29 terms

MGMT: Chapter 5

Decision Making
the process of choosing a solution from available alternatives
Rational Decision Making
a systematic process of defining problems, evaluating alternatives, and choosing optimal solutions
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
When does a problem exist?
when there is a gap between a desired state (what managers want) and an existing state (the situation that managers are facing)
Decision criteria
the standards used to guide judgments and decisions
Determining alternative's optimal value
Multiply the rating for each criterion (Step 5) by the weight for that criterion (Step 3), then summing those scores for each alternative course of action that you generated (Step 4)
Define the problem
1) Managers have to be aware of the gap
2) have to be motivated to reduce the gap
3) have to have the knowledge, skills, abilities, and resources to fix the problem
Identify decision criteria
-standards used to guide judgments and decisions
-the more criteria a potential solution meets, the better that solution should be
Weight the criteria
Absolute and relative comparisons to decide which criteria are more or less important
Absolute comparisons
each criterion is compared to a standard or ranked on its own merits (ex, scale of 1 to 5)
Relative comparisons
each criterion is compared directly to every other criterion (ex: +1, 0, -1)
Generate alternative courses of action
identify possible courses of action that could solve the problem, ideally as many alternatives as possible
Evaluate each alternative
each alternative is systematically evaluated against each criterion; this step can take much longer and be more expensive than the other steps
Compute the optimal decision
-multiply the rating for each criterion by the weight for that criterion
-sum the scores for each alternative course of action
Bounded Rationality
Decision-making process restricting in the real world by:
-limited resources
-incomplete and imperfect information
-managers' limited decision-making capabilities
choosing a "good enough" alternative
Protecting against escalation
-avoid being married to your own ideas
-progress reports
-outside auditors
-change managers
Availability Bias
the tendency of decision makers to give preference to recent information, vivid images that evoke emotions, and specific acts and behaviors that they personally observed
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
Anchoring and Adjusting bias
tendency of decision makers to use an initial value or experience as a basis of comparison
occurs in highly cohesive groups when members feel intense pressure not to disagree with each other
Groupthink Conditions
-the group is insulated from others with different perspectives
-the group leader begins by expressing strong preference for a particular decision
-there is no established procedure for systematically defining problems and exploring alternatives
-group members have similar backgrounds
Devil's Advocacy
creates c-type conflict by assigning an individual or a subgroup the role of critic
Steps to establish a Devil's Advocacy Program
1) generate potential solution
2) assign a devil's advocate to criticize and questions
3) present the critique of the solution to key decision makers
4) gather useful information
5) decide whether to use, change, or not use the originally proposed solution
Dialectical Inquiry
creates c-type conflict by forcing decision makers to state the assumptions of a proposed solution (thesis) and then to generate a solution that is the opposite (antithesis) of the proposed solution
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
Nominal Group Technique
begins by having group members act as individuals and come up with ideas, which they share until all ideas have been shared; group members then individually rank the ideas, and the idea with the highest average rank wins
Delphi Technique
panel of experts respond to questions and to each other until reaching agreement on an issue
Multivariable testing
-systematic approach of experimentation to analyze and evaluate potential solutions
-improves decision making by:
*conducting experiments and letting the data decide
*saving time and money by using a mathematical shortcut to test variables