Decision making
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DECISION MAKING. February 10, 2010. Decision-Making Styles. More information & Alternatives Overanalyze. Broader perspective Many alternatives Intuition & disc. Indecisive. Supportive Open to suggestions Wishy-washy Conflict Avoidant. Logical, systematic Action oriented

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DECISION MAKING

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Decision making

DECISION MAKING

February 10, 2010


Decision making styles

Decision-Making Styles

More information

& Alternatives

Overanalyze

Broader perspective

Many alternatives

Intuition & disc.

Indecisive

Supportive

Open to suggestions

Wishy-washy

Conflict Avoidant

Logical, systematic

Action oriented

Facts focused

Autocratic, Short-term


Question

Question?

Bill is supportive of his employees and prefers to have verbal conversations rather than written memos. His style is:

Analytical

Behavioral

Conceptual

Directive


Which style do you have

Which Style Do You Have?

Knowledge of your decision-making style:

Helps

Helps

Helps


Rational decision making

Rational Decision Making

Awareness

Pressure

Resources

Decision Criteria

Weigh Criteria

Rate alternatives on criteria

Weighted score for each alt.


Analyzing alternatives

ANALYZING ALTERNATIVES

  • Certainty

    • Outcome of an alternative is known

  • RISK

    • Likelihood of outcomes may be estimated

  • UNCERTAINTY

    • Neither certainty or reasonable probability estimates are available


Types of decisions

TYPES OF DECISIONS

  • Programmed

    • Well-structured, repetitive

  • Non-programmed

    • Uniqued/infrequent

    • Complex; Ill-defined


How rational are we

Rationality

Perfectly Rational/Logical

Complete Info.

Certainty

Maximize/Optimize

Bounded-Rationality

Bounded Rationality

Incomplete Info.

Satisficing

Incremental

HOW RATIONAL ARE WE?


Why do we satisfice

WHY DO WE SATISFICE?

Information

Overload

Limited

Resources

Expertise

Problems

Imperfect

Information

Cognitive

Limitations

Politics


Common decision making biases

COMMON DECISION MAKING BIASES

  • Intuition

  • Availability Bias

  • Confirmation Bias

  • Representative Bias

  • Cultural Bias

  • Sunk Cost Bias

  • Escalation of Commitment

  • Anchoring and adjustment

  • Framing


Decision making

  • A large car manufacturer has recently been hit with a number of economic difficulties, and it appears as if three plants need to be closed and 6,000 employees laid off. The vice-president of production has been exploring alternative ways to avoid this crisis. She has developed two plans:

    • Plan A: This plan will save one of three plants and 2,000 jobs.

    • Plan B: This plan has a 1/3 probability of saving all three plants and 6,000 jobs, but has a 2/3 probability of saving no plants and no jobs.


Decision making

  • A large car manufacturer has recently been hit with a number of economic difficulties, and it appears as if three plants need to be closed and 6,000 employees laid off. The vice-president of production has been exploring alternative ways to avoid this crisis. She has developed two plans:

    • Plan C: This plan will result in the loss of two of the three plants and 4,000 jobs.

    • Plan D: This plan has a 2/3 probability of resulting in the loss of all three plants and all 6,000 jobs, but has a 1/3 probability of losing no plants and no jobs.


Framing effects on decision making

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Framing Effects on Decision Making

  • Positive Frame

    • a problem presented as a gain

    • become more risk-averse

  • Negative Frame

    • a problem presented as a loss

    • become more risk-seeking


Improving decision making

Improving Decision Making

  • Decide to Decide

    • How important is this situation?

    • How credible is my information

    • How urgent is the situation?

  • Minimize Biases

    • Conscious information processing

    • Reality testing—Check your assumptions

      • Ask questions (and let them answer)

      • Look for information that disconfirms your beliefs

      • Know your people


The ethical decision tree

The Ethical Decision Tree


Participative management

Participative Management

Participative Management

process of involving employees in setting goals, making decisions, solving problems, and making changes in the organization


Advantages of group decision making

Advantages of Group Decision Making


Disadvantages of group decision making

Disadvantages of Group Decision Making


Group vs individual decision making

GROUP VS. INDIVIDUAL DECISION MAKING


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