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MHR 405 Ch 7 Notes Lec 6.docx

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Ryerson University
Human Resources
MHR 405
Robin Church

LEC 6 MHR 405 Chapter 7 Decision Making: the conscious process of making choices among alternatives with the intention of moving toward some desired state of affairs. Rational Choice Paradigm: the view in decision making that people should – and typically do – use logic and all available information to choose the alternative with the highest value. Subjective Expected Utility: the probability (expectation) of satisfaction (utility) resulting from choosing a specific alternative in a decision. 1. Identify Problem/Opportunity Symptom vs. Problem 2. Choose Decision Process  e.g. (Non)programmed 3. Discover/Develop Alternatives Search, Then Develop 4. Choose Best Alternative  Subjective Expected Utility 5. Implement Choice Figure 7.1 Rational Choice making process 6. Evaluate Choice Problems and opportunities are constructed from ambiguous information, not “given” to us Influenced by cognitive and emotional biases Five problem identification challenges: 1. Stakeholder Framing - Stakeholders often unintentionally filter information to amplify or supress seriousness of the situation of bad or good news. By framing the situation, they throw a spotlight on specific causes of symptoms and away from other possible causes. 2. Mental Models –Visual or relational images in our mind of the external world; they fill in the information that we don’t immediately see, helping us understand and navigate in our surrounding environment. These mental models also blind us from seeing unique problems or opportunities because they produce a negative evaluation of things that are dissimilar to the mental model. 3. Decisive Leadership – Being decisive includes quickly forming an opinion of whether an event signals a problem or opportunity. Consequently, eager to look effective, many leaders quickly announce problems or opportunities before having a change to logically assess the situation. LEC 6 4. Solution-Focused Problems – Decision makers engage in solution-focused problem identification because it provides comforting closure to the otherwise ambiguous and uncertain nature of problems. For example, “Problem is that we need more control over our suppliers” – doesn’t describe the problem, just a rephrased solution of an ill-defined problem. 5. Perceptual Defence – people block out bad news as a coping mechanism. Identifying Problems Effectively  Be aware of perceptual and diagnostic limitations  Fight against pressure to look decisive  Maintain “divine discontent” (aversion to complacency)  Discuss the situation with colleagues – see different perspectives Bounded Rationality: the view that people are bounded in their decision-making capabilities, including access to limited information, limited information processing, and tendency toward satisficing rather than maximizing when making choices Figure 1.2 Rational Choice assumptions vs. OB findings about alternatives Problems with Information Processing  Rational choice paradigm makes several assumptions about the human capacity to process information.  Assumes decision makers can process all info about alternatives and their consequences, which is impossible in reality. As new alternatives come along, it is compared to an implicit favourite, which undermines effective decision making. Implicit Favourite: a preferred alternative that the decision maker uses repeatedly as a comparison with other choices. LEC 6 Biased Decision Heuristics People have built-in decision heuristics that bias evaluation of alternatives Anchoring and Adjustment Heuristic: a natural tendency for people to be influenced by an initial anchor point such that they do not sufficiently move away from that point as new information is provided. Availability Heuristic: a natural tendency to assign higher probabilities to objects or events that are easier to recall from memory, even though ease of recall is also affected by nonprobability factors (e.g. emotional response, recent events). Representativeness Heuristic: a natural tendency to evaluate probabilities of events or objects by the degree to which they resemble (are representative of) other events or objects rather than on objective probability information. Example: If 1/5 are engineers in your class, the rest business majors, you might assume someone who acts like a stereotype of an engineer, is in fact an engineer (although really isn’t). Paralyzed by choice  Decision makers are less likely to make any decision at all as the number of options increases  Occurs even when there are clear benefits of selecting any alternative (such as joining a company retirement plan).  Evidence of human information processing limitations Problems with Maximization Satisficing: selecting an a
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