Chapter 7 (individual/group decision making)

What is PM?*

participative management, process of involving employees in (a) setting goals, (b) making decisions, (c) solving problems, and (d) making changes in the organization

law of unintended consequences*

things that happen that weren't forseen

Intuition model

"It just feels right" make decisions on their hunches (subconscious, visceral feelings) (Ben Hugh bought "I can has cheezburger") intuition: making a choice without the use of conscious thought or logical inference

Bounded rationality & satisficing model

"satisfactory is good enough" Hebert Simon: studied how managers actually make decisions. He proposed that managers could not act truly logically because their rationality was bounded by so many restrictions.

Incremental model

"the least that will solve the problem" incremental model: managers take small, short-term steps to alleviate a problem

*Three effective reactions: decide to decide*

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?" *netflix*

*Ethical Decision Tree*

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?

*Four disadvantages to group decision making*

1. a few people dominate or intimidate 2. groupthink 3. satisficing 4. goal displacement

*Nine common decision-making biases* (page 212-213)

1. availability - using only the info available 2. representativeness - faulty generalizing from a small sample or a single event 3. confirmation - seeking info to support one's point of view 4. sunk-cost - money already spent seems to justify continuing 5. anchoring & adjustment - being influenced by an initial figure 6. overconfidence - blind to one's own blindness 7. hindsight - the I-knew-it-all-along-effect 8. framing - shaping how a problem is presented 9. escalation of commitment - feeling overly invested in a situation

More group problem-solving techniques...*

1. brainstorming - for increasing creativity 2. the delphi technique - for consensus experts 3. computer-aided decision making

*Five advantages to group decision making*

1. greater pool of knowledge 2. different perspectives 3. intellectual stimulation 4. better understanding of decision rationale 5. deeper commitment to the decision

*Rational Decision Making Stages*

1. identify the problem or opportunity 2. think up alternative solutions 3. evaluate alternatives & select a solution 4. implement & evaluate the solution chosen

Two systems of decision making*

1. rational, analytical, and slow to act 2. emotional, impulsive, and prone to form and follow habits

*Nonrational Decision Making Models*

1. satisficing: gets the job done 2. incremental: small short term steps 3. intuition: does not involve logic/fact based

What managers need to know about groups & decision making...*

1. they are less efficient 2. their size affects decision quality 3. they may be too confident 4. knowledge counts

*Seven 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?

*Three key attributes among analytics competitors*

1. use of modeling: going beyond simple descriptive statistics Ex. Capital One, use data mining and predictive modeling to identify potential and most profitable customers 2. having multiple applications, not just one Ex. UPS 3. support from the top Ex.

Styles vary along two different dimensions...

1. value orientation 2. tolerance for ambiguity

Directive Style

Action-oriented decision makers who focus on the facts: low tolerance for ambiguity & task/technical concerns efficient, logical, practical, & systematic in their approach to solve a problem

Analytical Style

Careful decision makers who like lots of information & alternative choices: high tolerance for ambiguity & task/technical concerns overanalyze a situation, like to consider more information & alternatives, careful decision makers, respond well to new or uncertain situations

stage 2

Come up with alternative solutions after identifying the problem or opportunity and diagnosing its causes

Conceptual Style

Decision makers who rely on intuition & have a long-term perspective: low tolerance for ambiguity & people/social concerns adopt a long-term perspective, rely on intuition and discussions with others to acquire information, take risks, find creative solutions to problems

*Four general decision-making styles*

Directive, Analytical, Conceptual, & Behavioral

stage 3

Evaluate alternatives & select a solution - more than just cost & quality; 1. Is it ethical? 2. Is it Feasible? (not if time is short, costs are high, technology is unavailable, or customers are resistant) 3. Is it ultimately effective? (not if it is "good enough" but not optimal in the long run)

*Evidence-based decision making*

Jeffrey Pfeffer & Robert Sutton translating principles based on best evidence into organizational practice, bringing rationality to the decision-making process

Behavioral Style

Most people-oriented decision makers: High tolerance for ambiguity & people/social concerns work well with others, enjoy social interactions where opinions are exchanged, supportive, avoid conflict and are concerned about others.

Whats wrong with the rational model vs nonrational model?*

R - prescriptive, how managers should make decisions not how they actually make decisions NR - descriptive, how managers actually make decisions rather than how they should

decision tree*

a graph of decisions and their possible consequences; it is used to create a plan to reach a goal

Intuition*

benefit: it can speed up decision making (useful when deadlines are tight) & it can be helpful to managers when resources are limited drawback: it can be difficult to convince others that your hunch makes sense

Computer-Aided decision making*

chauffer-driven systems & group-driven systems

Decision*

choice made from among available alternatives

Delphi technique*

group process that uses physically dispersed experts who fill out questionnaires to anonymously generate ideas: the judgements are combined and in effect averaged to achieve a consensus of expert opinion

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

relaxed avoidance*

manager decides to take no action in the belief that there will be no great negative consequences

panic*

manager is so frantic to get rid of the problem that he or she can't deal with the situation realistically

relaxed change*

manager realizes that complete inaction will have negative consequences but opts for the first available alternative that involves low risk

*Nonrational Decision Making*

managers find it difficult to make optimal decisions NRMoDM: explains how managers make decisions; they assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisions

satisficing*

managers seek alternatives until they find one that is satisfactory, not optimal

*Rational Decision Making*

managers should make logical & optimal decisions RMoDM, classical model: how managers should make decisions, it assumes managers will make logical decisions that will be the optimum in furthering the organization's best interests

Consensus*

occurs when members are able to express their opinions and reach agreement to support the final decision

*Four ineffective reactions*

problem solving barriers when you must make an important decision in a situation of conflict 1. Relaxed Avoidance 2. Relaxed Change 3. Defensive Avoidance 4. Panic

stage 1

problems: difficulties that inhibit the achievement of goals; (customer complaints, supplier breakdowns, staff turnover, sales shortfalls, & competitor innovations) opportunities: situations that present possibilities for exceeding existing goals Diagnosis: (how to make improvements) how to change conditions from the present to the desirable, analyzing the underlying causes

Decision Making*

process of identifying and choosing alternative courses of action

Decision-making style*

reflects the combination of how an individual perceives and responds to information

Value Orientation vs Tolerance for Ambiguity*

reflects the extent to which a person focuses on either task and technical concerns or people and social concerns when making decisions indicates that the extent to which a person has a high need for structure or control in his or her life

ethics officer*

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

Analytics/business analytics*

sophisticated forms of business data analysis Examples - portfolio analysis, an investment adviser evaluates the risks of various stocks. time-series forecast, predicts future data based on patterns of historical data

heuristics*

strategies that simplify the process of making decisions

stage 4

successful implementation: 1. plan carefully 2. be sensitive to those affected evaluation: 1. give it more time 2. change it slightly 3. try another alternative 4. start over

Brainstorming & electronic brainstorming*

technique used to help groups generate multiple ideas and alternatives for solving problems "brainwriting" which members of a group come together over a computer network to generate ideas and alternatives

bounded rationality*

the ability of decision makers to be rational is limited by numerous constraints (complexity, time & money, cognitive capacity/values, skills, habits, & unconscious reflexes, imperfect information, information overload, different priorities, & conflicting goals)

Risk propensity*

willingness to gamble or to undertake risk for the possibility of gaining an increased payoff