Chapter 10 / Making Decisions

Satisficing

choosing a solution that meets some minimum qualifications, one that is "good enough." (Key to Simon's work)

Bounded Rationality

constraints that restrict rational decision making. This model purports that decision makers are restricted by constraints. (Simon)

Incubation (Creativity Stage 3)

is done unconsciously while the mind simultaneously mulls over information and makes remote associations. ("when you start something, finish it", do something else to stop thinking of the problem) This is the same principle used to solve "mental block" or "writers block". (goes against the work ethic)

Rational Model

logical four-step approach to decision-making; it assumes managers are completely objective and possess complete information to make a decision.

Hindsight Bias

when knowledge of an outcome influences our belief about the probability that we could have predicted the outcome earlier. (Super Bowl- Seattle Seahawks- Why did you throw the ball, when you had a great runner?; we know that now) (Makes us feel like we would have done better)

Minority Dissent and Participation

A research study showed that the most innovative groups possessed high levels of both _________________ in decision making. (Gen George Marshall: Roosevelt wanted more planes rather than Army, Marshall did not agree, some thought he killed his career, he showed backbone)

Generate Alternative Solutions- (Rational Model Stage 2)

Both the Obvious and the Creative; Managers may struggle during this stage if they rush to judgment, select readily available ideas or solutions, or make poor allocations of resources to study. Decision makers are encouraged to slow down when making decisions, to evaluate a broader set of alternatives, and to invest in studying a greater number of potential solutions.

Identify The Problem (Rational Model Stage 1)

Determining the Actual versus the Desirable; The goal is to diagnose the causes of the problem when you face a problem or an opportunity.

Concentration (Creativity Stage 2)

During the ___________ stage, an individual focuses on the problem but too much focus on trying to come up with creative solutions can block creativity.

Evaluate Alternatives and Select a Solution (Rational Model Stage 3)

Ethics, Feasibility, and Effectiveness; need to be evaluated not only on costs and quality criteria, but also on whether or not an alternative is ethical, feasible and if it would solve the problem.

Seek Divergent Views

Research findings suggest that managers should ______________from group members during decision making, should not seek compliance from group members or punish group members who disagree with a majority opinion.

Preparation (Creativity Stage 1)

The _________ stage reflects the notion that creativity starts from a base of tacit and explicit knowledge. (Its what you know but its not in writing, experience and research)

Rational Model

The ____________ does not describe how decisions are made by real-world decision makers.

Delphi Technique

The ________________ is useful in several situations, such as when face-to-face discussions are impractical, when disagreements and conflict are likely to impair communication, when certain individuals might severely dominate group discussion, and when groupthink is a probable outcome of the group process.

Nonrational Model

They are based on the assumptions that: 1) decision making is uncertain, 2) decision makers do not possess complete information, and 3) it is difficult for managers to make optimal decisions.

Illumination (The "Ahaaa!" Moment, Creativity Stage 4)

This is where the idea, which has been incubating, assumes definite form. This is the feeling you get when you have been struggling with your thoughts and can't quite put your finger on what is missing. The idea will appear suddenly and comes with a feeling of certainty. You will typically have an emotional reaction of joy, knowing you have found an idea, a solution.

Anchoring Bias

occurs when decision makers are influenced by the first information received about a decision, even if it is irrelevant. (Retail price $150 on blue jeans, on sale for $70, people think they are getting a great deal) (COSTCO, used a lot in marketing)

Overconfidence Bias

our tendency to be overconfident about estimates or forecasts. (Aviation Fuel for Delta Airlines- buy fuel on the spot market, its available, he has to be confident of the cost of fuel forecasts)

Creativity Stages

preparation, concentration, incubation, illumination, and verification.

Delphi Technique

process to anonymously generate ideas or judgments from physically dispersed experts. (Passing judgment)

Judgmental Heuristics

rules of thumb or shortcuts that people use to reduce information-processing demands. (Decision Making Biases, P.257)

Representativeness Heuristic

tendency to assess the likelihood of an event occurring based on impressions about similar occurrences. (Do not go to Home Depot in another town because the one in yours is bad)

Availability Heuristic

tendency to base decisions on information readily available in memory.

Framing Bias

tendency to consider risks about gains differently than risks pertaining to losses.

Escalation of Commitment Bias

tendency to stick to an ineffective course of action when it is unlikely that the bad situation can be reversed. ("Good money after bad bias"; drilling for oil- spent a lot of money, why don't you quit and cut your losses; we never want to be wrong)

Minority Dissent

the extent to which group members feel comfortable disagreeing with other group members, and a group's level of participation in decision making. (

Creativity

the process of using intelligence, imagination, and skill to develop a new or novel product, object, process, or thought. (Personalized Medicine- Different pills by DNA, will it sale?)

Confirmation Bias

the tendency to subconsciously decide something before investigating why it is the right decision or to seek information that supports our point of view and to discount information that does not.