MGT 551- Chapter 8

Groupthink

Pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision

Nominal Group Technique

Provides a more structured way to generate alternatives in writing and gives each manager more time and opportunity to come up with potential solutions - Useful when an issue is controversial and when different managers might be expected to champion different courses of action

The Rational Approach

State the situational goal Identify the problem Determine the decision type Generate alternatives Evaluate alternatives Choose an alternative Implement the plan Control: measure and adjust

Characteristics of Non-Programmed Decisions

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Characteristics of Programmed Decisions

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Potential Advantages to Group Decision Making

- Able to draw on combined skills of group members - Improve ability to generate feasible alternatives - Choices less likely to fall victim to bias

Potential Disadvantages to Group Decision Making

- Can take much longer than individuals to make decisions - Can be difficult to get two or more managers to agree because of different interests and preferences - Can be undermined by biases

Heuristics

- Rules of thumb that simplify the process of making decisions. - Decision makers use heuristics to deal with bounded rationality.

Delphi Technique

- Written approach to creative problem solving. - Group leader writes a statement of the problem to which managers respond - Questionnaire is sent to managers to generate solutions - Team of managers summarizes the responses and results are sent back to the participants - Process is repeated until a consensus is reached

Six Steps in Non- Programmed Decision Making

1. Recognize the need for a decision 2. Generate alternatives 3. Assess alternatives 4. Choose among alternatives 5. Implement the chosen alternative 6. Learn from feedback

Decision Making Approach:

1. Understand the Goal 2. Identify the Problem 3. Generate Alternatives (Realistically) 4. Evaluate Alternatives (Realistically) 5. Choose Best Alternative for the Situation 6. Implement the Plan 7. Evaluate Results 8. Adjust or Repeat Process if Necessary

The Administrative Model

A descriptive model approach to decision making that explains why decision making is inherently uncertain and risky and why managers can rarely make decisions in the manner prescribed by the classical model

Classical Model of Decision Making (Rational Approach)

A prescriptive model of decision making that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action.

Problem Solving

A special form of non-programmed decision-making in which the issue is unique—it requires developing and evaluating alternatives

Decision Rule

A statement that tells a decision-maker which alternative to choose based on the characteristics of the decision situation

Prior Hypothesis Bias

Allowing strong prior beliefs about a relationship between variables to influence decisions based on these beliefs even when evidence shows they are wrong

Prospect Theory

Argues that when people make decisions under a condition of risk they are more motivated to avoid losses than they are to seek gains

Condition of Risk

Certainty of an outcome is unknown but there is enough information to estimate probabilities of various outcomes

Escalating Commitment

Committing considerable resources to a project and then committing more even if evidence shows the project is failing

Reactor

Decisions are a last option process that occurs due to some other event

Defender

Decisions are made only in defense

Intrapreneurs

Individuals (managers, scientists, or researchers) who work inside an existing organization and notice an opportunity for product improvements and are responsible for managing the product development process

Entrepreneurs

Individuals who notice opportunities and take the responsibility for mobilizing the resources necessary to produce new and improved goods and services.

Ambiguous Information

Information whose meaning is not clear allowing it to be interpreted in multiple or conflicting ways.

Satisficing

Is examining alternatives only until a solution that meets minimal requirements is found.

Sub-Optimizing

Knowingly accepting less than the best possible outcome to avoid unintended negative effects on other aspects of the organization.

Condition of Amiguity

Neither the problem nor the alternatives are clear.

Agency Theory

Occurs when one person or entity (agent) is able to make decisions on behalf of, or that impact, another person or entity (principal). The dilemma exists because sometimes the agent is motivated to act in his own best interests rather than those of the principal

Non-Rrogrammed Decision

One that recurs infrequently and for which there is no previously established decision rule

Programmed Decision

One that recurs often enough for a decision rule to be developed

Condition of Certainity

Outcomes of each alternative are known

Reason for Making Decision:

Survival Necessity Standard Requirement Comfort or Cosmetic Perceived Duty

Creativity

The ability to generate new ideas or to conceive of new perspectives on existing ideas

Representativeness

The decision maker incorrectly generalizes a decision from a small sample or a single episode

Decision Making

The process by which managers respond to opportunities and threats that confront them by analyzing options and making determinations about specific organizational goals and courses of action.

Illusion of Control

The tendency to overestimate one's own ability to control activities and events

Condition of Uncertainty

There is insufficient information to estimate the probability of possible outcomes

Bounded Rationality

Time and Cost Restraints Perception of Information Information Condition Reason for Decision Decision Strategy

Reasoned Judgment

decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives

Intuition

feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering and result in on-the-spot decisions

Group Decision Making (Collaborative Decision Making)

is a situation where individuals collectively make a choice from the alternatives before them.

Analyzer

observes prospectors and moves when they feel the decision has been shown to be correct and the time is right

Prospector

pioneer, risk taker, first mover, leader

A decision is needed because __________

there is a discrepancy between an existing and a desired state of affairs.