Business Management - PART 2 - Chapter 9

Define Diagnosis and Analysis of Causes.

DIAGNOSIS is the step in the decision-making process in which managers analyze UNDERLYING CAUSAL FACTORS associated with the decision situation.

Why do managers make bad decisions?

The 6 biases are: 1. Being influenced by initial impressions 2. Justifying past decisions 3. Seeing what you want to see 4. Perpetuating the status quo 5. Being influenced by emotions 6. Overconfidence

What is a decision coach?

a person who provides hands-on help and feedback so that people can learn and practice new behaviors rather than refer to the default behavior of suppressing opinions that are contrary to the group. (used to avoid groupthink)

What are the 5 why's and why are they used?

a question-asking method used to explore the root cause underlying a particular problem. The first why generally produces a superficial explanation for the problem, and each subsequent why probes deeper into the causes of the problem and potential solutions.

What is point-counterpoint?

a technique which breaks a decision-making group into two subgroups and assigns them different, often competing, responsibilities. The groups then develop and exchange proposals and discuss and debate the various options until they arrive at a common set of understandings and recommendations.

Smart managers tap into knowledge of people throughout the organization, and sometimes even outside the organization, for __________________________________.

decision alternatives, for example, Canadian mining group Goldcorp offered a $575,000 prize to anyone who could identify rich drill sites. More than 1,400 technical experts in 50 countries offered alternatives to the problem.

When people slip into groupthink, the desire for harmony outweighs concerns over ______________________________.

decision quality

Define Develop Alternatives

develop possible alternative solutions that will respond to the needs of the situation and correct the underlying causes

What is an After Action Review?

disciplined procedure whereby managers invest time in reviewing the results of decisions on a regular basis and learn from them.

What is the meaning of a personal decision style?

distinctions among people with respect to how they evaluate problems, generate alternatives, and make choices.

Managers frequently use more than one leadership style in the workplace, but they typically have a _______________________ decision style.

dominant

Whether a decision is programmed or non-programmed, and regardless of whether managers choose the classical, administrative, or political model of decision making, SIX steps typically are associated with _______________________________. Study Exhibit 9.3.

effective decision making

Research suggests that many bad decisions are the result of what?

errors in judgment that originate in the human mind's limited capacity and in the natural biases managers unconsciously display during decision making.

According to Stanford University Professor Robert Sutton, they key to successful creative decision making is to do what?

fail early, fail often, and pull the plug early

Define Evaluation and Feedback

gathering information to determine how well the decision was implemented and whether it achieved its goals. Rose Acre Farms switched from caged hens to cage-free facitilites to address the growing concern of animal cruelty. Even though it was the more expensive option to build cageless facilities, they believed it was the right thing to do. Based on evaluation and feedback, they need to make some changes because some birds have died from suffocation inside nesting boxes.

What is a critical skill in today's fast-moving organizations?

having the ability to make fast, widely supported, high-quality decisions on a frequent basis.

Define Recognition of Decision Requirement

identifying a problem or opportunity. It requires surveillance of the internal and external environment for issues that merit executive attention.

What is a benefit of using hard evidence?

it can help take emotion out of the decision-making process, keep people relying on faulty assumptions, and help to limit confirmation bias.

What does 'know when to bail' mean?

know when to pull the plug when something isn't working.

Define 'Being Influenced by Emotion'

making a decision when you are angry, upset, or extremely happy might lead to a bad decision. A recent study showed that effective regulation of emotions was a characteristic of a higher-performing manager.

Define 'justifying past decisions'

making choices that justify their past decisions, even if those decisions no longer seem valid (e.g. sunken cost effect)

What is Analytical Style?

managers prefer complex solutions based on a lot of data

What does it mean to do a postmortem?

managers should reflect on and learn from every decision they make

What is confirmation bias?

occurs when a manger puts too much value on evidence the is consistent with a favored belief or viewpoint and discounts evidence that contradicts it. An example is the Tokyo Power Company (Tepco) delaying the decision to use seawater to cool nuclear reactors.

An ___________________________ exists when managers see potential accomplishment that exceeds specified current goals.

opportunity

Managers confront a decision requirement (i.e., they must make a decision) in the form of either a problem or an ___________________________.

opportunity

What is a drawback of brainstorming?

people in a group often want to conform with/agree with what others are saying, other may be concerned about pleasing the boss or impress colleagues.

A ________________________ occurs when organizational accomplishment is less than established goals and some aspect of performance is unsatisfactory.

problem

What is groupthink?

tendency of people in groups to suppress contrary opinions (i.e. to not share an opinion because it is different than the group's opinion)

Define 'being influenced by initial impressions'

the mind often gives disproportionate weight to the first information it receives. ANCHORING BIAS occurs when we allow initial impressions, statistics, and estimates to act as anchors to our subsequent thoughts and judgements.

The most successful managers are able to shift among decision styles based on ___________________________________.

the situation they are dealing with.

Define Implementation of the Chosen Alternative

the use of managerial, administrative, and persuasive abilities to ensure that the chosen alternative is carried out. The ultimate success of the chosen alternative depends on whether it can be translated into action.

What does it mean to 'play devil's advocate?'

to take on the role of challenging assumptions and assertions made by the group. This person's statements and questions can prevent premature consensus.

What is brainstorming?

uses a face-to-face interactive group to spontaneously suggest as many ideas as possible for solving a problem.

What is the sunken cost effect?

when a manager continues to pour money into a failing project, hoping to turn things around

Define 'Perpetuating the Status Quo'

when managers base decisions on what has worked in the past and may fail to explore new options, dig for additional information, or investigate new technologies. For example, GM stuck with its strategic decision to offer a multitude of brands long after there was clear evidence that trying to cover the whole range of the auto market was disastrous.

Define 'Seeing What You Want To See'

when people look for information that supports their existing instinct or point of view.

Define 'Being Overconfident'

when people overestimate their ability to predict uncertain outcomes.

What is risk propensity?

willingness to undertake risk with the opportunity of gaining an increased payoff. There is low and high risk propensity. Facebook would never have reached more than a billion users without Mark Zuckerberg's "move fast, break things" mind-set. This slogan was posted throughout the organization to prevent delay from too much analysis of alternatives.

What are the 4 major decision styles?

1. Directive Style 2. Analytical Style 3. Conceptual Style 4. Behavioral Style

What are the Six Stages of the Decision Making Process?

1. Recognition of Decision Requirement 2. Diagnosis and Analysis of Causes 3. Development of Alternatives 4. Selection of Desired Alternative 5. Implementation of Chosen Alternative 6. Evaluation and Feedback

Charles Kepner and Benjamin Tregoe, who conducted extensive studies of manger decision making, recommended that managers ask a series of questions to specify underlying causes, which included the following:

1. What is the state of disequilibrium affecting us? 2. When did it occur? 3. Where did it occur? 4. How did it occur? 5 To whom did it occur? 6. What is the urgency of the problem? 7. What is the interconnectedness of events? 8 What result came from which activity?

During the Recognition of Decision Requirement, where does information come from?

FORMAL sources of information such as periodic financial reports, performance reports, and other sources that are designed to discover problems before they become too serious. There are also INFORMAL sources of information such as talking to other managers, gathering opinions on how things are going, and seeking advice on which problems should be tackled or which opportunities embraced. For Example, Google offered free M&Ms to employees at work and they were eating too many, which was unhealthy. So the company analyzed the problem and experimented with ways to get people to each healthier snacks and drink more as well as consume free candy.

Who said "It isn't that they can't see the solution. It's that they can't see the problem?"

G.K. Chesterton

What is Conceptual Style?

Managers like a broad amount of information

What is Behavioral Style?

Managers with a deep concern for others

Innovative Decision Making

Mechanisms to help reduce bias-related decision errors: 1. Start with brainstorming 2. Use hard evidence 3. Engage in rigorous debate 4. Avoid groupthink 5. Know when to bail 6. Do a postmortem

What is Directive Style?

People who prefer simple, clear-cut solutions to problems

Define Selection of Desired Alternative. STUDY Exhibit 9.4

Selection of Desired Alternative. The best alternative is one in which the solution best fits the firm's overall goals and values and achieves the desired results using the fewest resources. Managers want to select the choice with the least amount of risk and uncertainty.

What is meant by evidence-based decision making?

a commitment to make more informed and intelligent decisions based on the best available facts and evidence, being alert to potential biases, and seeking and examining the evidence of rigor.

Why is recognizing decision requirements sometimes difficult?

because it often means integrating bits and pieces of information in novel ways.

What is electronic brainstorming?

brings people together in an interactive group over a computer network. One member writes an idea, another reads it and adds other ideas, and so on This generates about 40% more ideas than regular brainstorming because the approach is anonymous, people participate more freely.

What is meant by Engage in Rigorous Debate?

constructive conflict based on different points of view can bring a problem into focus, clarify people's ideas, stimulate creative thinking, and limit the role of bias.

What is meant by 'escalating commitment'?

continuing to invest time and money in a solution even when there is strong evidence that it is not appropriate. (know when to bail)