Management Week 4 (1)

What are distinct advantages of group decision making?

Decisions can be drawn from a larger number of individual perspectives and experiences.

Happy Socks sells high-quality socks online. Potential customers go through a three-step process online to complete a sale. First, they find Happy Socks, usually through advertising—a Google ad, for example. Customers decide to click on the ad or not. Second, they search for socks they may like and decide to put something in their "cart" or not. Finally, they decide to complete the transaction or not. Happy Socks can invest more in advertising, or in its online store, or in speeding up its checkout process. If Happy Socks wanted to use a decision tree to help them decide where to invest, each of these steps in the customer's journey would be?

a decision node

When you can break a decision down into stages or decision nodes with branches representing possible outcomes, which tool can you use to help you visualize your options?

a decision tree

The financial crisis of 2008 demonstrated the flaw in a bottom-up detailed approach to calculating risk. There are too many individual judgments that can be biased. Banks and bank regulators instead use a rule of thumb that bank capital should be 8-10 percent of the balance sheet. That is, managers rely on

a heuristic.

In a decision tree with costs or net income and probabilities, each path of decisions and outcomes can be summarized in

an expected value

College basketball players make many quick decisions in the course of a game. They do not stop to analyze the alternatives, weigh criteria, or calculate optimal solutions. They have trained to develop ________ .

an intuitive decision style

You are looking for a used car, and you're focused on finding one that has under 100k miles and is no older than 2006. In your search, you take little notice of the state of the engine or transmission. A month after buying the 2007 Busaru Scoutbeck with 98k miles, your transmission freezes on the way home from work. Which bias trap did you get yourself into that created this scenario?

anchoring bias

An important implication of prospect theory is that the way people subjectively frame an outcome affects their decision. Narrow framing is when people evaluate new gambles in isolation, ignoring other relevant risks. This is an example of

bounded rationality

You and some friends are on vacation, and you have just found out that a hurricane is approaching the island you are staying on. Your vacation group must decide between staying on the island or leaving immediately. The last flight leaves in one hour. The group needs to stay together, but if the group discusses this, it could take awhile to reach consensus. Which decision style is appropriate?

command or autocratic style

Kira's office needs to agree on a new copier purchase. The group discusses the alternatives and all concerns. The group generally agrees on the recommendation. What method have they used to make a decision?

consensus

If you are trying to avoid a framing bias and you are looking for a way to diagram a yes/no decision-making process, you should choose what tool to make your decisions?

decision tree

Bright Learning Co. has a problem. Some people want to move the headquarters to a place with nicer weather and others do not. There are many factors to consider, and different people will weigh the factors differently. To reach a common decision, they should

define the problem, identify criteria, weight the criteria, generate alternatives, evaluate each alternative against the criteria, and make a decision

According to an article in Forbes, John Gourville, a Harvard Business School professor, said, "Historically, first-degree price discrimination has been very difficult to implement, mostly for logistical reasons. With advances in technology and collecting of big data, then it may...become easier to do." Now Freshplum, an online seller, experiments with price discrimination based on geography, repeat sales, and how a customer reaches the website. Freshplum uses ________ to increase sales.

evidence-based decision making

Uber has an algorithm for setting prices. It increases prices during periods of high demand in part to attract more drivers to participate. Recently, the company is experimenting with route-based pricing. Some routes will pay more. Uber is using

evidence-based decision making

E-commerce creates a great deal of data on how consumers interact with a website. L.L.Bean keeps records that show how quickly consumers make decisions, how many alternatives they explore, and whether they stop without completing a purchase. When a manager sees an issue and proposes a solution, the company can easily test the solution. This is an example of

evidence-based decision-making

Kahneman found that the way a problem was stated could change preferences. When the choices were presented in positive terms, the participants preferred the more certain choice. When the choices were presented in negative terms, participants preferred a gamble, the chance of avoiding the loss. Participants were guilty of

framing bias

Computer CORE offers computer education to adults. Volunteers teach the classes. When CORE needed to update the presentations, the executive director created a committee of teachers. Each teacher had taken unique approaches to the presentations. The teachers were slow to agree, but they eventually chose a format and structure for new presentations. What were the advantages of using a committee?

greater expertise, and group buy-in and support for the choices

Groups tend to avoid critical evaluation of ideas that the group favors, which increases the risk of the group making flawed decisions. This is the definition of

groupthink

Looking to the past and incorrectly believing you can predict the future based on past knowledge or understanding is the definition of:

hindsight bias

Meetings to generate ideas favor first speakers. People hoping to look smart and productive will blurt out obvious ideas first. Everyone else then rallies around those ideas both internally and externally. The best thinking is often undeveloped. Professors Nordgren and Thompson favor a write first, talk second approach. Thompson calls this "brainwriting." Another name is

nominal group technique

What group decision-making process uses a series of written responses to a series of questionnaires instead of meeting in person to make decisions?

nominal group technique (NGT)

The practice of predictive analytics should be disciplined. That is, not only should guesses be made about the likelihood of future outcomes based on present trends, but also those predictions should be supported by

parallels from past experience

Frederick Corey, the vice provost of undergraduate education at Arizona State University, argues that colleges are driving by looking in the rear-view mirror. They use descriptive statistics on alumni to make policy about future students, so the data is years behind today's event. He advocates for

predictive analytics

If current trends are projected to continue in the future, decision makers will have access to rich insight. This work of projecting future trends is known as

predictive analytics

Kahneman and Tversky used experiments to examine how people actually make decisions about risk. The researchers found a multi-step process with editing and evaluating phases. People showed a strong preference to avoid losses, much more than probability or expected value would suggest. Their name for this process is

prospect theory

Bob is very analytical in his approach to decisions. He looks at the available data and weighs each factor. His approach takes more time but often finds cost savings or improves quality. His approach is called

rational decision making

Which technique can help a group discuss a complex multi-factor decision?

rational decision model

Natalie, a location scout, has been very busy with work and noticed her cell phone is breaking down. She likes her old Pamsung phone but needs to get one that has faster network abilities, is not more than two hundred dollars, has international roaming capabilities, and is water-resistant if possible. She thinks maybe the latest Phonei would work, but then she realizes the most important criteria are water resistance and international roaming. After visiting five stores and spending countless hours online researching the various phones, she evaluates her options and decides to go with the Yons Aperix Z3v. She buys the phone and sets out to find her latest movie location. What decision model did Natalie use to pick her new phone?

rational decision-making model

Experts disagree how quickly self-driving cars will arrive in showrooms or how many customers will want them. Managers at General Motors must choose a path where GM does reasonably well in all scenarios. This is called

robust decision making

Even when a group's decision process is well-organized, there is no way around the process being

slower and more expensive than individual decision making