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DECISION MAKING

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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  1. DECISION MAKING February 10, 2010

  2. 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

  3. Question? Bill is supportive of his employees and prefers to have verbal conversations rather than written memos. His style is: Analytical Behavioral Conceptual Directive

  4. Which Style Do You Have? Knowledge of your decision-making style: Helps Helps Helps

  5. Rational Decision Making Awareness Pressure Resources Decision Criteria Weigh Criteria Rate alternatives on criteria Weighted score for each alt.

  6. 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

  7. TYPES OF DECISIONS • Programmed • Well-structured, repetitive • Non-programmed • Uniqued/infrequent • Complex; Ill-defined

  8. Rationality Perfectly Rational/Logical Complete Info. Certainty Maximize/Optimize Bounded-Rationality Bounded Rationality Incomplete Info. Satisficing Incremental HOW RATIONAL ARE WE?

  9. WHY DO WE SATISFICE? Information Overload Limited Resources Expertise Problems Imperfect Information Cognitive Limitations Politics

  10. COMMON DECISION MAKING BIASES • Intuition • Availability Bias • Confirmation Bias • Representative Bias • Cultural Bias • Sunk Cost Bias • Escalation of Commitment • Anchoring and adjustment • Framing

  11. 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.

  12. 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.

  13. - + 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

  14. 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

  15. The Ethical Decision Tree

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

  17. Advantages of Group Decision Making

  18. Disadvantages of Group Decision Making

  19. GROUP VS. INDIVIDUAL DECISION MAKING

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