Chapter 11 Decision Making

Operational Decisions

-Day to Day decisions that run the organization. -Employees in an organization.

Tactical Decisions

-Decisions on how things will be implemented and completed. -Generally made by managers.

Non-programmed Decisions

-Unique and important. -Require conscious thinking, information gathering and consideration of alternatives. -Careful balance of timelines and available information.

Recommendations to Avoid Groupthink- Group Leaders Should:

-Break the group into two subgroups from time to time. -Have more than one group work on the same problem if time and resources allow it. This makes sense for highly critical decisions. -Remain impartial and refrain from stating preferences at the outset of decisions. -Set a tone of encouraging critical evaluations throughout deliberations. -Create an anonymous feedback channel where all group members can contribute to if desired.

Programmed Decisions

-Decisions that occur with enough frequency that our response is almost automatic. -The automatic response we use is called the decision rule.

Strategic Decisions

-Decisions that set the course of the organization. -Typically made by top management teams, C-level executives and Board of Directors. (Top Management Teams, CEO's)

Recommendations to Avoid Groupthink- Groups Should:

-Discuss the symptoms of groupthink and how to avoid them. -Assign a rotating devil's advocate to every meeting -Invite experts or qualified colleagues who are not part of the core decision-making group to attend meetings, and get reactions from outsiders on a regular basis and share these with the group. -Encourage a culture of difference where different ideas are valued. -Debate the ethical implications of the decisions and potential solutions being considered.

Rational Decision- Making Model

-Follows a specific process and is especially effective in situations where the goal is the maximize the quality of outcomes. -Most successful when objectives and foals are clearly outlined.

Intuitive

-Goals are unclear. -There is time pressure and analysis paralysis would be costly. -You have experience with the problem.

Operational Decision Examples

-How often should I communicate with my new coworkers? -What should I say to customers about our new product? -How will I balance my new work demands?

Rational Examples

-Information on alternatives can be gathered and quantified. -The decision is important. -You are trying to maximize your outcome.

Bounded Rationality Model

-Making a "good enough" choice. -Acknowledges limitations in decision-making. -Prone to harbor satisficing behavior. -Accepting the first solution that meets minimum criteria.

Intuitive Decision Making

-Making decisions without conscious reasoning. -Scan the environment in a situation and look for a pattern. -Once pattern is recognized, use prior experience, knowledge and training to develop a solution. -Solutions tested in a mental model to understand how well it might work. -Once a suitable solution identified, put into action.

Recommendations to Avoid Groupthink- Individuals Should:

-Monitor their own behavior for signs of groupthink and modify behavior if needed. -Check themselves for self-censorship. -Carefully avoid mindguard behaviors. -Avoid putting pressure on other group members to conform. -Remind members of the ground rules for avoiding groupthink if they get off track.

Potential Challenges to Decision Making

-Overconfidence Bias -Hindsight Bias -Anchoring -Framing Bias -Escalating Commitment

Decision Making Approaches (4)

-Rational Decision-Making Model -Bounded Rationality Model -Intuitive Decision- Making Model -Creative Decision- Making Model

Developing Your Own Personal Decision-Making Skills

-Review your new learning, look for opportunities to practice making good decisions (and avoid making poor decisions). -Conduct project "premortems". -Delve into "what if" scenarios. -Discussion: Consider how you might use the premortem technique on class project.

Decision Making

-Selecting choices among alternative courses of action. -Decisions have consequences of varying degrees. Ask yourself: 1.Is the decision fair? 2.Will this decision make me feel better or worse? 3.Are any rules broken when making this decision? 4.Are any laws broken when making this decision? 5.What feelings would I have if this were broadcast publicly?

Strategic Decision Examples

-Should we merge with another company? -Should we pursue a new product line? -Should we downsize our organization?

Creative

-Solutions to the problem are not clear. -New solutions need to be generated. -You have time to immerse yourself in the issues.

Improving Creativity

-Team Composition -Team Process -Leadership -Culture

Bounded Rationality

-The minimum criteria are clear. -You do not have or you are not willing to invest much time to making the decision. -You are not trying to maximize your outcome.

Tactical Decision Examples

-What should we do to help facilitate employees from the two companies working together? -How should we market the new product line? -Who should be let go when we downsize?

Characteristics of Groupthink

1.Illusion of invulnerability. 2.Collective rationalizations. 3.An unquestioned belief in the groups' inherent morality. 4.Stereotyped views of out-groups. 5.Direct pressure on members who go against any of the group's stereotypes. 6.Self-censorship. 7.Illusions of unanimity. 8.Emergence of self-appointed mindguards.

Tools/Techniques for Making Better Decisions

1.Nominal group technique. 2.Delphi technique. 3.Majority rule. 4.Consensus. 5.Group decision support. systems. 6.Decision trees.

Using the example presented above, you should turn over the card with the 'E' and the to determine whether the rule was true or not.

7

Deduction can be thought of as:

A kind of reasoning process where the conclusion follows directly from the initial premise

The tendency to rely on information that quickly comes to mind when trying to make a decision.

Availability Heuristic

What type of inference provides a mathematical model for incorporating existing beliefs with new data in order to make an educated guess?

Bayesian

The expected utility hypothesis states that given the right information, people will generally:

Choose the action that is most likely to lead to the highest expected value

Decision making is:

Choosing a specific course of behavioral actions from among many possibilities

People are generally worse at correctly identifying a syllogism as invalid than they are at establishing that they are valid. This suggests that there is a type of _________________ when evaluating syllogisms.

Confirmation bias

The belief bias and atmosphere effect suggests that people:

Do not analyze syllogisms by simply applying the rules of logic

What is the expected utility hypothesis? Give an example of a situation in which you or someone you know has proven this hypothesis wrong.

Expected utility hypothesis is generally the notation that given the correct information a person will more often then not choose the option that is likely to produce the highest expected value--which is based on a persons preferences, goals and values. An example of this would be my fiancee, he's quite selfish, in believing that people spend too much time and effort doing for others and not enough time focusing on theirselves and their own advances, yet in regards to the two of us most of is actions are for the greater value of me, our relationship and our future, he acts without hesitation. Yet his sisters house could burn down leaving his nieces and nephew homeless and he would feel it to be a learning and growing experience for them and never offer for them to stay with out. Another example would be with myself, I received an injury that resulted in a legal case, I was offered a fairly decent settlement amount, and was in a bit of debit, but declined the offer because my health was not where it needed to be and I would be left paying medical expenses out of pocket rather then through the insurance company.

It has been found that Jean Piaget was correct in his theory that adults consistently think clearly and logically and rarely make errors in deductive reasoning.

False

Denying the antecedent

If the antecedent is not true then the consequent is not true.

Affirming the consequent

If the antecedent is true then the consequent is true.

Modus ponens or affirming the antecedent

Observe that the antecedent is true we can conclude that the consequent is true.

Modus tollens or denying the consequent

Observe that the consequent is false and conclude that the antecedent must be false.

Why do people rate tornadoes to be a greater cause of death than asthma when, in fact, asthma kills 20 times more people than tornadoes?

People have a tendency to rely on information that quickly comes to mind.

According to Jean Piaget people decide the truth of statements by evaluating them logically. However, it has been found that:

People make errors that are inconsistent with applying the rules of logic

In the study by Ross et al. (1975), people were given feedback about their ability to tell real from fake suicide notes apart and then told their results were manufactured. They found that once people believed something about their abilities:

They ignored or discounted new information

Generalization

We extrapolate from a limited number of observations to draw a conclusion about the broader population or category.

Statistical Syllogism

We go from observations about a group to an inference about an individual.

One-shot learning

We learn a concept from a single example.

Argument from Analogy

We observe that two things share some set of properties and conclude that they must share a different property.

Choose the item that you think would most likely cause a belief bias. A) Taking your time to consider whether you believe a syllogism B) Working too quickly through a syllogism C) Having beliefs that are considered outside of the norm D) Having a clear and logical thought pterm-21attern

Working too quickly through a syllogism

When TV announcers say something like: "How much would you pay? $200...how about $150...if you call now, we'll give it to you for the amazing price of just...." they are trying to get people to focus and rely on an initial piece of information (i.e., the price being $150-$200). This is related to which heuristic?

anchoring

When evaluating syllogisms, people are generally ___________ at correctly identifying a syllogism as invalid and ___________ at establishing that they are valid, which demonstrates a type of confirmation bias.

better; worse

Acquiring and processing information about the world in order to make behavioral decisions.

cognition

This is the tendency people have to look for evidence that supports their current views rather than disprove them.

confirmation bias

The process of ___ is choosing a specific course of behavioral actions from among many possibilities.

decision making

A fundamental distinction between deductive and inductive reasoning is that:

deduction starts with rules and induction infers rules from observations.

In modus tollens, or denying the consequent, when we observe that the consequent is false we can conclude that the antecedent is ________________.

false

In Wason's card task, the key to testing a rule is to check cases that have the potential to _____________ the rule.

falsify

Kahneman and Tversky demonstrated that people are often predictably ____________________.

irrational

One-shot learning refers to:

learning a concept from a single example.

Why is it that most people will not take a bet unless the amount they can win is almost double what they could lose?

loss aversion

A ___________________ model is the generation of visualizations of the sentences in a syllogism in which people mentally explore the sentences to see whether the model breaks down.

mental

Estimates about whether certain facts about the world are true are called:

premises

Any statement that can be true or false and can refer to properties of the external world or experiences that allow us to draw new conclusions from available information.

propositions

Reasoning begins with ______________, which can be thought of as statements that can be true or false and can refer to properties of the external world.

propositions

People often do better in a Wason-card-like task if the rule they are checking involve:

real-life examples

Before we can make a decision, we need to determine what information we can bring to bear on the situation based on the information we currently have. This is referred to as:

reasoning

According to Kahneman, there are two reasoning systems: a _______ system that engages in the serial, analytical processing of information and a _______system that relies on heuristics.

slow; fast

A categorical _________________________ occurs when a conclusion can be derived from two or more propositional statements.

syllogism

The most basic form of deductive reasoning which involves drawing conclusions from two or more propositional statements.

syllogism

In a conditional syllogism, all that deduction tells you is what follows from ____________.

what