Decision Making

1. Decision Making

2. Today: Decision Making Exercise! It is approximately 10 a.m. in mid Aug and you have just crash landed in the Sonora desert in the Southwest US. The light twin engine plane, containing the bodies of the pilots, has completely burned. Only the air frame remains. None of the rest of you are injured. The pilot was unable to notify anyone of your position before the crash, however, he had indicated that you were 70 miles S/SW from a mining camp which is the nearest known habitation, and that you were approx 65 miles off course.

3. Today: Decision Making Exercise! The immediate areas is quite flat and except for a few cacti appears to be rather barren. The last weather report indicated that the temp would reach 110 that day, which means that at ground level it will be almost 130. You are dressed in light weight clothing – short sleeved shirts, pants, socks and street shoes. Everybody has a handkerchief. Collectively, your pockets contain $2.83 in change and $85 in bills, a pack of cigarettes and a ball point pen

4. Your Task • Before the plane caught fire, your group was able to salvage 15 items. Your task is to rank these items according to their importance to your survival, with 1 being the most important and 15 being the least important. • You may assume: • The number of survivors is the same as the number on your team • You are the actual people in the situation • The team has agreed to stick together • All the items are in good condition

5. Step 1: Individual Rankings Flashlight (4 battery size) Jack knife Sectional air map of the area Large plastic raincoat Magnetic compass 45 caliber pistol (loaded) Parachute (red and white) Compress kit with gauze Bottle of salt tablets Quart of water per person Book, “Edible Animals of the Desert” A pair of sunglasses per person 2 Quarts of 180 proof Vodka 1 top coat per person A cosmetic mirror

6. Step 2: Group Rankings Flashlight (4 battery size) Jack knife Sectional air map of the area Large plastic raincoat Magnetic compass 45 caliber pistol (loaded) Parachute (red and white) Compress kit with gauze Bottle of salt tablets Quart of water per person Book, “Edible Animals of the Desert” A pair of sunglasses per person 2 Quarts of 180 proof Vodka 1 top coat per person A cosmetic mirror

7. Step 3: Expert Rankings 1. Cosmetic mirror • Most powerful tool to communicate your presence • Can generate 5-7 million candle power of light • Reflected sunbeam can be seen beyond the horizon • If you had no other item, you would still have better than an 80% chance of being spotted within 24 hours. 2. Top coat per person • After communication system next priority is to slow down dehydration • 40% of dehydration is moisture lost through perspiration • Perspiration reduced by avoiding the hot dry air from circulating next to skin • Ironically, the coats are the best way to do this • Without them survival time would be cut by at least a day

8. Step 3: Expert Rankings 3. Water • You could probably survive 3 days with the first 2 items • Although water would not extend life much, it would hold off dehydration • Best to drink as soon as you get thirsty so that you can remain clear headed in the first day when important decisions have to be made and a shelter erected • Once dehydration begins, it would be impossible to reverse it with the amount available so rationing would be pointless 4. Flashlight • Only quick reliable night signaling device • Multiple use during the day: reflector and lens could be an auxiliary signal device or for starting fire, the battery container could be used for digging or as a water container in the distillation process (see raincoat)

9. Step 3: Expert Rankings 5. Parachute • Both shelter and signaling device • Use cactus as tent pole • Double or triple folding could provide shade enough to reduce temp 20% 6. Jackknife • Although not as crucial as 1-5, has multiple uses: rigging shelter and cutting cactus for moisture 7. Raincoat • Can be used to build a solar still by digging a hole and placing the raincoat over it the temperature differential will extract moisture and produce condensation on the underside of the plastic • By placing a rock in the center of the hole, a cone shape can be formed to drip the condensation into the flashlight container • Up to a quart can be made each day, but the energy required would likely outweigh the benefits

10. Step 3: Expert Rankings 8. Gun • Sound signaling device (international distress 3 shots in rapid succession) • Bullets: quick fire starter • Butt of pistol as a hammer • Disadvantages: impatience, irritability and irrationality are linked with dehydration and guns are dangerous tools • Hunting useless, hard to aim and eating protein increases dehydration 9. Sunglasses • Replaceable by handkerchief and shelter of parachute, but still makes life more comfy 10. Compress kit with gauze • Because of low humidity and dehydration bleeding is unlikely • Materials could be used as rope or for further protection from the sun

11. Step 3: Expert Rankings 11. Magnetic Compass • Bad idea to walk! • Possible to use as auxiliary signaling device 12. Sectional Air Map of Area • Again….bad idea to go anywhere! • Firewood or toilet paper • Head cover or shade 13. Book on Eating Animals in the Desert • Hunger much less of a problem than dehydration • Conserving energy means hunting is counterproductive and eating protein takes up a lot of water • Rule of thumb, eat only when you have lots of water • Desert animals are rare, hard to see

12. Step 3: Expert Rankings 14. Vodka • Booze dehydrates • In this situation it would be lethal • Only use as a coolant, fire, or the empty bottle 15. Salt Tablets • Huge myths about their value • Without lots of extra water, the effect would be like drinking sea water

13. Step 4: Calculate Score • Calculate and put up on board: • Average individual scores on your team (all individual scores divided by the number of team members) • Team score • Gain score: the difference between the team and the average individual score • If the team score is lower than avg. ind. the gain is “+”, if it is higher it is “-” • Lowest individual score • Number of individual scores lower than the team score

14. DISCUSSION To what extent did the group discussion change the accuracy of the answers? Which behaviors helped/hindered the decision making process? What happened if a person had a very accurate individual score but was not very persuasive in the group? What happened if a person had a poor individual score and was very persuasive in the group? Did any conflict arise? How was it managed?

15. DISCUSSION Leader Vote? Majority wins?

16. Summary Group decision making = better decisions Individual decision making = faster decisions

17. Decision Making

18. Objective Central task of managers: making decisions Objective:understand how we make decisions

19. Types of Problems and Decisions Poorly-Structured Problems: New, unusual problems for whichinformation is ambiguousor incomplete. Well-Structured Problems:Easilydefined, familiarand straightforward. Non-Programmed Decisions: A unique decision to address (poorly-structured) problemsneeding customizedsolutions. Programmed Decisions: A “routine” (rate, procedure or policy) used to address repetitive (structured) problems • Minimize need for discretion • Facilitate efficiency Most real-world decisions have elements of both.

20. Rational Decision Making • Definition: Decisions that are optimal • Value-maximizing • Select by analyzing alternatives and picking best solution

21. Rational Decision Making 3. Search for alternative solutions 4. Compare and evaluate alternative solutions 1. Define theissue 2. Set goals External and Internal environment forces 6. Implement the solution selected 5. Choose among alternative solutions 7. Follow up and control

22. Choosing a University…. • Does your observations map onto these rational decision stages? • Which did you rush through? • Would you make any modifications to this model according to your experience?

23. The Feasibility of Rational Decisions • It’s desirable, but lets look closer… • Assumptions of the model are very demanding • Managerial decisions seldom meet all the tests • Do we always want to make the best decision?

24. Single, well- defined goal Problem is clear and unambiguous Alternatives & consequences are known Rational Decision Making Preferences are clear Final choice will maximize payoff Preferences are constant and stable No time or cost constraints exist Assumptions of Rational Decisions

25. Bound Rationality • Bounded rationality = behaving rationally within limitations imposed by cognitive abilities and complexity of environment. • Satisficing - Searching for and choosing an acceptable, or satisfactory response • Choosing “good enough” rather than trying to make the optimal decision • Intelligent satisficing means working on the decision only until the costs of further analysis outweigh the benefits from improving the decision.

26. Why Satisficing? Satisficing decision Uncertainty, Risk, Ambiguity Information processing biases Limited Information Perceived problem

27. BRD: Key concepts • Certainty: • Outcome of every alternative is known • Risk: • Able to estimate the probability of outcomesstemming from each alternative • Uncertainty: • Not certain about outcomes and unable to estimate probabilities • Ambiguity: • Not certain about what the meaning of the data is in the first place • Limited Information: • Search costs & time constraints prevents gathering information on all alternatives & outcomes

28. BRD and Heuristics • Heuristics: Rules of thumb to deal with complex situations. • Saves effortif the heuristic is right • If heuristic is wrong, can have cognitive bias – systematically repeated errors that arise from the decision-making process in use.

29. Availability Bias • Availability Bias: The frequency of an event is often assessed with how easily it is brought to mind. • Why? Ease of Recall: • E.g., Judging if a list of 100 names has more men or women is influenced by the number and gender of famous names. • Incidents that are hard to imagine are underestimated • E.g., Winning the lottery

30. Representativeness Bias • Incorrectly generalizing from a small sample or a single incident. • Why? Insensitivity to prior probabilities: • “Steve is very shy and withdrawn, invariably helpful, but with little interest in people, or in the world of reality.  A meek and tidy soul, he has a need for order and structure, and a passion for detail.” Is Steve a librarian, or a farmer? • Why? Misconception of chance: • Gamblers fallacy, if you hit 5 reds in a row in roulette, is it more likely for the next to be black?

31. Additional Key Cognitive Biases • Escalating Commitment: • Committing considerable resources to a project and then committing more even if evidence shows the project is failing. • You call for information and are put on hold. How long do you stay on hold? • The car broke down last month and it was repaired.  You have a new problem.  Do you continue to put money in the lemon of a car? • Illusion of Control: • The tendency to overestimate one’s own ability to control activities and events. • E.g., Throwing dice: people tend to throw harder for high numbers and softer for low numbers.

32. Groups and Decision-Making 1 2 3 4 • Advantages of group decision-making (assuming the group is working well): • Better decision: • More complete information • More creative decision: • More and better alternatives • Especially when expertise is diverse • The decision is more likely to be perceived as legitimate • Members are more likely to be committed to the decision

33. Groups and Decision-Making • Disadvantages of group decision-making • Even if the group is working well: • Group decision-making is time consuming • And if the group is not working particularly well: • Members may feel railroaded by a minority • Who is responsible may be ambiguous • Members may feel pressure to conform even though they disagree “Groupthink:” conformity marked by withholding different or unpopular views in order to give the appearance of agreement

34. So when do groups make better decisions than individuals? Criteria of EffectivenessGroupsIndividuals Accuracy x Speed x Creativity x Degree of acceptance x Efficiency x

35. Summary Different types of problems and decisions Rational and boundedly rational decision making models Biases and heuristics Groups and decision making

36. Teams

37. Objectives • Explore the elements of the management of teams • Design • Development • Process • Discuss the challenges of successfully managing teams

38. Groups vs. Teams • Group • Two or more people who interact with each other to accomplish certain goals or meet certain needs. • Team • A group whose members work intensely with each other to achieve a specific, common goal. All teams are groups but not all groups are teams. The ideal definition of a team is hard to achieve.

39. Types of work teams Functional Team: A manager and subordinates from a particular functional area or department. Cross-functional Team: A group of individuals who normally work within different functional areas but who are brought together to accomplish a task. Self-managing Team: A formal group of employees that operate without a manager and are responsible for a complete work process or segment.

40. ESSENTIALS OF TEAM DESIGN • Team design is the most important thing to get right • Goals • Define team’s goal to gain focus and urgency • Size • Smallest team that can do the job • Leadership • Choose anenabling, credible and powerful leader • Rewards • Reward the team not the individual

41. Design: Size Matters • Group size affects how a group performs. • Large groups - good for getting diverse input • Small groups - good at making use of information • Normally, small groups (say 2 to 9 members) interact better and tend to be more motivated. • Optimal group size 5-7 • Free Rider Tendency: • Individual members reduce their effort and contribution as groups increase in size, because responsibility becomes dispersed. • Reduce by: • Keeping the group no larger than necessary • Make individual efforts identifiable and accountable. • Emphasize each member’s valuable contributions.

42. Essentials of Team Process Stages of Development Conflict Cohesiveness Norms

43. Teams develop through stages High Adjourning Performing Degree of Maturity Norming – “Norms” Storming – “Control” Forming – “Existence” Low End Start Time Together

44. The Stages • Forming • Aimed at answering key questions: Who are We? What do we do? Who is our leader? • Storming • Conflict arises through the promotion of agendas and challenges to leadership. • Norming • Characterized by cooperation, consensus, and shared understanding of goals and rules. • Performing • Focus on achievement of goals.

45. Examples: Group Development • In what stage does each task occur: • A consensus develops as to group goals and how the group should work to get there. • Feelings of friendship and camaraderie arise. • The real work gets done. • There is conflict over leadership and how to achieve group goals. • There is conflict because some members don’t want to submit to the demands of other group members. • Members try to reach a common understanding of what the group’s goal should be and how to get there.

46. Low-Med levels Functional Usually Dysfunctional Low levels Functional Conflict Management • Conflict - perceived incompatible differences resulting in interference or opposition • Task Conflict • Relationship Conflict • Process Conflict • Functional vs. Dysfunctional conflict • Conflict can help group performance! • Functional conflict resolution occurs when the conflict is settled by compromise (give and take) or collaboration (finding a way to make both parties better off).

47. Conflict and Performance

48. Group Cohesiveness • Cohesiveness • Degree to which members are attracted to a group and share the group’s goals • Usually good for performance, unless group’s goalsare not aligned with organization’s goals. • Build cohesiveness through: • Smaller groups • Group identity – name the group, engage in competition with other groups. • Success – small initial successes

49. Norms, Conformity and Deviance • Norms: • Acceptable standards or expectations that are shared by the group’s members • E.g., Working hours, behavior rules, & output quotas • Conformity: • Compliance with norms • Members conform to obtain rewards, imitate respected members, and because they feel the behavior is right. • When a member deviates, other members tend to try to make them conform, expel them, or change the group norms to accommodate. • Desire for acceptance by group makes some members susceptible to conformity pressures • Deviance is not all bad. • Excessive conformity reduces flexibility. • Deviance allows for new ideas in the group.

50. Deviance and Performance