Management Ch. 5-Decision making

anchoring and adjusting bias

tendency of decision makers to use an initial value or experience as a basis of comparison, judgment is anchored by an initial value that all other decisions are based upon

multivariable testing

uses math and those results lead to a decision- a systematic approach of experimentation to analyze and evaluate potential solutions. saves time and money

decision making

process of choosing a solution from available alternatives

avoid escalation of commitment

tendency to stick with the wrong decision bc married to the idea, leads to greater commitment of resources (use more resources to fix something bad), protect against this by progress reports, outside auditors, changing managers

groupthink occurs when

the group is insulated from others with different perspectives, the group leader expresses a strong preference for a particular decision, there is no established procedure for defining problems and exploring alternatives , group members have similar backgrounds

steps to establish devil's advocacy program

1) generate a potential solution 2) assign a devil's advocate to criticize the question 3) present the critique of the solution to key decision makers 4) gather added info 5) decide whether to use, changes, or not use the originally proposed solution

rational decision making

a systematic process of defining problems, evaluating alternatives, and choosing optimal solutions

Groupthink

bad and occurs in highly cohesive groups when group members feel intense pressure not to disagree with each other so that the group can approve a proposed solution

tools for how to process decisions

devil's advocacy, dialectical inquiry, nominal group technique, Delphi technique, multivariable testing

relative comparisons

each criterion is compared directly to every other criterion

absolute comparisons

each criterion is compared to a standard or ranked on its own merit

5-evaluate the criteria

evaluating criteria against other criterion to make sure all criteria is met can take much longer and be much more extensive than all the other steps because of the amount of info to be collected

overreliance on intuition

intuition works best for experienced managers but overreliance can lead to careless and inconsistent decision making

6-compute the optimal decision

determine each alternatives alternative value by multiplying the rating for each criterion (step 5) by the weight for that criterion (step 3) and sum those scores for each alternative course of action (step 4) [that weight is then multiplied by ratings in each category]

dialectical inquiry

lots of brilliance and creativity, creates c-type conflict by forcing decision makers to state the assumptions of a proposed solution (thesis) and to then generate a solution opposite (anti thesis) of the proposed solution

1- define the problem

managers must be aware of the gap (problem), be motivated to reduce the gap, and have knowledge skills abilities and resources to fix the problem in form of abstract

flip chart

mind map of everyones thoughts

Delphi technique

panel of experts respond to q's and to each other until reaching agreement on an issue, for long term decisions, don't need to all be in same place and is more expensive to bring experts together so typically done electronically

availability bias

the tendency of a decision maker to give preference to recent info, vivid images that evoke emotion, and specific acts and behaviors that they personally observed; may overlook rational data

relative weighting of decision criteria

0= indifferent +1= good -1= bad

steps to establish Delphi technique

1) assemble a panel of experts 2) create a questionnaire of open ended questions 3) summarize the responses and feed back to the panel until the members reach agreement 4) create brief report no more than 2 pages and send to the panel members for agreement/disagreement 5) continue the feedback process until panel reaches agreement

6 steps to rational decision making

1) define the problem 2) identify decision criteria 3) weight the criteria 4) generate alternative courses of action 5) evaluate each alternative 6) compute the optimal decision

steps to establish nominal group technique

1) during a quiet time members write down as many probs and solutions as possible 2) each member shares 1 idea at a time 3) all ideas are posted on flip charts 4) groups discusses advantages/disadvantages 5) ideas ranked independently in 2nd quiet time 6) members read rankings aloud & idea w highest average rank is selected

steps to establish a dialectical inquiry process

1) generate a potential solution 2) identify the assumptions underlying the potential solution 3) generate a conflicting counterproposal based on opposite assumptions 4) have advocates of each position present their arguments and engage in a debate in front of decision makers 5) decide whether to use, change, or not use the originally proposed solution

bounded rationality

a decision making process restricted in the real world by: limited resources, incomplete and imperfect info, managers' limited decision-making capabilities

devil's advocacy

creates c-type conflict by assigning an individual or a subgroup the role of critic (devil on one shoulder angel on the other)

3-weight the criteria

decide which criteria are more or less important with absolute and relative comparisons

problem

exists when there is a gap between the desired state (what managers want) and an existing state (the situation managers are facing)

nominal group technique

facilitator makes flip charts and pulls everyone's' ideas, begins with group members acting as individuals, produces poorer quality decisions

maximize decisions

fully rational decision makers use this by choosing the optimal decision (impossible due to limited resources)

4-generate alternative courses of action

identify as many possible courses of action that could solve the problem as possible

satisfice

most managers use this to choose the "good enough" alternative

limits to rational decision making

no perfect decisions in the real world, bounded rationality, maximizing vs. satisficing

absolute weighting of decision criteria

scale of 1-5 from unimportant to important

2-identify decision criteria

standards used to guide judgments and decisions, the more criteria the better

representative bias

when decision makers judge the likelihood of an event's occurrence based on its similarity to previous events and their likelihood of occurrence; decision based on past