Chapter 8 - Decision Making
Explanation: C) Most of us will primarily make programmed decisions during the day because these are the routine decision making situations we encounter with clearly identifiable actions and outcomes that are often predictable.
1) Which type of decision do you make most frequently during a typical day? A) Naturalistic B) Rational C) Programmed D) Non-programmed
Explanation: B) Behavioral economics incorporates the investigation of mental tricks, also known as mental accounting, people engage in to assist in making complex decisions, often those dealing with financial and business decisions.
10) Which type of decision making incorporates mental tricks known as mental accounting people use to help make financial and business decisions? A) Probability accounting B) Behavioral economics C) Organizational psychology D) Naturalistic
Answer: Students may incorporate errors from the problem solving process, errors with implementation, evaluation, source information, personal biases and experiences, etc. They should include five errors. For each, the justification of the error along with at least one suggestion to avoid/minimize/eliminate the error.
11) Problem solving is meant to improve a situation, but errors can thwart success and possibly make it worse. Identify five errors, describe their impact and what you can do to avoid them.
Explanation: C) Decision making justifies the choice of actions to be taken and sensemaking justifies and attempts to find/apply meaning in actions after we take them. The justification or action may have no rational basis for either process
12) Sensemaking differs from rational decision making because ________. A) Sensemaking examines past experiences to make decisions B) Sensemaking justifies your reason for action before you do it C) Sensemaking provides meaning to your action after you have taken it D) Sensemaking doesn't have identifiable steps
Explanation: C) By comparing the situation you are facing to past experiences based on common factors, you are able to bring knowledge about the decision consequences to the current situation to provide knowledge to make an improved decision.
13) How is prototyping helpful for making decisions? A) By looking for context and that can more fully inform your decision making B) By going with what your mind automatically jumped to, prototypes speed up decision making C) By categorizing the situation you can draw on similar experiences in the past to more accurately predict the consequences of your decision choices D) All of the above
Explanation: B) In both bounded rationality and satisficing you have to act without having all of the information either because it's missing or because it doesn't exist.
14) What is a common element found in both bounded rationality and satisficing? A) Time pressure for decision B) You are forced to act without all information C) Subjectivity and not objectivity is used in both D) They should be considered last resorts of problem solving
Explanation: C) Organizational psychology decision making incorporates the aspect of weighing options found in the rational decision making model with emotions, politics, and practical considerations that impact outcomes.
15) Which decision making approach incorporates emotions, politics, practical considerations, and the systematic weighing of options? A) Rational decision making B) Naturalistic decision making C) Organizational psychology-based decision making D) Behavioral economics decision making
Explanation: A) The chance of "picking" the right solution for a problem is poor and the process is composed of individuals vying to advance their interests rather than an organization advancing its mission or acting strategically.
16) How would the garbage can model describe organizational decision making? A) Heavily influenced by trivial matters and chance B) It improves as the quality of the problems and solutions improve C) It is modeled after untrained decision makers D) All of the above
Explanation: A) The naturalistic model represents the most likely behaviors to solve the problem under the situation. You are being put on the spot, and you will likely fall back on your experiences to help you reach a quick conclusion.
17) You have to make a decision quickly and as best you can. What model best describes your process? A) Naturalistic B) Rational C) Behavioral economics D) Garbage can
Explanation: D) Roughly half of decisions fail, but perhaps more importantly is how you handle failure. Entrepreneurs commonly acknowledge it as the key to their success and many express it is because they learned from their failures and didn't get discouraged by them.
18) Understanding that decisions don't always work is evidenced by the ________ failure rate of decisions. A) 20% B) 35% C) 40% D) 50%
Explanation: C) Looking at the decision you are facing in terms of how it can fail can help you identify areas where decisions can go wrong.
19) How can consequences improve your decision making? A) Reflect on negative consequences so you don't repeat your mistakes B) Glean as much learning as you can from other people's consequences so you don't have to be the one who learns the hard way C) Focus on how you can prevent failure to identify and address areas that could lead to these negative consequences D) Reflect on the negative consequences to remember what could be at stake and keep you focused
Explanation: C) Dealing with changing customer demands is a non-programmed decision because it is highly complex and not routine. Because of these factors, it may require that new methods or procedures are developed to assist in decision making.
2) Which of the following is a non-programmed decision? A) Deciding who to hire B) Determining budgets C) Dealing with changing customer demands D) Production demands
Explanation: D) Although naturalistic decisions are limited in time and/or resources, simplifying the problem by ignoring variables you don't deem important can result in consequences you don't intend precisely because you don't know they are factors. You are making a complex decision with less than perfect information from a biased perspective, so don't assume that it isn't an important factor if you don't see its relevance.
20) Which improvement has been suggested when addressing complex problems in naturalistic decision making? A) Base your decision on factors you feel are most important B) Focus on the context of the problem C) Utilize others as a sounding board for your ideas D) Don't eliminate variables to simplify the problem
Explanation: C) Solving the problem may not work as you planned. Plan B generally means you start over with an entirely different course of action. Focusing on resilience means that you analyze your decision for potential changes while you are creating your plan to solve the problem. If one part fails, your pre-planned alternate course of action is ready to implement to keep the plan progressing. In this way, the system is resilient to changes that could end in failure.
21) What is meant by recommending that decision makers should focus on resilience? A) Emotionally rebounding from poor decisions quickly B) Learning from your mistakes so you don't make them again C) Identify areas that may be problematic as you apply your solution and develop plans to address each before you begin D) Prepare a plan B before you begin
Explanation: B) Naturalistic decision making draws upon the decision maker's intuition, past experience and emotions to make a decision based on a quick assessment of the situation.
22) Which model uses one's emotions, intuition, and past experiences when deciding the best course of action? A) Rational B) Naturalistic C) Organizational psychology D) Behavioral economics
Explanation: D) All of these are approaches to decision making that can be helpful for making decisions using objective statistics like last quarter's sales data. Using objective data does not dictate that you use any particular model to make the decisions you need; the sales data would be just one factor considered in your future decision along with factors such as your perception, biases, heuristics, and the context.
23) Which decision making approach should you use if you need to make a decision using last quarter's sales data? A) Behavioral economics B) Organizational psychology C) Rational model D) All of the above
Explanation: D) There is clearly a problem and you have to take time to gather information before you write up a transfer or fire someone, but not weeks of time! You won't be able to gather all of the information anyway because everyone has their own bias, perspective, and personal agenda. The context is also hugely important: these people have to work together and you have specific personnel procedures that might impact your actions. Combining all of these factors, the most appropriate is organizational psychology-based decision making.
24) As HR manager, you have received e-mails from nearly every member of a team asking for transfers off the team or demanding one (or more) teammates be terminated. You weren't aware of any issue with this team before, and you don't have a clear idea of what's going on, but this is clearly an issue you have to address. What type of decision making should you use? A) Behavioral economic-based decision making B) Rational decision making C) Naturalistic decision making D) Organizational psychology-based decision making
Answer: Utilize specialists with different areas of expertise to participate in decision making instead of limiting decision making responsibilities to those in certain organizational positions like upper management. Provide them with the training they need to make decisions based on all situational factors. This adds diverse views and skills to decision making and solicits expertise from those with the unique insight from other areas.
25) The last recommendation for improving naturalistic decision making is "decision makers should put less emphasis on organizational decision making structures and more emphasis on training decision makers who have expertise to look at a situation in its entirety." What should organizations do to implement this suggestion?
Explanation: C) Mental accounting distorts our view of both gains and losses, and this becomes the information that we base future decisions on, which could result in a repeating cycle.
3) How does mental accounting distort our perceptions? A) Downplay loss B) Emphasize gain C) Both of the above D) None of the above
Explanation: C) Incorrect information can impact any stage of the decision making model; it doesn't wait until the decision to make an impact. For example, if the incorrect information you perceive leads you to misidentify the problem, it will impact every subsequent step you take in any problem solving approach that you use. Reaching a certain stage in a particular model does not correct for the incorrect information that got you there.
4) Where might incorrect information impact the decision making process? A) Problem identification B) Solution evaluation C) Plan implementation D) All of the above
Explanation: C) When we don't have time to gather the resources we would like to rely on, we don't have all of the information we need and we don't have time to fully analyze or think through the problem, synthesize a response, or create resiliency.
5) Why do time constraints cause errors in decision making? A) Your performance is being judged, placing far more pressure on you to quickly solve the problem successfully B) Effective managers can quickly assess the situation and make a decision. Taking more time provides the impression that you aren't a good manager C) Time constraints limit your ability to gather information D) Time is money
Explanation: D) The overconfidence bias, availability, and anchoring bias are three of the common heuristics used to shortcut the rational decision making process.
6) Which of the following is not a heuristic used to shortcut the rational decision making process? A) You are overconfident that your opinion will be correct B) You act with the information that you have instead of taking the time to collect better information C) You are focused on resolving only the one factor in the problem you deem to be the most important D) All of the above are heuristics used to shortcut the rational decision making process
Explanation: C) You are demonstrating the confirmation bias. You focus on the good and ignore the bad to confirm your decision was well made and that you took the right course of action. This leads to inaccurate information and skews our perceptions.
7) When you begin your new job, you are soaking in all types of information about your new work environment: some good, some bad. Mentally, you emphasize the number and importance of the good aspects and discount those of the bad as you go through your first week. What are you doing? A) Managing your impression that you like the job B) Maintaining a healthy outlook C) Confirming to yourself that you made the right decision D) Gathering information about the organization's culture
Explanation: A) The hindsight bias is a lie (to ourselves or others) that we held the position originally when we changed to the "correct" answer/viewpoint/decision after learning new information or learning the outcome.
8) What is the hindsight bias? A) Changing viewpoints based on new information but not admitting the change B) Changing viewpoints based on new information C) The ability to objectively assess what they should or would have done after the fact (also known as Monday morning quarterbacking) D) Only occurs in situations that end in less than optimal outcomes
Explanation: B) Behavioral economics seeks to explain consistent errors in decision making such as bias and heuristics. These specific mental tricks or shortcuts people use when deciding difficult issues often result in predictably irrational behavior.
9) What is the behavioral economics approach? A) The approach that represents behavior demonstrated when people decide economic problems B) The approach that investigates why people predictably make irrational decisions C) The approach that was named after the Nobel prize winning economic developers D) The approach that measures behaviors economically and attempts to account for the way people actually make decisions
