possible information relevant to the decision, and the information they do have is often flawed and imperfect. Decision makers have limited analytical and computational abilities. They are not capable of judging their information and alternatives perfectly. They will inevitably make misjudgments in the evaluation process. Decision makers do not have unlimited time to make decisions. Real-life situations provide time constraints in which decisions must be made. suggests that decision makers must be willing to adapt their rational approach

Satisficing

a combination of the words "satisfy" and "suffice"—means settling for a less-than-perfect solution when working with limited information

When you can break a decision down into stages or decision nodes with branches representing possible outcomes, which tool can you use to help you visualize your options?

a decision tree

Happy Socks sells high-quality socks online. Potential customers go through a three-step process online to complete a sale. First, they find Happy Socks, usually through advertising—a Google ad, for example. Customers decide to click on the ad or not. Second, they search for socks they may like and decide to put something in their "cart" or not. Finally, they decide to complete the transaction or not. Happy Socks can invest more in advertising, or in its online store, or in speeding up its checkout process. If Happy Socks wanted to use a decision tree to help them decide where to invest, each of these steps in the customer's journey would be?

a pathway

Heuristics

analytical and decision-making tools that help simplify the analysis process by relying on tried and tested rules of thumb. A heuristic simplifies a complex situation and allows the decision maker to focus only on the most important pieces of information.

What action can help a group avoid groupthink?

assign a rotating devils advocate at every meeting

An important implication of prospect theory is that the way people subjectively frame an outcome affects their decision. Narrow framing is when people evaluate new gambles in isolation, ignoring other relevant risks. This is an example of

bounded rationality

You and some friends are on vacation, and you have just found out that a hurricane is approaching the island you are staying on. Your vacation group must decide between staying on the island or leaving immediately. The last flight leaves in one hour. The group needs to stay together, but if the group discusses this, it could take awhile to reach consensus. Which decision style is appropriate?

command or autocratic style

Prospect Theory

complex analysis of how individuals make decisions when there is risk involved. Most strictly rational approaches to questions of financial risk rely on the principle of expected value, where the probability of an event is multiplied by the resulting value should the event occur. Weighing potential loss and gain

Sally and Aamir's company are celebrating a hard-won deal. Sally manages the team who created the product, and believes it was the high quality of the product that cinched the deal. Aamir manages the sales team, and he believes it was the long hours of work put in by his salespeople that sealed the deal. These are examples of

confirmation bias

positional

decision-making approach is "looser," setting up strong positions on the board and preparing to react to the opponent. A player using this strategy increases flexibility, creating options as opposed to forcing a single sequence.

Analytics that try to understand and describe what has taken place are ________. The analyst attempts to explain what the data reveals about the events that have occurred, the relationships between different events and market forces, and why the numbers are what they are.

descriptive

E-commerce creates a great deal of data on how consumers interact with a website. L.L.Bean keeps records that show how quickly consumers make decisions, how many alternatives they explore, and whether they stop without completing a purchase. When a manager sees an issue and proposes a solution, the company can easily test the solution. This is an example of

evidence based decision making

In 2015, Walmart's revenue fell for the first time in Walmart's 45-year run as a public company. Shoppers were fed up. They complained of dirty bathrooms, empty shelves, endless checkout lines, and impossible-to-find employees. Only 16 percent of stores were meeting the company's customer service goals. Walmart decided to conduct an experiment. with heresy! They would raised wages, increased training, and provided employees with give more consistent regular schedules. Early tests showed a strong positive response from customers. By early 2016, the proportion of stores hitting their targeted customer-service ratings had rebounded to 75 percent. Sales were rising again! Walmart executives switched from the norm—cutting costs—to ________.

evidence based decision making

Delphi technique

experts respond to questionnaires in a number of rounds. Questions narrow in on a specific topic as the rounds progress. The first questionnaire consists of open-ended questions and aims to identify broad issues related to the issue at hand. The responses are analyzed qualitatively by sorting, categorizing, and searching for common themes. These responses are then used to construct the second questionnaire, which is more specific and aims to rate or rank the items in terms of their significance. Subsequent questionnaires can narrow down responses further.

Computer CORE offers computer education to adults. Volunteers teach the classes. When CORE needed to update the presentations, the executive director created a committee of teachers. Each teacher had taken unique approaches to the presentations. The teachers were slow to agree, but they eventually chose a format and structure for new presentations. What were the advantages of using a committee?

greater expertise, a group buy-in, and support for the choices

What are distinct disadvantages of group decision making?

groups may suffer from process losses such as coordination and communication problems

Suresh owns a shoe store, and he likes to give his employees a lot of say in management decisions. He's deciding what styles to carry for the upcoming back-to-school rush, so he calls a meeting with his eight part-time employees to get their ideas. Three of his employees come to the meeting sporting sneakers from a new brand Suresh has never heard of before. They tell him that they heard about the brand on Instagram, and they think it's going to be the next big thing. Several of the other employees get excited about the shoes and ask where they can get them. Suresh's most experienced employee, Delilah, tries to ask about the company making the shoes and its marketing strategy, but she eventually gets swept up in the excitement, too. Suresh orders 1,000 pairs to stock for the back-to-school rush, but he quickly realizes that what people really wanted was the newest sneaker from Nike. The trend his employees predicted never materialize, and he eventually has to sell the shoes at a deep discount. What drawback of group decision making did Suresh experience?

groupthink

combinational

has a final outcome in mind, making a series of moves that try to link the initial position with the final outcome in a firm, narrow, and more certain way.

Looking to the past and incorrectly believing you can predict the future based on past knowledge or understanding is the definition of:

hindsight bias

The rational decision-making process

involves careful, methodical steps. The more carefully and strictly these steps are followed, the more rational the process is. Steps: -identify the problem -establish decision criteria -weigh decision criteria -generate alternatives -evaluate alternatives -select best alternative

Optimizing

involves collecting as much data as possible and trying to find the optimal choice.

Brainstorming

is an idea-generating process that specifically encourages all alternatives while withholding any criticism of those alternatives.

democratic method

is when all group members are given equal authority in a formal voting system. Even then, there are choices. A decision might be accepted by a simple majority or unanimity might be required. The most favored method currently is through consensus.

Affective conflict

is when the dialogue becomes "personal" and people become more aggressive or start to disengage. The mindset moves from "we have a problem" to "you are the problem." Opposition is seen as something to be thwarted rather than explored. The goal becomes winning for its own sake rather than the best possible solution

Cognitive conflict

is where people focus on the tasks or issues and debate and thrash these out and come to a creative solution. The parties might argue and exchange views vigorously, yet there is two-way communication and an openness to hearing each other. The goal is to find the best possible solution rather than to win the argument. Alternative perspectives are seen as valuable rather than threatening.

Meetings to generate ideas favor first speakers. People hoping to look smart and productive will blurt out obvious ideas first. Everyone else then rallies around those ideas both internally and externally. The best thinking is often undeveloped. Professors Nordgren and Thompson favor a write first, talk second approach. Thompson calls this "brainwriting." Another name is

nominal group technique

What group decision-making process uses a series of written responses to a series of questionnaires instead of meeting in person to make decisions?

nominal group technique

Frederick Corey, the vice provost of undergraduate education at Arizona State University, argues that colleges are driving by looking in the rear-view mirror. They use descriptive statistics on alumni to make policy about future students, so the data is years behind today's event. He advocates for

predictive analytics

If current trends are projected to continue in the future, decision makers will have access to rich insight. This work of projecting future trends is known as

predictive analytics

intuitive

rapidly consolidating data and producing a decision almost immediately. The subconscious mind works best with repeated experiences.

Compare the way a novice and an experienced driver make decisions. The novice needs to rely on controlled processing, requiring focused concentration on a sequence of operations that require mental effort and are easily disrupted by any distractions. In contrast, the well-practiced driver, relying on automatic processes, can carry out the same task efficiently while engaged in other activities (such as chatting with a passenger or tuning in to a radio station). Of course, he or she can always switch to more deliberative processing when necessary, such as conditions of extreme weather, heavy traffic or mechanical failure. The two processes for decision making are ________.

rational and intuitive

Bob is very analytical in his approach to decisions. He looks at the available data and weighs each factor. His approach takes more time but often finds cost savings or improves quality. His approach is called

rational decision making

Natalie, a location scout, has been very busy with work and noticed her cell phone is breaking down. She likes her old Pamsung phone but needs to get one that has faster network abilities, is not more than two hundred dollars, has international roaming capabilities, and is water-resistant if possible. She thinks maybe the latest Phonei would work, but then she realizes the most important criteria are water resistance and international roaming. After visiting five stores and spending countless hours online researching the various phones, she evaluates her options and decides to go with the Yons Aperix Z3v. She buys the phone and sets out to find her latest movie location. What decision model did Natalie use to pick her new phone?

rational decision making

Derek Muller of Veritasium offers a bet. He will flip a coin. On heads, you will win $10, and on tails, you will pay him $10. The expected value is $0, so the bet is fair. According to prospect theory, most people will

reject this bet as too risky

rational

requires more effort, using logic and reason to make a choice.

Robust Decisions

revolve around the inability to predict the future with certainty. Rather than rely on an imperfect analysis to determine the "best" decision, a robust decision provides a plan that will work in light of numerous uncertainties. It supposes that a number of situations are all possible and provides a solution pathway that will be successful if any of those situations should arise. This pathway could potentially be a single solution that works in any of the likely future scenarios, or it might provide separate responses to be enacted depending on how the future uncertainties unfold.

Meg is picking classes for college. She wants a career where she can help people, and she likes languages. She signs up for Arabic classes. In case this doesn't work out, she also takes economics classes. Economics majors have more success getting jobs after college than language majors. Her decision is

robust

For most of our decisions, we do not try to optimize the decision but simply make a good decision and move on. This is called

satisfying

nominal group technique

similar to brainstorming, in that it encourages all members to contribute their ideas. However, it is different from brainstorming in that it limits discussion during the decision-making process. Group members are all present but members operate independently and use the following four-step process in idea generating: Members independently write down ideas on a given problem. Each member presents one idea to the group. Each member takes a turn, presenting a single idea, until all ideas have been shared. The group engages in discussion on the ideas for clarity and evaluation. Each member independently rank-orders the ideas. The idea with the highest aggregate ranking determines the final decision.

Even when a group's decision process is well-organized, there is no way around the process being

slower and more expensive than individual decision making

If group members have a legitimate opportunity to participate in the decision-making process,

they will be far more likely to support the decision

Decision Trees

useful tools, particularly for situations where financial data and probability of outcomes are relatively reliable. They are used to compare the costs and likely values of decision pathways that a business might take. They often include decision alternatives that lead to multiple possible outcomes, with the likelihood of each outcome being measured numerically. a branched flowchart showing multiple pathways for potential decisions and outcomes. The tree starts with what is called a decision node, which signifies that a decision must be made.

The Gilbreths have a large family with 12 children. They need to pick a new car that will serve everyone, including 4 teenagers who are driving age or approaching it. Their criteria include safety, gas mileage, reliability, and seating for 14. They are following the rational decision-making process so that they can have a family discussion without heated words. What is the next step?

weight the decision criteria