MGT 2013 Chapter 7 - Individual & Group Decision Making

Rules for Brainstorming

1. Defer judgment. 2. Build on the ideas of others. 3. Encourage wild ideas. 4. Go for quantity over quality. 5. Be visual. 6. One conversation at a time. 7. eat shit

Tips for Improving Your Intuition

1. Trust your intuitive judgments: Your feelings count. Trust them and rely on your "gut" when it feels right. 2. Seek feedback: Confirm your intuitive judgments by asking trusted others for feedback. 3. Test your intuitive success rate: Think back over the last year and assess how many times you relied on your intuition. What was your success rate? If your intuition was wrong, assess why and try to use this knowledge in the future. 4. Try visualizing solutions: Visualizing solutions will help engage the System 1 thinking needed to activate your intuition.  5. Challenge your intuition: Rather than automatically accepting your intuitive thoughts, challenge them. Test your intuition by thinking of counterarguments. Then challenge those counterarguments.

How many stages are in the rational decision making process?

4

How many rules are there for Brainstorming

7!

Computer-Aided Decision Making

A computer-based information system that provides a flexible tool for analysis and helps managers focus on the future Produces collected information known as business intelligence

Predictive modeling

A data-mining technique used to predict future behavior and anticipate the consequences of change

Disadvantages of Group Decision Making

A few people dominate or intimidate. Sometimes a handful of people will talk the longest and the loudest, and the rest of the group will simply give in. Or one individual, such as a strong leader, will exert disproportionate influence, sometimes by intimidation. This cuts down on the variety of ideas. Satisficing. Because most people would just as soon cut short a meeting, the tendency is to seek a decision that is "good enough" rather than to push on in pursuit of other possible solutions. Satisficing can occur because groups have limited time, lack the right kind of information, or are unable to handle large amounts of information. Goal displacement. Although the primary task of the meeting may be to solve a particular problem, other considerations may rise to the fore, such as rivals trying to win an argument. Groupthink. Groupthink occurs when group members strive to agree for the sake of unanimity and thus avoid accurately assessing the decision situation. Here the positive team spirit of the group actually works against sound judgment.

Delphi Technique

A 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 Originally designed for technological forecasting but now is used as a multipurpose planning tool

Group Decision Making: How to Work With Others

Advantages of group decision making Greater pool of knowledge Different perspectives Intellectual stimulation Better understanding of decision rationale Deeper commitment to the decision

How to combat groupthink?

Allow criticism and allow other perspectives.

Some Uses of Big Data

Analyzing consumer behavior and spurring sales Improving hiring and personnel management Tracking movie, music, TV, and reading data Exploiting farm data Advancing health and medicine Aiding public policy

Nonrational Decision Making

Assumes that decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisions Two types are discussed: satisficing and intuition The nonrational models are descriptive rather than prescriptive: They describe how managers actually make decisions rather than how they should.

Satisficing model

Because of constraints, managers don't make an exhaustive search for the best alternative. Instead, managers seek alternatives until they find one that is satisfactory, not optimal. While satisficing might seem to be a weakness, it may well outweigh any advantages gained from delaying making a decision until all information is in and all alternatives weighed.

Some Hindrances to Perfectly Rational Decision Making

Complexity Time and money constraints Different cognitive capacity, values, skills, habits, and unconscious reflexes Imperfect information Information overload Different priorities Conflicting goals

Group Problem-Solving Techniques

Consensus Occurs when members are able to express their opinions and reach agreement to support the final decision Brainstorming Technique used to help groups generate multiple ideas and alternatives for solving problems

General Decision-Making Styles

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 and technical concerns or on people and social concerns when making decisions Tolerance for ambiguity Indicates the extent to which a person has a high need for structure or control in his or her life

bounded rationality

Developed in the 1950s by economist Herbert Simon Suggests that the ability of decision makers to be rational is limited by numerous constraints Complexity, time and money, cognitive capacity

Who developed bounded rationality?

Developed in the 1950s by economist Herbert Simon Because of constraints (remember: the hindrances), managers don't make an exhaustive search for the best alternative. Instead, they follow what Simon calls the satisficing model.

Four General Decision Making Styles

Directive: Efficient, logical, practical, and systematic in their approach to solving problems action oriented, decisive, and like to focus on facts Analytical: Careful decision makers who take longer to make decisions but who also respond well to new or uncertain situations Conceptual: Tend to focus on the people or social aspects of a work situation. They take a broad perspective to problem solving and like to consider many options and future possibilities Behavioral: Supportive, receptive to suggestions, show warmth prefer verbal to written information; have a tendency to avoid conflict

dos and don'ts for achieving consensus.

Dos: Use active listening skills. Involve as many members as possible. Seek out the reasons behind arguments. Dig for the facts. Don'ts: Avoid log rolling and horse trading ("I'll support your pet project if you'll support mine"). Avoid making an agreement simply to keep relations amicable and not rock the boat. Finally, don't try to achieve consensus by putting questions to a vote; this will only split the group into winners and losers, perhaps creating bad feelings among the latter.

Making Ethical Decisions

Ethics (from Chapter 3) Standards of right and wrong that influence behavior Ethics officer Someone trained about matters of ethics in the workplace, particularly about resolving ethical dilemmas

rational decision making

Explains how managers should make decisions Assumes managers will make logical decisions that will be optimum in furthering the organization's best interests Also called the classical model

How to implement and evaluate correctly in the rational decision making process?

For implementation to be successful, you need to do two things: Plan carefully Especially if reversing an action will be difficult, you need to make careful plans for implementation. Some decisions may require written plans. Be sensitive to those affected You need to consider how the people affected may feel about the change—inconvenienced, insecure, even fearful, all of which can trigger resistance. This is why it helps to give employees and customers latitude during a changeover in business practices or working arrangements.

How to Overcome Barriers to Decision Making

Four ineffective reactions Relaxed avoidance - taking no action in the belief that there will be no great negative consequences Relaxed change - realizing complete inaction will have negative consequences but opts for the first available alternative Defensive avoidance - can't find a good solution and follows by (a) procrastinating, (b) passing the buck, or(c) denying the risk Panic - so frantic to get rid of the problem that one can't deal with the situation realistically

What Managers Need to Know About Groups and Decision Making

Groups take longer to make decisions. Their size affects decision quality. - Optimal group size may be 5 or 7 people - Odd group numbers are best They may be too confident. Knowledge counts.

Knowledge of your decision-making style

Helps you to understand yourself and facilitates self-improvement Can increase your ability to influence others by being aware of your—and their—style Gives you an awareness of how people can take the same information, yet arrive at different decisions

Three Effective Reactions: Deciding to Decide

In deciding to decide, a manager agrees that he or she must decide what to do about a problem or opportunity and take effective decision-making steps. Three ways to help you decide whether to decide are to evaluate the importance, credibility, and urgency of the situation. 1. Importance—"How High Priority Is This Situation?" You need to determine how much priority to give the decision situation. If it's a threat, how extensive might prospective losses or damage be? If it's an opportunity, how beneficial might the possible gains be? 2. Credibility—"How Believable Is the Information about the Situation?" You need to evaluate how much is known about the possible threat or opportunity. Is the source of the information trustworthy? Is there credible evidence? 3. Urgency—"How Quickly Must I Act on the Information about the Situation?" Is the threat immediate? Will the window of opportunity stay open long? Can actions to address the situation be done gradually?

Big data

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

Intuition Model

Intuition is making a choice without the use of conscious thought or logical inference. Stems from both: Expertise—a person's explicit and tacit knowledge about a person, a situation, an object, or a decision opportunity—is known as a holistic hunch Automated experience - the involuntary emotional response to those same matters It is important to try to develop your intuitive skills because they are as important as rational analysis in many decisions, and some guidelines for this development are on the next slide.

Who came up with the 7 Implementation Principles of Evidence-Based Management?

Pfeffer and Sutton learn their first names

Seven Implementation Principles of Evidence-Based Management

Pfeffer and Sutton identify seven implementation principles to help companies that are committed to doing what it takes to profit from evidence-based management. 1. Treat your organization as an unfinished prototype: Leaders need to think and act as if their organization were an unfinished prototype that won't be ruined by dangerous new ideas or impossible to change because of employee or management resistance. 2. No brag, just facts: This slogan is an antidote for over-the-top assertions about forthcoming products. 3. See yourself and your organization as outsiders do: "Having a blunt friend, mentor, or counselor," Pfeffer and Sutton suggest, "can help you see and act on better evidence." 4. Evidence-based management is not just for senior executives: The best organizations are those in which everyone is guided by the responsibility to gather and act on quantitative and qualitative data and share results with others. 5. Like everything else, you still need to sell it: To sell an evidence-based approach, you may have to identify a preferred practice based on solid if unexciting evidence, then use vivid stories to grab management attention. 6. If all else fails, slow the spread of bad practice: It may be necessary for you to ignore orders you know to be wrong or delay their implementation. 7. The best diagnostic question: What happens when people fail? "Failure hurts, it is embarrassing, and we would rather live without it," the authors write. "Yet there is no learning without failure. . ."

Decision making

Process of identifying and choosing alternative courses of action Can be made rationally, but often it is nonrational System 1: intuitive and largely unconscious - operates automatically and quickly; it is our fast, automatic, intuitive, and largely unconscious mode, as when we detect hostility in a voice or detect that one object is more distant than another System 2: analytical and conscious - analytical and conscious: is our slow, deliberate, analytical, and consciously effortful mode of reasoning, which swings into action when we have to fill out a tax form or park a car in a narrow space

Symptoms of Groupthink

Sense of invulnerability. Group members have the illusion that nothing can go wrong, breeding excessive optimism and risk taking. They may also be so assured of the rightness of their actions that they ignore the ethical implications. Rationalization. Rationalizing protects the pet assumptions underlying the group's decisions from critical questions. Illusion of unanimity and peer pressure. The illusion of unanimity is another way of saying that a member's silence is interpreted as consent. If people do disagree, peer pressure leads other members to question the dissenters' loyalty. "The wisdom of crowds." Groupthink's pressure to conform often leads members with different ideas to censor themselves—the opposite of collective wisdom, says James Surowiecki, in which "each person in the group is offering his or her best independent forecast. It's not at all about compromise or consensus.

Business analytics

Sophisticated forms of business data analysis Examples: portfolio analysis, time-series forecast

What are the 4 steps to the rational decision making process

Stage 1: Identify the problem or opportunity—determining the actual versus the desirable Stage 2: Think up alternative solutions—both the obvious and the creative Stage 3: Evaluate alternatives and select a solution—ethics, feasibility, and effectiveness Stage 4: Implement and evaluate the solution chosen

When is the Delphi Technique Useful (8)

The Delphi technique is useful when face-to-face discussions are impractical. It's also practical when disagreement and conflicts are likely to impair communication, when certain individuals might try to dominate group discussions, and when there is a high risk of groupthink.

Big data analytics

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

What's wrong with the rational model?

The rational model is prescriptive, describing how managers ought to make decisions. It doesn't describe how managers actually make decisions. Indeed, the rational model makes some highly desirable assumptions—that managers have complete information, are able to make an unemotional analysis, and are able to make the best decision for the organization. We all know that these assumptions are unrealistic.

Evidence based decision making or Evidence-based management

The translation of principles based on best evidence into organizational practice Brings rationality to the decision-making process From the textbook, "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," say Stanford professors Jeffrey Pfeffer and Robert Sutton. "They fail to face the hard facts and use the best evidence to help navigate the competitive environment."

Nine Common Decision-Making Biases

There are several common decision making biases (called heuristics) that simplify the process of making decisions: 1. When managers use only information that is readily available from memory to make judgments, an availability bias exists. 2. A representativeness bias refers to the tendency to generalize from a small sample or a single event. 3. When people seek information to support their point of view and discount data that do not, a confirmation bias exists. 4. When managers add up all the money already spent on a project and conclude it is too costly to simply abandon it, sunk cost bias exists. 5. The tendency to make decisions based on an initial figure is anchoring and adjustment bias. 6. The overconfidence bias is the bias in which people's subjective confidence in their decision making is greater than their objective accuracy. 7. The hindsight bias is the tendency of people to view events as being more predictable than they really are. 8. The framing bias is the tendency of decision makers to be influenced by the way a situation or problem is presented to them. 9. Escalation of commitment bias occurs when decision makers increase their commitment to a project despite negative information about it.

What Makes It Hard to Be Evidence Based

There's too much evidence. There's not enough good evidence. The evidence doesn't quite apply. People are trying to mislead you. You are trying to mislead you The side effects outweigh the cure. Stories are more persuasive anyway.

Who's Better at Financial Decisions?

Warren Buffett and female investors have something in common A study found that women trade less often than men, do a lot more research, and tend to base their investment decisions on more than just numbers Men tend to trade more, and the more you trade, typically the more you lose

When a Group Can Help in Decision Making: Three Practical Guidelines

When it can increase quality When it can increase acceptance When it can increase development When it can increase quality: If additional information would increase the quality of the decision, managers should involve those people who can provide the needed information. Thus, if a type of decision occurs frequently, such as deciding on promotions or who qualifies for a loan, groups should be used because they tend to produce more consistent decisions than individuals do. When it can increase acceptance: If acceptance within the organization is important, managers need to involve those individuals whose acceptance and commitment are important. When it can increase development: If people can be developed through their participation, managers may want to involve those whose development is most important.

ethical decision tree

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

Decision

choice made from among available alternatives

What are the two kinds of Decision Making?

rational and nonrational

rational decision making is also called

the classical model