Management Midterm Chapter 4

bounded rationality

A concept suggesting that decision makers are limited by their values and unconscious reflexes, skills, and habits

state of risk

A condition in which the availability of each alternative and its potential payoffs and costs are all associated with probability estimates

state of uncertainty

A condition in which the decision maker does not know all the alternatives, the risks associated with each, or the likely consequences of each alternative

state of certainty

A condition in which the decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative

programmed decision

A decision that is relatively structured or recurs with some frequency (or both)

nonprogrammed decision

A decision that is relatively unstructured and occurs much less often than a programmed decision

administrative model

A decision-making model that argues that decision makers (1) use incomplete and imperfect information, (2) are constrained by bounded rationality, and (3) tend to "satisfice" when making decisions

interacting group or team

A decisionmaking group or team in which members openly discuss, argue about, and agree on the best alternative

Delphi group

A form of group decision making in which a group arrives at a consensus of expert opinion

classical decision model

A prescriptive approach to decision making that tells managers how they should make decisions; it assumes that managers are logical and rational and that their decisions will be in the organization's best interests

groupthink

A situation that occurs when a group or team's desire for consensus and cohesiveness overwhelms its desire to reach the best possible decision

nominal group

A structured technique used to generate creative and innovative alternatives or ideas

coalition

An informal alliance of individuals or groups formed to achieve a common goal

intuition

An innate belief about something, without conscious consideration

Which of the following decision-making models is based on the belief that human behavior is often imperfect?

Behavioral

Cheryl needs to replace her roof. She calls five roofers. After a week only one called her back, so she went with them. Cheryl used

Bounded rationality

For a major project for his employer, Jason wants to choose the management consulting team that will give his employer the best outcome. Which decision criteria should Jason use to maximize effectiveness?

Can't decide⎯Jason needs to know which criteria are most important to his employer.

Which of the following decision-making models is a prescriptive model?

Classical

After BP failed repeatedly to stop the oil spill, it gathered engineers from around the world to help find a solution. This was a(n) ____ group.

Delphi

Which of the following is NOT an example of an interacting group?

Delphi group

When Donald Rumsfeld was Secretary of Defense, he was a very strong-willed manager. He was often able to persuade generals and admirals to do what he thought was best. Which disadvantage of group decision making was that group experiencing?

Domination by one member

Amazon, maker of Kindle, could choose a touch screen which increases glare or non-touch screen for better viewing. They were in which step of the rational decision making model?

Evaluate the possible alternatives

College students can buy textbooks on Borders.com, Amazon, and their local bookstore. When they compare prices they are in which step of the rational decision making model?

Evaluate the possible alternatives

When a plant manager who is trying to reduce turnover of production workers notices that turnover has decreased by 10 percent four months after he instituted a new training program, at which step in the rational decision-making process is this manager?

Evaluating the results

The best alternative is the most ____ alternative.

effective

Which of the following is an advantage of group decision making when compared to individual decision making?

More alternatives are likely to be generated.

Which of the following is a disadvantage of group decision making?

More time will be needed to make the decision.

Which of the following types of groups is sometimes used to develop a consensus of expert opinion by getting a group of experts together to generate and then discuss alternatives?

Nominal

Which of the following is an accepted technique for minimizing groupthink in group decision processes?

Only "use of a devil's advocate" and "use of critical evaluation of alternatives."

steps in rational decision making

Recognize and define the decision situation; identify appropriate alternatives; evaluate each alternative in terms of its feasibility, satisfactoriness, and consequences; select the best alternative; implement the chosen alternative; and follow up and evaluate the results of the chosen alternative

decision making

The act of choosing one alternative from among a set of alternatives

Katerina is the leader of a standing committee, and she is trying to avoid the groupthink that can often occur in group decision making. Which of the following techniques should she consider?

a. Assigning one person to act as a devil's advocate b. Keeping her preferences secret until the end c. Requesting that divergent viewpoints be considered ALL OF THESE

Which of the following is a true statement?

a. The classical model of decision making is a prescriptive model. b. The administrative model of decision making is a descriptive model. c. The classical model focuses on the real world, while the administrative model shows us the ideal world. NONE OF THESE

According to the concept of bounded rationality, decision makers are limited by

a. less than complete information. b. their values. c. their habits. d. limited time. ALL OF THESE

Tony Hayward, former CEO of BP, made statements and decisions about vacations during the oil spill that led to him stepping down as CEO. His innate belief without conscious consideration that attending a polo match during the crises was ok shows he used

bad intuition

When people are asked "if you fold a piece of paper 50 times, how high will it be?" they tend, at best, to say a tall building. In reality it would reach to the sun. Human decisions are limited by ____.

bounded rationality

Keisha is Vice President of accounting, and she has to decide which computer software to purchase for her department. She has looked at all of the possible alternatives and is leaning toward the system with which she is most familiar. This is an example of

bounded rationality.

"Decision making under risk" means the decision maker

can estimate decision data with some probability.

In the classical decision making model, "optimization" means..

choosing the alternative with the best overall expected outcomes.

Tim thinks he deserves a promotion. He talks with HR about his outstanding performance. HR knows that Tim's performance is only a little better than the others and if Tim gets promoted other directors will ask for promotion to VP. They will be turned down and the long term affect will be several disgruntled managers. Tim's promotion failed the test for ____.

consequences

James is responsible for his boss's travel arrangements. James selects the train tickets to purchase. James in engaged in

decision making

The process of choosing one alternative from among many alternatives is called

decision making

The senior pastor at Princeton Alliance Church needs to select a pastor of adult ministry. This is an example of

decision making under uncertainty

One advantage of group decision making is

diversity of members' backgrounds.

The Obama administration continued to push through health care reform even though its version was supported by less than half of the American public. From a political perspective the administration showed ____.

escalation of commitment

Tim knows he deserves a raise. He talks with HR about his outstanding performance. HR describes what a bad year the company is having and that there is no money for raises. Tim's raise failed the test for ____.

feasibility

A disadvantage of using interacting groups to make decisions is

group politics.

Groups that interact electronically are more likely to express dissenting views, than groups that interact face to face. This knowledge would be helpful in minimizing ____.

groupthink

All of the following are advantages of group decision making EXCEPT

groupthink may occur.

Eric is communications director. The New York Times wants to interview his boss. Eric suspects the reporter is not objective, so he declines the interview. Eric used ____ to make the decision.

intuition

After BP failed repeatedly to stop the oil spill, it gathered engineers from around the world for a series of face-to-face meetings to help find a solution. This was a(n) ____ group.

nominal

Accenture and Acxiom executives formed a strategic alliance between the companies. This is a(n) ____ decision.

nonprogrammed

Decisions by managers of Time Warner to sell off Warner Music Group's DVD and CD manufacturing, printing, packaging, physical distribution, and merchandising business was an example of a(n) ____ decision.

nonprogrammer

Bar code scanning computers at checkout have greatly simplified the inventory ____ decisions.

programmed

John does not like his current job. He has an offer for a good job, with better pay, but it requires relocating to an area with which he is not familiar. John is reluctant to change jobs because of

risk propensity

Bounded rationality is assumed in

the behavioral model

Tim knows he deserves a promotion. He talks with HR about his outstanding performance. HR has been told by headquarters to maintain the number of vice presidents at the current level. Tim's promotion failed the test for ____

satisfactoriness

Herbert Simon noted that managers generally fail to make rational decisions because they are limited by their own values, skills, habits, and unconscious reflexes as well as by incomplete information. What name did Simon give this phenomenon?

Bounded rationality

Citicorp chose to settle an SEC lawsuit for $75 million. When executives compare the cost of the settlement to those of other financial institutions they are in which step of the rational decision making model?

Follow up and evaluate the results

Which of the following disadvantages of group decisions typically results from the group being very cohesive?

Groupthink

Who was one of the first experts to develop the administrative model of decision making?

Herbert Simon

During the recession many Americans lost their jobs. They could spend less, spend savings, or continue their lifestyle by using credit. They were in which step of the rational decision making model?

Identify alternatives

When the price of oil came down, demand for full size SUVs increased. Automakers make more profit on large vehicles than small vehicles. Automakers chose to increase production of full size SUVs. The increase in production was which step in the rational decision making model?

Implement the chosen alternative

Which of the following is the most common form of a decision-making group?

Interacting

decision-making process

Recognizing and defining the nature of a decision situation, identifying alternatives, choosing the best alternative, and putting it into practice

When a marketing manager decides to launch a new product because it was the first product he investigated that showed profits over the minimum required threshold, what type of decision process is this manager using?

Satisficing

Amazon, maker of Kindle, chose to stay with a black and white screen for greater readability. They were in which step of the rational decision making model?

Select the alternative

Joyce wants to decrease turnover. She can change hiring practices, increase benefits, increase wages, or provide a yearend bonus. She chooses the yearend bonus because it keeps payroll lower and should quickly affect turnover. Joyce is in which step in the decision-making process?

Selecting which alternative to implement

risk propensity

The extent to which a decision maker is willing to gamble when making a decision

satisficing

The tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency

escalation of commitment

When a decision maker stays with a decision even when it appears to be wrong

When Jeffrey Gundlach left TCW group, forty fellow employees went with him to start a new company. There were ____.

a coalition

If you were asked to help a manager establish a nominal group, which of the following would you recommend?

a. Alternatives are listed on a flip chart. b. The alternative with the most votes is the solution. c. Members are permitted to ask questions only for clarification. ALL OF THESE

For his work in developing the administrative model to describe how managers make decisions in the real world, Herbert Simon won the Nobel Prize in

economics

Rahda offered to buy a home. Her realtor told her there is an 80% chance her offer price will be accepted. She is operating in a

state of risk

The administrative model of decision making assumes that managers are imperfect. This means that managers

suffer from human biases.