Chapter 7 Management

Heuristics

Strategies that simplify the process of making decisions

Framing bias

The tendency of decision makers to be influenced by the way a situation or problem is presented to them

Hindsight bias

The tendency of people to view events as being more predictable than they really are

Representative bias

The tendency to generalize from a small sample or a single event

Anchoring and adjustment bias

The tendency to make decisions based on an initial figure

implementation, data issues, and cost.

The toughest challenges to overcome with artificial intelligence are

Data Analytics

To decide how much an insurance policy should cost a customer, underwriters use ________, such as historical industry trends and loan characteristics, to predict risk levels.

Sunk-cost bias

Way of thinking in which managers add up all the money already spent on a project and conclude it is too costly to simply abandon it; also called the sunk-cost fallacy

True

When brainstorming, you should go for quantity over quality.

Bounded rationality

the ability of decision makers to be rational is limited by numerous constraints

Nonrational models of decision making

they assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimum

Decision trees

Graph of decisions and their possible consequences, used to create a plan to reach a goal

Decision Tree

A ________ is a graph of decisions and their possible consequences.

Decision

A choice made from among available alternatives

Groupthink

A cohesive group's blind unwillingness to consider alternatives. This occurs when group members strive for agreement among themselves for the sake of unanimity and avoid accurately assessing the decision situation

Examples of nonrational models

-intuition -bounded rationality

Evidence-Based Decision Making Seven Implementation Principles:

1. Treat your organization as an unfinished prototype. 2. No brag, just facts. 3. See yourself and your organization as outsiders do. 4. Evidence-based management is not just for senior executives. 5. Like everything else, you still need to sell it. 6. If all else fails, slow the spread of bad practice. 7. The best diagnostic question: What happens when people fail?

4 steps in rational decision making

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

Rational model of decision making

Also called the classical model; the style of decision making that explains how managers should make decisions; it assumes that managers will make logical decisions that are the optimal means of furthering the organization's best interests

Overconfidence bias

Bias in which people's subjective confidence in their decision making is greater than their objective accuracy

Confirmation bias

Biased way of thinking in which people seek information to support their point of view and discount data that do not support it

have a high tolerance for ambiguity.

Colin, who is a paralegal for a powerful Manhattan law firm, likes the fast pace of his work and the fact that things are always changing there. Colin can be said to

True

Evidence-based management includes making decisions based on what actually works versus what ought to work.

True

In the late 1800s, David began selling books door-to-door. To entice purchases from female customers, he would include perfume samples as thank you gifts. When the perfume became more popular than the books, David shifted the focus of his business that lead to his founding of Avon. This is an example of a manager viewing his organization as an unfinished, changeable prototype that won't be ruined by dangerous new ideas.

False

Knowing your decision-making style does not really help you determine your strengths and weaknesses as a decision maker, but it can help you understand when a decision needs to be made.

Sham participation

Occurs when powerless, but useful individuals are selected by leaders to rubber stamp decisions and work hard to implement them

Categorical thinking bias

Tendency of decision makers to classify people or information based on observed or inferred characteristics

Artificial intelligence (AI)

The ability of a computer system to perform tasks that normally require human intelligence

Behavioral Style

The most people-oriented decision makers

Decision making

The process of identifying and choosing alternative courses of action

Escalation of commitment bias

When decision makers increase their commitment to a project despite negative information about it

non rational

Which models of decision making describe how managers actually make decisions?

Groups have a greater pool of knowledge.

Why should you encourage Derin to use groups to make decisions?

Directive Style

action-oriented decision makers who focus on facts

4 general decision making styles

analytical, conceptual, directive, behavioral

Analytical Style

careful decision makers who like lots of information and alternative choices

Conceptual Style

decision makers who rely on intuition and have a long-term perspective

Big data

stores of data so vast that conventional database management systems cannot handle them.