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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

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
slide11
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.
slide12
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
participative management
Participative Management

Participative Management

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

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