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Chapter 11 BU288.docx

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Wilfrid Laurier University
Ping Zhang

BU288 Chapter 11 Decision Making Week 6 What is Decision Making? -Decision making the process of developing a commitment to some course of action -Decision making involves making a choice among several action alternatives -Decision making is a process that involves more than simply the final choice among alternatives if you decide to accept the offer of a new job, we want to know how this decision was reached -It involves some commitment of resources, such as time, money or personnel -A problem is a perceived gap between an existing state and a desired state Well-Structured Problems -Well-structured problem a problem for which the existing state is clear, the desired state is clear, and how to get from one state to the other is fairly obvious -Ex. Courier which delivery route should I use? -Because decision making takes time and is prone to error, organizations attempt to program the decision making for well-structured problems -Program a standardized way of solving a problem -Programs usually go under labels such as rules, routines, standard operating procedures, or rules of thumb -Ex. At UPS, drivers routes are programmed to avoid left hand turns so they dont idle waiting for oncoming traffic to clear Ill-Structured Problems -Ill structured problem a problem for which the existing and desired states are unclear and the method of getting to the desired state is unknown -Ill structured programs are generally unique they have not been encountered before -They frequently arouse controversy and conflict among the people who are interested in the decision -Ex. In which part of the country should we build a new plant? -The decision makers must resort to non-programmed decision making -They are likely to try and gather more information and be more self-consciously analytical in their approach can entail high risk and stimulate strong political considerations The Compleat Decision Maker a Rational Decision-Making Model 1. Identify problem v 2. Search for relevant information v 3. Develop alternative solutions to the problem v 4. Evaluate alternative solutions v 5. Choose best solution v 6. Implement chosen solution v 7. Monitor and evaluate chosen solution BU288 Chapter 11 Decision Making Week 6 Perfect versus Bounded Rationality -Perfect rationality a decision strategy tthat is completely informed, perfectly logical, and oriented toward economic gain -He or she: -can gather information about problems and solutions without cost and is thus completely informed -is perfectly logical if solution A is preferred over solution B, and B is preferred over B, they A is necessarily preferable to C -Has only one criterion for decision making economic gain -Bounded rationality a decision strategy that relies on limited information and the reflects time constraints and political considerations -Framing- aspects of the presentation of information about a problem that are assumed by decision makers -A frame could include assumptions about the boundaries of a problem, the possible outcomes of a decision, or the reference points used to decide if a decision is successful -Cognitive biases tendencies to acquire and process information in an error-prone way -These biases constitute assumptions and shortcuts that can improve decision-making efficiency, but they frequently lead to serious errors in judgement Problem Identification and Framing -The perfectly rational decision maker, infinitely sensitive and completely informed, should be a great problem identifier -This can lead to difficulties in problem identification: -Perceptual defence perceptual system may act to defend the perceiver against unpleasant perceptions -Problem defined in terms of functional specialty selective perception can cause decision makers to view a problem as being in the domain of their own specialty even when some other perspective might be warranted -Problem defined in terms of solution jumping to conclusions -Problem diagnosed in terms of symptoms a concentration on surface symptoms will provide the decision maker with few clues about an adequate solution -Rational decision makers should try to be very self-conscious about how they have framed problems -Decision makers should avoid overarching, universal frames -While it is good to put customers first, we do not want to frame every problem as a customer service problem Information Search -Once a problem is identified, a search for information is instigated Too Little Information -Sometimes decision makes do not acquire enough information to make a good decision -People tend to be mentally lazy and use whatever information is most readily available to them -Confirmation bias the tendency to seek out information that conforms to ones own definition of or solution to a problem -This ceremonial information search leads to decision-based evidence making rather than evidence- based decision makingBU288 Chapter 11 Decision Making Week 6 Too Much Information -Information overload the reception of more information than is necessary to make effective decisions -Can lead to errors, omissions, delays, and cutting corners -Causes decision markets to be confused -Decision makers tend to think that more is better even if decisions do not improve with additional information, confidence in the decisions will increase -Decision makers may fear being kept in the dark and associate the possession of information with power -Managers: -Gather much information that has little decision relevance -Use information that they collected and gathered after a decision to justify that decision -Request information that they do not use -Request more information, regardless of what is already available -Complain that there is not enough information to make a decision even though they ignore available information -Information search involves seeking advice from various parties Alternative Development, Evaluation, and Choice -Maximization the choice of the decision alternative with the greatest expected value -Decision makers may not know all alternative solutions, and they may be ignorant of the ultimate values and probabilities of success of those solutions that he knows. Again, cognitive biases come into play -For example: -People avoid incorporating known existing
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