Ch 7

Two nonrational models

(1) satisficing and (2) intuition

Devil's Advocacy

Assigns someone the role of critic

Disadvantages of Group Decision Making

The quality of a group's decision can be influenced by a few vocal people who dominate the discussion. Groups are prone to groupthink, which occurs when group members strive for agreement among themselves for the sake of unanimity and avoid accurately assessing the decision situation. Groups often satisfice by seeking a decision that is "good enough" rather than "best." Goal displacement can occur when considerations other than the primary goal rise to the fore, such as rivals trying to win an argument

Challenges to Being Evidence Based

There's too much evidence. There's not enough good evidence. The evidence doesn't quite apply. People are trying to mislead you. You are trying to mislead you. The side effects outweigh the cure. Stories are more persuasive, anyway.

Evidence-based management implementation principles:

Treat your organization as an unfinished prototype—not something that will be ruined by dangerous new ideas or that is impossible to change. Follow the slogan "no brag, just facts" by ignoring assertions made with complete disregard for facts. See yourself and your organization as others do without inflated views of your talents and prospects for success. Ensure everyone is guided by the responsibility to gather and act on quantitative and qualitative data, not just for senior executives. You need to sell evidence-based decision making by using vivid stories to sell preferred practices. If all else fails, slow the spread of bad practices through so-called "evidence-based misbehavior." Use the best diagnostic question: what happens when people fail?

Stage 4: Implement and Evaluate the Solution Chosen.

With some decisions, implementation is straightforward but for others, the implementation can be quite difficult. For implementation to be successful, you need to plan carefully and be sensitive to those affected. You also need to follow-up and evaluate the results of the decision and take action. If it is not working, there are some possibilities: you may need to give it more time, change it slightly, try another alternative, or start over.

Analytics

business analytics, is the term used for sophisticated forms of business data analysis

Specialization improves efficiency

but it also leads to tunnel vision and blind spots

Nonrational models of decision making

explain how managers do make decisions assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimum decisions are descriptive rather than prescriptive; they describe how managers actually make decisions

representativeness bias

generalizing from a small sample or single event

electronic brainstorming, or brainwriting

in which group members come together over a computer network to generate ideas.

availability bias

using only the readily available information from memory to make judgments

escalation of commitment bias

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

sunk-cost bias

continuing because of money already spent.

ethics officer

someone trained about matters of ethics in the workplace, particularly about resolving ethical dilemmas.

Big Data

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

Heuristics

strategies that simplify the process of making decisions but can also be barriers to high-quality decision making.

Value orientation

the extent to which a person focuses on either task and technical concerns or people and social concerns

Tolerance for ambiguity

the extent to which a person has a high need for structure or control in his or her life

Big Data analytics

the process of examining large amounts of data of a variety of types to uncover hidden patterns, unknown correlations, and other useful information

Advantages of Group Decision Making

A group possesses more information and knowledge than one individual acting alone. Individuals with different backgrounds and experiences bring varied perspectives to diagnosing and solving problems. A group of people can brainstorm or otherwise bring greater intellectual stimulation and creativity to the decision-making process than is usually possible with one person acting alone. Participating in a decision increases group members' understanding about why a decision is being made. If you've been part of the group that has bought into the final decision, you're more apt to be committed to seeing that the course of action is successfully implemented

Project post-mortem

A review of recent decisions in order to identify possible future improvements

Stage 2: Think Up Alternative Solutions

After you've identified the problem or opportunity and diagnosed its causes, you need to come up with alternative solutions. You will want to consider both the obvious and the creative

decision

a choice made from among available alternatives

Predictive modeling

a data-mining technique used to predict future behavior and anticipate the consequences of change.

decision tree

a graph of decisions and their possible consequences; it is used to create a plan to reach a goal

Brainstorming

a technique used to help groups generate multiple ideas and alternatives for solving problems

The rational model of decision making

also called the classical model, explains how managers should make decisions assumes managers will make logical decisions that will be the optimum in furthering the organization's best interests

decision-making style

reflects the combination of how an individual perceives and responds to information.

confirmation bias

seeking information to support one's point of view and discounting data that do not.

Decision making

the process of identifying and choosing alternative courses of action

hindsight bias

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

framing bias

the tendency to be influenced by the way a situation or problem is presented

Bounded Rationality and the Satisficing Model

Herbert Simon's research found that managers could not act truly logically because their rationality was bounded by so many restrictions the concept suggests that the ability of decision makers to be rational is limited by numerous constraints managers don't make an exhaustive search for the best alternative, but rather they follow the satisficing model—that is, managers seek alternatives until they find one that is satisfactory, not optimal

The rational model makes three unrealistic assumptions

Managers have complete and error-free information about all alternative courses of action and their consequences. Managers are able to make an unemotional analysis, with no prejudices or emotional blind spots. Managers are able to make the best decision for the organization

Conceptual

People with this style have a high tolerance for ambiguity and focus on the people/social aspects of a work situation. They adopt a long-term perspective and rely on intuition and discussions with others to acquire information. This style can foster an indecisive approach to decision making

Symptoms of Groupthink

Sense of invulnerability: an illusion that breeds excessive optimism and risk taking and the ignoring of ethical implications. Rationalization: protects pet assumptions underlying the group's decisions from critical questions. Illusion of unanimity and peer pressure: a member's silence is interpreted to mean consent and peer pressure leads members to question a dissenters' loyalty The wisdom of crowds: groupthink's pressure to conform often leads members with different ideas to censor themselves, limiting the possibilities for collective wisdom

Four Stages of Rational Decision Making

Stage 1: Identify the Problem or Opportunity Stage 2: Think Up Alternative Solutions Stage 3: Evaluate Alternatives and Select a Solution Stage 4: Implement and Evaluate the Solution Chosen

The rational model is prescriptive

describing how managers ought to make decisions, not how managers actually make decisions

Dialectic Method

Calls for managers to foster a structured dialogue or debate of opposing viewpoints prior to making a decision.

Stage 3: Evaluate Alternatives and Select a Solution

If an alternative isn't ethical, you shouldn't give it a second look. A proposed solution may not be feasible for a variety of reasons, including high costs, unavailable technology, or resistant customers. If the solution ultimately will not be effective in the long-run, a short-term "good enough" solution may not be the best option

The Intuition Model

Intuition that stems from expertise—a person's explicit and tacit knowledge about a person, situation, object, or decision opportunity—is known as a holistic hunch Intuition based on feelings—the involuntary emotional response to those same matters—is known as automated experience. The benefits of intuition are that it can speed up decision making when deadlines are tight and it can be helpful when resources are limited. A drawback of intuition is that others may not see your logic, and, therefore, it might be hard to convince them that your decision makes sense

Directive

People with this style have low tolerance for ambiguity and are oriented toward task and technical concerns. They are efficient, logical, practical, and systematic in their approach to solving problems. They can also be autocratic and focus on the short run.

Analytical

People with this style like a lot of information and alternative choices and may overanalyze a situation. They take longer to make decisions but also respond well to new or uncertain situations

Behavioral

People with this style work well with others, are supportive and receptive to suggestions. Because they tend to be nonconfrontational, they may adopt a wishy-washy approach to decision making.

Preventing Groupthink

Prevention is better than treatment or cure when dealing with groupthink, and it is important to allow criticism and other perspectives. Assign each group member the role of critical evaluator, able to actively voice objections and doubts. Subgroups within the group should be allowed to discuss and debate ideas. Once the group has reached a consensus, everyone should be encouraged to rethink his or her position to check for flaws. Outside experts should be used to introduce fresh perspectives. Different groups with different leaders should explore the same policy questions. Top-level executives should not use policy committees to rubber-stamp decisions that have already been made. When major alternatives are discussed, someone should be made the devil's advocate to try to uncover all negative factors

Stage 1: Identify the Problem or Opportunity

Problems are difficulties that inhibit the achievement of goals. Opportunities are situations that present possibilities for exceeding existing goals. How to change conditions from the present to the desirable is a matter of diagnosis, or analyzing the underlying causes

anchoring and adjustment bias

making decisions based on an initial figure.

Evidence-based management

means translating principles based on best evidence into organizational practice

Consensus

occurs when members are able to express their opinions and reach agreement to support the final decision

Ready-made solutions

one expert as best practices that have been captured and turned into standard operating procedures so that employees are better prepared to address regularly recurring problems

System 1

operates automatically and quickly; it is our fast, automatic, intuitive, and largely unconscious mode.

System 2

our slow, deliberate, analytical, and consciously effortful mode of reasoning

overconfidence bias

people's subjective confidence in their decision making being greater than their objective accuracy