mgt chp 7

Decision support system

-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 Example: American Airlines developed a decision support system called the yield management system that helps managers decide how much to overbook and how to set prices for each seat so that a plane is filled and profits are maximized.

Decision tree

-A graph of decisions and their possible consequences -Used to create a plan to reach a goal

The 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 -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.

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 models of decision making

-Assumes that decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisions -These 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.

Two Kinds of Decision Making: Rational and Nonrational

-Decision:Choice made from among available alternatives -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 System 2: analytical and conscious

Bounded rationally

-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

Rational model of decision making

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

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 -In actuality, research shows that very few people have only one dominant decision-making style. Rather, most managers have characteristics that fall into two or three styles. Studies also show that decision-making styles vary across occupations, job levels, and countries. There is not a best decision-making style that applies to all situations. However, by having knowledge of your decision-making style, it helps you in the ways presented here.

Intuition model

-Intuition is making a choice without the use of conscious thought or logical inference. -May stem from either: 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

Business analytics

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

Ethics and ethics officer

-Standards of right and wrong that influence behavior -Someone trained about matters of ethics in the workplace, particularly about resolving ethical dilemmas

Evidence-based management

-The translation of principles based on best evidence into organizational practice -Brings rationality to the decision-making process

System 1 System 2 Why don't we use the more deliberate and rational System 2 more often?

-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. -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. Because it's lazy and tires easily, so instead of slowing things down and analyzing them, it is content to accept the easy but unreliable story that System 1 feeds it.

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

Three Effective Reactions: Deciding to Decide

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?

Seven Implementation Principlesof 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 learni

Advantages of 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

4 steps in rational decision making

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

Disadvantages of Group Decision Making

1.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. 2.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. 3.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. 4.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.

There are four defective problem-recognition and problem-solving approaches that act as barriers when you must make an important decision in a situation of conflict.

1.Relaxed avoidance - taking no action in the belief that there will be no great negative consequences 2.Relaxed change - realizing complete inaction will have negative consequences but opts for the first available alternative 3.Defensive avoidance - can't find a good solution and follows by (a) procrastinating, (b) passing the buck, or(c) denying the risk 4.Panic - so frantic to get rid of the problem that one can't deal with the situation realistically

What makes it hard to be evidence based?

1.There's too much evidence. 2.There's not enough good evidence. 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.

Tips for Improving Your Intuition

1.Trust your intuitive judgments 2.Seek feedback 3.Test your intuitive success rate 4.Try visualizing solutions 5.Challenge your intuition

Nine Common Decision-Making Biasesaka HEURISTICS

1.When managers use only information that is readily available from memory to make judgments, an AVAILABILITY BIAS exists. 2. A REPRESENTATIVE 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 HINDISIGHT 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.

Predictive modeling

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

Financial decisions

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 Context matters: In stressful situations, men are more prone to risky decisions; otherwise, men and women are similar in their risk-taking decisions

David has been a manager for 14 years. He has seen many different situations with his employees. He often makes decisions without really thinking about them. This is called A.intuition. B.satisficing. C.bounded rationality. D.unbounded rationality.

A.

How to combat groupthink?

Allow criticism and allow other perspectives.

Brian is supportive of his employees and prefers to have verbal conversations rather than written memos. His style is A.analytical. B.behavioral. C.conceptual. D.directive.

B.

Isha is trying to decide on a new contract for copier services. One of the salespeople has an excellent bid, but Isha believes that there are things he is not telling her. Why does this make it hard for her to use evidence-based decision making? A.There's too much evidence. B.There's not enough good evidence. C.People may try to mislead you. D.The evidence doesn't quite apply.

C.

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 Value orientation Tolerance for ambiguity

4 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

4 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

Some Hindrances to Perfectly Rational Decision Making

Examples: -Complexity (e.g., "wicked" problems) -Time and money constraints -Different cognitive capacity, values, skills, habits, and unconscious reflexes -Imperfect information -Information overload

Big data

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

Tolerance for ambiguity

Indicates the extent to which a person has a high need for structure or control in his or her life

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.

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

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.

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.

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

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.

During the 1950s, economist Herbert Simon—who later received the Nobel Prize—began to study how managers actually make decisions. From his research he proposed that

managers could not act truly logically because their rationality was bounded by so many restrictions. Because of constraints (remember: the hindrances we covered in a previous slide), managers don't make an exhaustive search for the best alternative. Instead, they follow what Simon calls the satisficing model. 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