Management, Ch.7, key terms

Implementation principles, 7

(7 IMPLEMENTATION PRINCIPLES)

9 common decision-making biases: rules of thumb, or "HEURISTICS"

1. AVAILABILITY BIAS 2. REPRESENTATIVE BIAS 3. CONFIRMATION BIAS 4. SUNK COST BIAS 5. ANCHORING AND ADJUSTMENT BIAS 6. OVERCONFIDENCE BIAS 7. HINDSIGHT BIAS 8. FRAMING BIAS 9. ESCALATION OF COMMITMENT BIAS

Group problem-solving techniques

1. BRAINSTORMING 2. DELPHI TECHNIQUE 3. Computer-aided decision making -DECISION SUPPORT SYSTEM

4 defective problem-recognition and problem-solving approaches

1. RELAXED AVOIDANCE -"There's no point in doing anything; nothing bad's going to happen" 2.RELAXED CHANGE -"Why not just take the easiest way out?" 3. DEFENSIVE AVOIDANCE -"There's no reason for me to explore other solution alternatives" 4. PANIC -"This is so stressful, I've got to do something--anything-- to get rid of the problem"

Evidence-based, what makes it hard

1. There's too much evidence 2. There's not enough evidence to bear on your decisions 3. The evidence doesn't quite apply 4. People are trying to mislead you 5. You are trying to mislead you 6. The side effects outweigh the cure. 7. Stories are more persuasive, anyway.

7 implementation principles

1. Treat your organization as an unfinished prototype. 2. No brag, just facts. 3. See yourself and your organization as outsiders do. 4. Evidence-based management is not just for senior executives. 5. Like everything else, you still need to sell it. 6. If all else fails, slow the spread of bad practice. 7. The best diagnostic question: What happens when people fail?

Decision tree

A graph of decisions and their possible consequences; it is used to create a plan to reach a goal. 1. Is the proposed action legal? 2. If "yes", does the proposed action maximize shareholder value? 3. If "yes", is the proposed action ethical? 4. If "no", would it be ethical not to take the proposed action?

Group decision making

Advantages: a. Greater pool of knowledge b. Different perspectives c. Intellectual stimulation d. Better understanding of decision rationale e. Deeper commitment to the decision Disadvantages: a. A few people dominate or intimidate b. GROUPTHINK c. Satisficing d. GOAL DISPLACEMENT What managers need to know: 1. They are less efficient 2. Their size affects decision quality 3. They may be too confident 4. Knowledge counts

2 Jeffrey Pfeffer

Advocate for evidence-based management. "There is a growing body of academic research suggesting that firms incur big costs when they cut workers."

Electronic brainstorming

Also called brainwriting. Members of a group come together over a computer network to generate ideas and alternatives. (GROUP PROBLEM-SOLVING TECHNIQUES)

Analytics

Also called business analytics. Term used for sophisticated forms of business data analysis.

Rational model of decision making

Also called classical model. Explains how managers should make decisions; it assumes managers will make logical decisions that will be the optimum in furthering the organization's best interests. Four steps 1. Identify the problem or opportunity -PROBLEMS -OPPORTUNITIES -DIAGNOSIS 2. Think up alternative solutions -Both obvious and creative 3. Evaluate alternatives & select a solution -Ethics, feasibility, & effectiveness 4. Implement & evaluate the solution chosen. -Successful implementation a. Plan carefully b. Be sensitive to those affected -Evaluation a. Give it more time b. Change it slightly c. Try another alternative d. Start over Assumptions: a. Complete information, no uncertainty b. Logical, unemotional analysis c. Best decision for the organization (DECISION MAKING)

Diagnosis

Analyzing the underlying causes. (RATIONAL MODEL)

2 Thomas H. Davenport

Babson College's Working Knowledge Research Center studied 32 organizations that made a commitment to quantitative, fact-based analysis and found three key attributes. 1. Use of modeling: going beyond simple descriptive statistics -PREDICTIVE MODELING 2. Having multiple applications, not just one 3. Support from the top

Decision support system

Computer-based information system that provides a flexible tool for analysis and helps managers focus on the future. (GROUP PROBLEM-SOLVING TECHNIQUES)

Bounded rationality

Concept suggests that the ability of decision makers to be rational is limited by numerous constraints. (NONRATIONAL MODELS)

Predictive modeling

Data-mining technique used to predict future behavior and anticipate the consequence of change. (2 THOMAS H. DAVENPORT)

Escalation of commitment bias

Decision makers increase their commitment to a project despite negative information about it. (9 common decision-making biases: rules of thumb)

Problems

Difficulties that inhibit the achievement of goals. (RATIONAL MODEL)

Minority dissent

Dissent that occurs when a minority in a group publicly opposes the beliefs, attitudes, ideas, procedures, or policies assumed by the majority of the group.

2 Herbert Simon

Economist who received a nobel prize. In the 1950s began to study how managers actually make decisions BOUNDED RATIONALITY.

Nonrational models of decision making

Explain how managers make decisions; they assume decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisions. Two nonrational models: 1. BOUNDED RATIONALITY & the STAISFICING MODEL "Satisfactory is good enough". 2. The INTUTITION model "It just feels right".

Groupthink

Group members strive to agree for the sake of unanimity and thus avoid accurately assessing the decision situation. (GROUP DECISION MAKING)

Delphi technique

Group process that uses physically dispersed experts who fill out questionnaires to anonymously generate ideas; the judgments are combined and in effect averaged to achieve a consensus of expert opinion. (GROUP PROBLEM-SOLVING TECHNIQUES)

Big data

Includes not only data in corporate databases but also web-browsing data trails, social network communications, sensor data, and surveillance data.

Intuition

Making a choice without the use of conscious thought or logical inference. (NONRATIONAL MODELS) For developing intuitive awareness: 1. Open up the closet. 2. Don't mix up your I's 3. Elicit good feedback 4. Get a feel your batting average 5. Use imagery 6. Play devil's advocate 7. Capture and validate your intuitions.

Deciding to decide

Manager agrees that he must decide what to do about a problem or opportunity and take effective decision-making steps. 1. Importance -"How high priority is this situation?" 2. Credibility -"How believable is the information about the situation?" 3. Urgency -"How quickly must I act on the information about the situation?"

Defensive avoidance

Manager can't find a good solution and follows by: a. procrastinating b. passing the buck c. denying the risk of any negative consequences (4 defective problem-recognition and problem-solving approaches)

Relaxed avoidance

Manager decides to take no action in the belief that there will be no great negative consequences (4 defective problem-recognition and problem-solving approaches)

Panic

Manager is so frantic to get rid of the problem that he can't deal with the situation realistically (4 defective problem-recognition and problem-solving approaches)

Relaxed change

Manager realizes that complete inaction will have negative consequences but opts for the first available alternative that involves low risk. (4 defective problem-recognition and problem-solving approaches)

Sunk-cost bias

Managers add up all the money already spent on a project and conclude it is too costly to simply abandon it. (9 common decision-making biases: rules of thumb)

Satisficing model

Managers seek alternatives until they find one that is satisfactory, not optimal. (NONRATIONAL MODELS)

Availability bias

Managers use information readily available from memory to make judgments. (9 common decision-making biases: rules of thumb)

Consensus

Members are able to express their opinions and reach agreement to support the final decision.

Confirmation bias

People seek information to support their point of view and discount data that do not. (9 common decision-making biases: rules of thumb)

Overconfidence bias

People's subjective confidence in their decision making is greater than their objective accuracy. (9 common decision-making biases: rules of thumb)

Big data analytics

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

Decision making

Process of identifying and choosing alternative courses of action. 2 systems of decision making: 1. System 1 -intuitive and largely unconscious (fast) 2. System 2 -analytical and conscious (slow) (RATIONAL MODEL OF DECISION MAKING)

Decision-making style

Reflects the combination of how an individual perceives and responds to information. Value orientation -reflects the extent to which a person focuses on either task or technical concerns or people and social concerns when making decisions. Tolerance of ambiguity -Individual difference indicates extent to which a person has a high need for structure or control in his or her life. 4 form styles of decision making: 1. Directive style -Action-oriented decision makers who focus on facts -Low tolerance for ambiguity and oriented toward task and technical concerns 2. Analytical style -Careful decision makers who like lots of information & alternative choices. -High tolerance for ambiguity and oriented towards task and technical concerns 3. Conceptual style -Decision makers who rely on intuition & have a long-term perspective -High tolerance for ambiguity and oriented towards people and social concerns 4. Behavioral style -The most people-oriented decision makers -Low tolerance for ambiguity and oriented towards people and social concerns

Opportunities

Situations that present possibilities for exceeding existing goals. (RATIONAL MODEL)

Ethics officer

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

2 Jeffrey Pfeffer and Robert Sutton

Stanford professors that said, "Too many companies and too many leaders are more interested in just copying others, doing what they've always done, and making decisions based on beliefs in what ought to work rather than what actually works." "They fail to face the hard facts and use the best evidence to help navigate the competitive environment." (7 IMPLEMENTATION PRINCIPLES).

heuristics

Strategies that simplify the process of making decisions. (9 common decision-making biases: rules of thumb)

Brainstorming

Technique used to help groups generate multiple ideas and alternatives for solving problems. (GROUP PROBLEM-SOLVING TECHNIQUES)

Framing bias

Tendency of decision makers to be influenced by the way a situation or problem is presented to them. (9 common decision-making biases: rules of thumb)

Hindsight bias

Tendency of people to view events as being more predictable than they really are. (9 common decision-making biases: rules of thumb)

Representative bias

Tendency to generalize from a small sample or a single event (9 common decision-making biases: rules of thumb)

Anchoring and adjustment bias

Tendency to make decisions based on an initial figure. (9 common decision-making biases: rules of thumb)

Goal displacement

The primary goal is subsumed by a secondary goal. (GROUP DECISION MAKING)

1 trivia: Google

Used evidence-based analysis to find out what makes a better boss.