Chapter 7 MOB

54) A(n) ________ typically contains an ambiguous term that leaves interpretation up to the decision maker. A) rule B) procedure C) edict D) policy

54. D

9) The phenomenon of escalation of commitment refers to an increased commitment to a previous decision despite evidence that it may have been wrong. T/F

TRUE

55) "Smoking and the consumption of alcohol are strictly prohibited inside the work premises." This is most likely an example of a(n) ________. A) rule B) objective C) procedure D) axiom

55. A

23) Which of the following statements is true concerning problem identification? A) Problems are generally obvious. B) A symptom and a problem are one and the same. C) Generally, what is a problem for one manager is a problem for all other managers. D) Effectively identifying problems is not easy.

23. D

24) After identifying a problem, the next step in the decision-making process is ________. A) identifying decision criteria B) allocating weights to decision criteria C) analyzing alternatives D) developing alternatives

24. A

25) To determine the ________, a manager must determine what is relevant or important to resolving a problem. A) bounded rationality of a decision B) escalation of commitment C) weight of the decision criteria D) decision criteria

25. D

100) What can a manager do to make effective decisions in today's fast-moving world?

Answer: The following are a few guidelines that a manager can adhere to in order to make effective decisions in today's fast-moving world: a. Understand cultural differences b. Know when it is time to call it quits. c. Use an effective decision-making process. d. Build an organization that can spot the unexpected and quickly adapt to the changed environment.

12) Rules and policies are the same. T/F

FALSE

11) A programmed decision is a repetitive decision that can be handled by a routine approach. T/F

TRUE

22) A(n) ________ is the existence of a discrepancy between an existing and a desired state of affairs. A) hazard B) risk C) uncertainty D) problem

22. D

26) Amanda, a single parent, is looking for a new job. Considering that she has two school-going children, she is particularly keen on finding an employer who can provide her with alternative work arrangements such as flexible work hours and telecommuting. In terms of the decisionmaking process, these represent Amanda's ________. A) decision criteria B) problems C) alternatives D) heuristics

26. A

72) When decision makers tend to think they know more than they do or hold unrealistically positive views of themselves and their performance, they are exhibiting the ________. A) selective perception bias B) anchoring effect C) self-serving bias D) overconfidence bias

72. D

73) The ________ describes how decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information. A) anchoring effect B) selective perception effect C) confirmation bias D) framing bias

73. A

21) A series of eight steps that begins with identifying a problem and concludes with evaluating a decision's effectiveness is known as ________. A) the decision-making process B) decision support theory C) a decision-tree analysis D) a decision information system

21. A

27) Max is planning on going away to college next year and is currently trying to figure out which colleges he should apply to. He would like to major in English Literature at an accredited liberal arts college, but is also looking for a university that offers financial aid. In terms of the decision-making process, these represent Max's ________. A) problems B) alternatives C) decision criteria D) heuristics

27. C

28) After identifying the decision criteria that are important or relevant to resolving a problem, the next step in the decision-making process is ________. A) allocating weights to the criteria B) analyzing the alternatives to solving the problem C) reducing the number of criteria through the process of elimination D) implementing the alternative

28. A

29) Creativity is most essential in which of the following steps of the decision-making process? A) analyzing alternatives B) allocating weights to the decision criteria C) developing alternatives D) identifying decision criteria

29. C

30) In the decision-making process, after allocating weights to the decision criteria, the decisionmaker must then _________. A) list viable alternatives that could resolve the problem B) allocate weights to each alternative that could resolve the problem C) evaluate each alternative that could resolve the problem D) rate all alternatives that could solve the problem using the decision criteria

30. A

31) Sue works in the finance department of a large multinational corporation. Her manager has asked her to submit a detailed report on the department's quarterly expenses within the next two days. Being pressed for time, Sue identifies three courses of action that could help her accomplish her task-she can stretch her working hours till she finishes the report, she can ask her colleague to chip in, or she could ask her manager for additional time. Which stage is Sue at in the decision-making process? A) selecting an alternative B) identifying decision criteria C) developing alternatives D) evaluating decision effectiveness

31. C

32) In the decision-making process, while ________, the decision maker puts the decision into action by conveying it to those affected by it and getting their commitment to it. A) selecting an alternative B) evaluating a decision's effectiveness C) implementing an alternative D) analyzing alternatives

32. C

33) Which of the following is important in effectively implementing the chosen alternative in the decision-making process? A) evaluating each alternative by using the established criteria B) being creative while implementing the alternatives C) allowing those impacted by the outcome to participate in the process D) ignoring criticism concerning your chosen alternative

33. C

34) The final step in the decision-making process is to ________. A) determine the criteria for the next decision B) analyze the process of allocating weights to the decision criteria C) evaluate the outcome of the decision D) implement the chosen alternative

34. C

35) Managers are assumed to use ________ if they make logical and consistent choices to maximize value. A) rational decision making B) intuitive decision making C) bounded rationality D) evidence-based management

35. A

36) It is assumed that a rational decision maker ________. A) faces unclear and ambiguous problems B) is limited by his or her ability to process information C) is unaware of all the possible alternatives and consequences D) is fully objective and logical

36. D

37) Which of the following is NOT a valid assumption about rationality? A) The problem is clear and unambiguous. B) A single, well-defined goal is to be achieved. C) The decision maker is logical in his approach. D) The decision maker accepts a solution that is good enough.

37. D

38) When managers make decisions that are rational but limited by their ability to process the information, they are following the concept of ________. A) cognitive decision making B) bounded rationality C) escalation of commitment D) intuitive decision making

38. B

39) Managers cannot possibly analyze all information on all alternatives, they tend to ________, rather than ________. A) maximize; satisfice B) neutralize; satisfice C) satisfice; neutralize D) satisfice; maximize

39. D

40) ________ results in a solution that is considered "good enough." A) Escalating B) Linear thinking C) Intuition D) Satisficing

40. D

41) Toby is hunting for a new apartment. He is specifically looking for one that is located in the heart of the city and should be available for $600 per month. However, Toby is also willing to pay up to $850 per month for a place that is situated slighted away from the city center. According to him, the second option "will also do." This is an example of ________. A) rational decision making B) bounded rationality C) intuitive decision making D) non linear thinking

41. B

42) Julie is keen on joining Columbia University to pursue a master's degree in economics. However, after three months of applying and waiting for an acceptance letter, she finally decides to join NYU, which was one of her backup colleges. This is an example of ________. A) maximizing B) neutralizing C) minimizing D) satisficing

42. D

43) Escalation of commitment refers to ________. A) commitment to a faulty decision due to an unwillingness to go against the opinion of the majority B) an increased commitment to a previous decision despite evidence that it may have been wrong C) the strengthening of commitment to a particular course of action due to greater motivation by others D) greater commitment to a decision because of one's belief that it is "the right thing to do"

43. B

44) In intuitive decision making, managers ________. A) often tend to ignore their feelings or emotions B) use data from their subconscious mind to help make their decisions C) use available evidence to improve their decision making skills D) do not depend on their past experiences to make decisions

44. B

45) All of the following are aspects of intuition EXCEPT ________. A) experienced-based decisions B) affect-initiated decisions C) cognitive-based decisions D) programmed decisions

45. D

46) Intuitive decision making ________. A) is the systematic use of the best available evidence to improve decision making practice B) generally results in poor decisions and hence managers should learn to ignore their gut feelings C) is the process of making decisions based on experience, feelings, and accumulated judgment D) complements rational decision making but not bounded rational decision making

46. C

47) ________ are straightforward, familiar, and easily defined. A) Organic problems B) Structured problems C) Analogous problems D) Nonprogrammed problems

47. B

48) Structured problems align well with which type of decisions? A) programmed B) analogous C) organic D) nonlinear

48. A

49) A(n) ________ decision is a repetitive decision that can be handled by a routine approach. A) nonprogrammed B) organic C) nonlinear D) programmed

49. D

50) A procedure ________. A) is an explicit statement that tells a manager what can or cannot be done B) is a series of sequential steps a manager uses to respond to a structured problem C) is used mainly for unstructured, rather than structured, problems D) is subject to the interpretation of the decision maker

50. B

51) A(n) ________ is an explicit statement that tells a manager what can or cannot be done. A) agenda B) objective C) rule D) solution

51. C

52) A policy ________. A) typically contains an ambiguous term B) specifically states what should or should not be done C) is a series of sequential steps a manager uses to respond to a structured problem D) is used when dealing with unstructured problems and nonprogrammed decisions

52. A

53) What is a difference between a policy and a rule? A) A policy establishes general parameters for the decision maker. B) A policy specifies what should or should not be done. C) A policy is more explicit. D) A rule typically contains an ambiguous term.

53. A

56) Which of the following is an example of a procedure? A) Without exception, all employees in customer-facing roles must be formally attired at all times. B) Before going on a leave of absence, fill up the application form available on the company's online leave management system. All applications will be approved/rejected within two days by the employee's immediate supervisor. C) We promote from within, whenever possible. If qualified applicants are available internally, a job posting will be issued by the HR department providing the necessary details about all vacancies. D) Employees working with power tools must wear safety glasses at all times.

56. B

57) Which of the following is an example of a policy? A) Before going on a leave of absence, fill up the application form available on the company's online leave management system. All applications will be approved/rejected within two days by the employee's immediate supervisor. B) Employees working with power tools must wear safety glasses at all times. C) Smoking and the consumption of alcohol are strictly prohibited inside the work premises. D) We are an equal opportunity employer with a diverse workforce. We do not discriminate against employees and applicants on the basis of sex, race, color, religion, national origin, age, disability, marital status, sexual orientation or veteran status.

57. D

58) Unstructured problems ________. A) refer to the usual problems faced by organizations B) are generally solved using procedures, rules, and policies C) are accompanied by ambiguous or incomplete information D) do not require the decision maker to go through an involved decision process

58. C

59) Nonprogrammed decisions ________. A) involve standardized solutions B) are usually made by lower-level managers C) are associated with clear and specific goals D) are unique and nonrecurring

59. D

60) When problems are ________, managers must rely on ________ in order to develop unique solutions. A) structured; nonprogrammed decision making B) structured; pure intuition C) unstructured; nonprogrammed decision making D) unstructured; programmed decision making

60. C

61) Lower-level managers typically confront ________. A) unstructured problems B) new and unusual problems C) programmed decisions D) nonprogrammed decisions

61. C

62) ________ is a situation where a manager has the ability to make accurate decisions because the outcome of every alternative is known. A) Certainty B) Risk C) Bureaucracy D) Contingency

62. A

63) If an individual knows the price of three similar cars at different dealerships, he is operating under which of the following decision-making conditions? A) risk B) supposition C) certainty D) speculation

63. C

64) The manager of an apparel store estimates how much to order for the current spring season based on last spring's sales figures. The store manager is operating under which of the following decision-making conditions? A) surety B) risk C) homogeneity D) certainty

64. B

65) Which of the following best describes the psychological orientation of an individual making a "maximax" choice? A) optimist B) cynic C) pessimist D) defeatist

65. A

66) Optimistic managers follow a maximax choice when they ________. A) maximize the maximum possible payoff B) maximize the minimum possible payoff C) minimize the maximum regret D) minimize the minimum regret

66. A

67) What is the psychological orientation of a decision maker who makes a "maximin" choice? A) optimist B) realist C) pessimist D) idealist

67. C

68) ________ is a situation in which a decision maker cannot make reasonable probability estimates. A) Necessity B) Risk C) Uncertainty D) Certitude

68. C

69) The ________ thinking style is characterized by a person's preference for using external data and facts and processing this information through rational, logical thinking to guide decisions and actions. A) linear B) normative C) behavioral D) organic

69. A

70) The ________ thinking style is characterized by a preference for internal sources of information and processing this information with internal insights, feelings, and hunches to guide decisions and actions. A) active experimentation B) nonlinear C) linear D) organic

70. B

71) Rules of thumb that managers use to simplify decision making are known as ________. A) heuristics B) folksonomies C) algorithms D) sophisms

71. A

74) Sophie is in charge of recruitment at her company. During a particular interview, the first thing Sophie noticed about the applicant was that he was improperly attired. Though the candidate possessed the necessary qualifications and effectively answered all her questions, Sophie rejected him. This is an example of the ________. A) randomness bias B) self-serving bias C) anchoring effect D) representation bias

74. C

75) When decision makers seek out information that reaffirms their past choices and discount information that contradicts past judgments, they are exhibiting the ________. A) framing bias B) availability bias C) representation bias D) confirmation bias

75. D

76) The ________ occurs when decision makers select and highlight certain aspects of a situation while excluding others. A) framing bias B) availability bias C) representation bias D) randomness bias

76. A

77) The ________ happens when decisions makers tend to remember events that are the most recent and vivid in their memory. A) self-serving bias B) availability bias C) representation bias D) randomness bias

77. B

78) Whenever anyone praises Mark for his good performance, he has the tendency to attribute his success to his personal qualities such as his ability to thrive under pressure and his eye for detail. However, any negative performance feedback is always met with excuses such as unsupportive team members or insufficient time. This is an example of the ________. A) self-serving bias B) confirmation bias C) randomness bias D) framing bias

78. A

79) Sarah's sales figure show that she has been the top performer in her department for the last eight months. Two month prior to her annual performance review, Sarah's sales numbers fell due to her ill health causing her manager to rate her performance as just satisfactory. This is an example of the ________. A) randomness bias B) availability bias C) self-serving bias D) representation bias

79. B

80) Martie had arranged for a high-profile speaker to deliver the keynote address at her college's annual function. However, due to unforeseen circumstances, the speaker was forced to drop out at the last moment. Martie reacts to this news by saying, "I knew all along that this would happen." This is an example of the ________. A) anchoring bias B) randomness bias C) self-serving bias D) hindsight bias

80. D

81) Pat is the manager of a large project that has been underway for the last eight months. It has now become apparent that, due to various external factors, the project is unlikely to succeed. Even though the best option would be to withdraw from the project, Pat continues to pump money and resources into it in the hope that the project's prospects will change. He reasons that he doesn't want all those months of hard work to go to waste. This is an example of the ________. A) availability bias B) hindsight bias C) sunk costs error D) self-serving bias

81. C

82) To make effective decisions in today's fast-moving world, managers need to ________. A) build organizations that shun complexity B) know when it is time to call it quits C) ignore cultural differences D) build organizations that rely on their past successes

82. B

83) An effective decision-making process ________. A) focuses on matters of importance B) focuses on consistency more than logic C) avoids subjective and intuitive thinking D) is complex but reliable

83. A

Colleen is a student, and her older brother has loaned her an old car. The car is in need of several repairs before she will feel comfortable driving it. 84) Colleen needs a vehicle, but she has to decide if the vehicle is worth repairing. She is facing a(n) ________ that is a discrepancy between an existing and a desired state of affairs. A) uncertainty B) contingency C) problem D) risk 85) Before talking to a repair person, Colleen needs to prioritize the repairs. Her first concern is safety of the vehicle. This step in the decision-making process is called ________. A) weighting the decision criteria B) analyzing alternatives C) identifying the decision criteria D) evaluating decision effectiveness

84. C 85. C

Sharon was the regional manager of a large cable television company. She faced many problems and decisions daily, such as how to price each market, whom to hire, what kind of technology to purchase, and how to handle the increasing customer complaints. She needed some help sorting these issues out. 86) When a customer calls and requests a refund for a partial month's usage of the cable service, the fact that such situations are routine and most likely have a standard response would make the response a ________ decision. A) unstructured B) nonprogrammed C) speculative D) programmed 87) Usually Sharon follows a ________, a series of interrelated sequential steps for responding to a structured problem. A) rule B) policy C) procedure D) code

86. D 87. C

Michelle has a new job and is learning to perform the tasks assigned to her. Different situations demand different decision-making processes. 88) Michelle finds a company directive that specifically restricts her from taking certain actions. This is a(n) ________. A) rule B) policy C) agenda D) procedure 89) Michelle eventually finds a problem that has no cut-and-dry solution. The problem is unique and is unlikely to occur again. This problem is ________ in nature. A) structured B) programmed C) scheduled D) nonprogrammed

88. A 89. D

Newcastle United, a soccer club, was relegated from the top flight two seasons ago. Following relegation, the club's board sacked the manager and hired a new manager to replace him. The club won back promotion to the league and enjoyed a good season. Andy Carroll, the star player for Newcastle, was the top scorer in the league for that season. However, the club, needing to strengthen the team by buying new players, sold Andy Carroll to Liverpool soccer club to buy three average players. The club is presently experiencing a dip in form and is in danger of being relegated again. 90) Which of the following statements, if true, would indicate the presence of self-serving bias on the part of the manager? A) The manager assumes moral responsibility for the club's disappointing performance and offers to resign from his position. B) The manager buys Andy Carroll back from Liverpool at a much higher price to revive the team's fortunes. C) The manager blames the board for selling the top scorer and replacing him with below-par players. D) The manager threatens to quit if the board refuses to buy back Andy Carroll from Liverpool immediately. 91) Which of the following statements, if true, best reflects sunk cost error on the part of the board? A) The board buys, a now out-of-form, Andy Carroll back from Liverpool at a much higher price in the hopes of reversing the team's form. B) The board admits that it underestimated Andy Carroll's real market value while selling him to Liverpool. C) The board blames the manager for buying three under-par players instead of one good replacement for Andy Carroll. D) The board backs the manager-who is confident that the team will be back in form-to improve the team's performance with its current players.

91. A 90. C

99) Explain any six decision errors and biases that managers make.

Answer: a. When decision makers tend to think they know more than they do or hold unrealistically positive views of themselves and their performance, they are exhibiting the overconfidence bias. b. The immediate gratification bias describes decision makers who tend to want immediate rewards and to avoid immediate costs. For these individuals, decision choices that provide quick payoffs are more appealing than those in the future. c. The anchoring effect describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information. First impressions, ideas, prices, and estimates carry unwarranted weight relative to information received later. d. When decision makers selectively organize and interpret events based on their biased perceptions, they are using the selective perception bias. This influences the information they pay attention to, the problems they identify, and the alternatives they develop. e. Decision makers who seek out information that reaffirms their past choices and discount information that contradicts past judgments exhibit the confirmation bias. These people tend to accept at face value information that confirms their preconceived views and are critical and skeptical of information that challenges these views. f. The framing bias is when decision makers select and highlight certain aspects of a situation while excluding others. By drawing attention to specific aspects of a situation and highlighting them, while at the same time downplaying or omitting other aspects, they distort what they see and create incorrect reference points. g. The availability bias is when decisions makers tend to remember events that are the most recent and vivid in their memory. The result is that it distorts their ability to recall events in an objective manner and results in distorted judgments and probability estimates. h. When decision makers assess the likelihood of an event based on how closely it resembles other events or sets of events, they commit the representation bias. Managers exhibiting this bias draw analogies and see identical situations where they do not exist. i. The randomness bias describes the actions of decision makers who try to create meaning out of random events. They do this because most decision makers have difficulty dealing with chance even though random events happen to everyone and there is nothing that can be done to predict them. j. The sunk costs error occurs when decision makers forget that current choices cannot correct the past. They incorrectly fixate on past expenditures of time, money, or effort in assessing choices rather than on future consequences. k. Decision makers who are quick to take credit for their successes and to blame failure on outside factors are exhibiting the self-serving bias. l. The hindsight bias is the tendency for decision makers to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known.

93) Briefly discuss the assumptions of rationality and the validity of those assumptions.

Answer: A decision maker who is perfectly rational is fully objective and logical. The problem faced is clear and unambiguous. The decision maker has a clear and specific goal. He is aware of all possible alternatives and consequences. Making decisions consistently leads to selecting the alternative that maximizes the likelihood of achieving that goal. These assumptions apply to any decision - personal or managerial. For managerial decision making, an additional assumption is that decisions are made in the best interests of the organization. However, most of these assumptions of rationality are not very realistic.

101) What are the five habits that highly reliable organizations (HROs) share?

Answer: According to Karl Weick, an organizational psychologist, organizations that can spot the unexpected and quickly adapt to the changed environment are known as highly reliable organizations (HROs). According to him, HROs share the following five habits: a. HROs are not tricked by their success. They are preoccupied with their failures. They are alert to the smallest deviations and react early and quickly to anything that does not fit with their expectations. b. HROs defer to the experts on the front line. Frontline workers those who interact day in and day out with customers, products, suppliers, and so forth have firsthand knowledge of what can and cannot be done, what will and will not work. These organizations get their input and allows them to make decisions. c. HROs let unexpected circumstances provide the solution. d. HROs embrace complexity. Because business is complex, these organizations recognize that it "takes complexity to sense complexity." Rather than simplifying data, these organizations aim for deeper understanding of the situation. d. HROs anticipate, but also recognize their limits. These organizations try to anticipate as much as possible, but they recognize that they can't anticipate everything.

94) What is meant by bounded rationality and satisficing?

Answer: Despite the unrealistic assumptions of perfect rationality, managers are expected to be rational when making decisions. It is understood that "good" decision makers are supposed to do certain things and exhibit good decision-making behaviors as they identify problems, consider alternatives, gather information, and act decisively but prudently. When they do so, they show others that they are competent and that their decisions are the result of intelligent deliberation. However, a more realistic approach to describing how managers make decisions is the concept of "bounded rationality." According to this concept, managers make decisions rationally, but are limited by their ability to process information. Because they cannot possibly analyze all information on all alternatives, managers "satisfice," rather than maximize. That is, they accept solutions that are "good enough." Thus, they become rational within the limits of their ability to process information.

95) Define intuitive decision making and identify the five different aspects of intuition.

Answer: Intuitive decision making is the process of making decisions on the basis of experience, feelings, and accumulated judgment. Intuitive decision making can complement both rational and bounded rational decision making. A manager who has had experience with a similar type of problem or situation often acts quickly with limited information because of that past experience. The five different aspects of intuition are: a. Affect-initiated decisions - Managers make decisions based on feelings or emotions. b. Cognitive-based decisions - Managers make decisions based on skills, knowledge, and training. c. Experience-based decisions - Managers make decisions based on their past experiences. d. Subconscious mental processing - Managers use data from their subconscious to help them make decisions. e. Values or ethics-based decisions - Managers make decisions based on ethical values or culture.

96) Discuss structured problems, programmed decisions, unstructured problems, and nonprogrammed decisions.

Answer: Some problems are straightforward. The decision maker's goal is clear, the problem is familiar, and information about the problem is easily defined and complete. Hence, these are called structured problems. For instance, when a server spills a drink on a customer's coat the customer is upset and the manager needs to do something. Because it is not an unusual occurrence, there is some standardized routine for handling it. For example, the manager offers to have the coat cleaned at the restaurant's expense. This is called a programmed decision, a repetitive decision that can be handled by a routine approach. Because the problem is structured, the manager does not have to go to the trouble and expense of going through an involved decision process. Not all the problems managers face can be solved using programmed decisions. Many organizational situations involve unstructured problems, which are problems that are new or unusual and for which information is ambiguous or incomplete. Whether to build a new manufacturing facility in China is an example of an unstructured problem. When problems are unstructured, managers rely on nonprogrammed decision making in order to develop unique solutions. Nonprogrammed decisions are unique and nonrecurring and involve custom-made solutions. Lower-level managers mostly rely on programmed decisions because they confront familiar and repetitive problems. As managers move up the organizational hierarchy, the problems they confront become more unstructured. However, few managerial decisions in the real world are either fully programmed or nonprogrammed. Most fall somewhere in between.

97) Discuss the three types of programmed decisions that a manager depends on to resolve structured problems.

Answer: Usually a manager relies on one of three types of programmed decisions to counter structured problems: procedure, rule, or policy. A procedure is a series of sequential steps a manager uses to respond to a structured problem. Identifying the problem is a bit difficult. Once it is clear, so is the procedure. For instance, a purchasing manager receives a request from a warehouse manager for 15 PDA handhelds for the inventory clerks. The purchasing manager knows how to make this decision by following the established purchasing procedure. A rule is an explicit statement that tells a manager what can or cannot be done. Rules are frequently used because they are simple to follow and ensure consistency. For example, rules about lateness and absenteeism permit supervisors to make disciplinary decisions rapidly and fairly. The third type of programmed decisions is a policy, which is a guideline for making a decision. In contrast to a rule, a policy establishes general parameters for the decision maker rather than specifically stating what should or should not be done. Policies typically contain an ambiguous term that leaves interpretation up to the decision maker.

98) Discuss the three different decision-making conditions that managers usually face.

Answer: When making decisions, managers usually face three different conditions: certainty, risk, and uncertainty. a. Certainty - The ideal situation for making decisions is one of certainty, which is a situation where a manager can make accurate decisions because the outcome of every alternative is known. b. Risk - These are conditions in which the decision maker is able to estimate the likelihood of certain outcomes. Under risk, managers have historical data from past personal experiences or secondary information that lets them assign probabilities to different alternatives. c. Uncertainty - This is a situation in which a decision maker has neither certainty nor reasonable probability estimates available. Under these conditions, the choice of alternative is influenced by the limited amount of available information and by the psychological orientation of the decision maker. An optimistic manager follows a maximax choice (maximizing the maximum possible payoff); a pessimist follows a maximin choice (maximizing the minimum possible payoff); and a manager who desires to minimize his maximum "regret" opts for a minimax choice.

1) The decision-making process begins by identifying decision criteria. T/F

FALSE

10) Intuitive decision making complements rational decision making but not bounded rational decision making. T/F

FALSE

13) A policy is an explicit statement that tells a manager what can or cannot be done. T/F

FALSE

14) Nonprogrammed decision making relies on procedures, rules, and policies. T/F

FALSE

17) The availability bias describes the actions of decision makers who try to create meaning out of random events. T/F

FALSE

20) Highly reliable organizations (HROs) are easily tricked by their success. T/F

FALSE

4) Once the alternatives to solving a problem have been identified, the next step in the decisionmaking process is selecting one of these alternatives. T/F

FALSE

7) One assumption of rational decision making is that the decision maker is not aware of all possible alternatives and consequences. T/F

FALSE

5) Implementing an alternative refers to the process of choosing the best alternative. T/F

FASLE

92) List and discuss the eight steps in the decision-making process. Answer:

Step 1: Identifying a problem The decision-making process begins with the existence of a problem or a discrepancy between an existing and a desired state of affairs. However, a discrepancy without pressure to take action becomes a problem that can be postponed. Step 2: Identify decision criteria - Once the manager has identified a problem that needs attention, the decision criteria important to resolving the problem must be identified. That is, managers must determine what is relevant in making a decision. Step 3: Allocating weights to the criteria - The decision maker must weigh the items in order to give them the correct priority in the decision. A simple approach of doing this is to give the most important criterion a weight of 10 and then assign weights to the rest against that standard. Step 4: Developing alternatives - The fourth step requires the decision maker to list the viable alternatives that could resolve the problem. No attempt is made in this step to evaluate the alternative, only to list them. Step 5: Analyzing alternatives - Once the alternatives have been identified, the decision maker must critically analyze each one. From this comparison, the strengths and weaknesses of each alternative become evident. Step 6: Selecting an alternative - The sixth step involves choosing the best alternative from among those considered. Step 7: Implementing the alternative - Implementation involves conveying the decision to those affected by it and getting their commitment to it. If the people who must carry out a decision participate in the process, they are more likely to enthusiastically support the outcome than if they are just told what to do. Step 8: Evaluating decision effectiveness - The last step in the decision-making process involves appraising the outcome of the decision to see if the problem has been resolved. If the desired result has not been achieved, the manager may consider returning to a previous step or may even consider starting the whole decision process over.

15) Risk is the condition in which a decision maker is able to estimate the likelihood of certain outcomes. T/F

TRUE

16) The anchoring effect describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information. T/F

TRUE

18) The sunk costs error occurs when decision makers forget that current choices cannot correct the past. T/F

TRUE

19) Managers need to understand cultural differences to make effective decisions in today's fast-moving world. T/F

TRUE

2) A decision criterion defines what is important or relevant to resolving a problem. T/F

TRUE

3) In the decision-making process, after allocating weights to the decision criteria, the decision maker lists viable alternatives that could resolve the problem. T/F

TRUE

6) Decision making is a part of the planning, organizing, leading, and controlling functions and thus, the essence of management. T/F

TRUE

8) According to the concept of bounded rationality, managers make decisions rationally, but are limited by their ability to process information. T/F

TRUE