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Decision Making and Creativity
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MGMT
Terms in this set (41)
Decision Making is _____
Identifying and choosing alternative solutions that lead to a desired state of affairs
The two models of decision making are _____
1. Rational
2. Irrational
Rational Model of Decision Making
Explains how managers SHOULD make decisions; assumes managers are completely objective and possess complete information
4 Stages of Rational Decision Making:
1. Identify the problem or opportunity
2. Generate alternative solutions
3. Evaluate alternatives and select a solution
4. Implement and evaluate the solution chosen
Rational Model Stage 1:
- Identify the problem or opportunity
- Change from the actual state to the desirable state
Rational Model Stage 2:
- Generate alternative solutions
- Use brainstorming
- Need to slow down to evaluate a broader set of alternatives
- Invest in studying a greater number of potential solutions
- Utilize analytical and logical thinking to facilitate identifying a broader set of alternatives and potential solutions
Rational Model Stage 3:
Evaluate alternatives and select a solution with consideration for:
- cost
- quality
- ethics
- feasibility (time, cost, infrastructure)
- whether it removes the causes and solves the problem
Rational Model Stage 4:
- Implement and evaluate the chosen solution
- Stakeholders need to evaluate how effectively the solution solves the problem
- Test and long term audit
- If solution fails, management returns to Stage 1
Optimizing (Rational Model Stage 4)
Solving problems by producing the best possible solution based on a set of highly desirable conditions
Nonrational Models of Decision Making
Models of decision-making style that explain how managers ACTUALLY make decisions; uncertain, incomplete information
Normative Model (Nonrational)
SATISFICING - choosing a solution that meets the minimum qualifications and is "good enough"; decision-making strategy or cognitive heuristic that entails searching through alternatives until an acceptable threshold is met
Intuition Model (Nonrational)
Consists of judgments, insights, or decisions that "come to mind on their own" - a gut feeling
Simon's Normative Model
Guided by bounded rationality - the notion that decision makers are bounded or restricted by a variety of constraints when making decisions
A holistic hunch is _____
a judgment based on the subconscious integration of information stored in memory
Automated experience represents _____
a choice based on a familiar situation and a partially subconscious application of learned information related to it
Pros and Cons of Rational Decision Making:
Pros:
- Quality
- Transparency
- Responsibility
Cons:
- Incomplete information
- Leaving emotions out
- People may be unwilling to implement and support decisions
Pros and Cons of using intuition:
Pros:
- Useful when resources are limited
- Speeds up decision making
Cons:
- Good ideas may be ignored
- May have difficulty convincing others
- Subject to bias
Judgmental Heuristics
- Cognitive shortcuts or biases used to simplify the process of making decisions
- Can help managers make decisions but can lead to bad decisions
Confirmation Bias
A tendency to search for information that supports our preconceptions and to ignore or distort contradictory evidence
Overconfidence Bias
People's subjective confidence in their decision making is greater than their objective accuracy
Availability Bias
Items that are more readily available in memory are judged as having occurred more frequently
Representative Bias
Decision makers assess the likelihood of an event based on how closely it resembles other events or sets of events - leads us to look for information that supports previously formed stereotypes
Anchoring Bias
A tendency to fixate on initial information, from which one then fails to adequately adjust for subsequent information
Hindsight Bias
The tendency to believe, after learning an outcome, that one would have foreseen it
Framing Bias
The tendency of decision makers to be influenced by the way that problems are framed
Escalation of Commitment Bias
The tendency to stick to an ineffective course of action when it is unlikely that the bad situation can be reversed
What is Evidence-Based Decision Making?
Process of conscientiously using the best available data and evidence when making managerial decisions
- make decision
- inform decision
- support decision
What is Big Data?
Reflects the vast quantity of data available for decision making used to create a competitive advantage by:
- making information transparent and usable
- allowing organizations to measure and collect performance information
- allowing for more narrow segmentation of customers
- being used to develop new products
Competitive Advantage through Big Data:
- making information transparent and usable
- allowing organizations to measure and collect performance information
- allowing for more narrow segmentation of customers
- being used to develop new products
Advantages of Group Decision Making
1. Greater pool of knowledge
2. Different perspectives
3. Greater commitment to a decision
4. Better understanding of decision rationale
5. More visible role modeling
Disadvantages of Group Decision Making
1. Social Pressure
2. Few People Dominate
3. Goal Displacement
4. Groupthink
What is Groupthink?
The mode of thinking that occurs when the desire for harmony in a decision-making group overrides a realistic appraisal of alternatives
Groupthink occurs when:
- workers are deeply involved in a cohesive in-group
- members' need for unanimity overrides their motivation to realistically appraise alternative courses of action
Symptoms of Groupthink:
1) Invulnerability
2) Inherent morality
3) Rationalization
4) Stereotyped views of opposition
5) Self censorship
6) Illusion of unanimity
7) Peer pressure
8) Mindguards
Techniques for Preventing Groupthink
1. Each group should have an assigned critical evaluator or "devil's advocate"
2. Top-level executives should not use policy to rubber-stamp decisions
3. Different groups with different leaders should explore the same policy questions
4. Managers should encourage subgroup debates
5. Someone should be given the role of devil's advocate when discussing major alternatives (after coming to a conclusion)
6. Once a consensus is reached, all members should be encouraged to rethink their positions to check for flaws
What is Consensus in Group Decision Making?
A consensus is reached when all members can say they either agree with the decision or have had their say; everyone agrees to support the outcome
Brainstorming (Group Decision Making)
Problem solving technique that is used to help groups generate multiple ideas and alternatives for solving problems
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. Stay focused on the topic
7. One conversation at a time
Delphi Technique (Group Decision Making)
Group process that anonymously generates ideas of judgments from physically dispersed experts
Delphi Technique is useful when:
- face-to-face discussions are impractical
- disagreements and conflict may occur
- group domination is an issue
- groupthink is likely
Decision Support System (DSS)
Computer-based interactive systems that help decision makers use data and models to solve unstructured problems
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