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Chapter 11

BUS 2090 Chapter Notes - Chapter 11: Delphi Method, Groupthink, Nominal Group Technique

Course Code
BUS 2090
Hassan Wafai

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Chapter 11 Individuals, Groups & Organizations
Decision Making
What is Decision Making?
Decision Making: The process of developing a commitment to some cause of action
Decisions involve making a choice among several alternatives
Decision making is a process that involves thought and reasons why you make the choice
Usually involves the commitment of resources such as time, money, personnel etc.
Can also describe it as a from of problem solving
A problem exists b/t some existing state & some desired state
Well-Structured Problems
Well-Structured Problems: A problem for which the ending state is clear, the desired state is clear, and how to
get from 1 state to another is fairly obvious
These problems are simple and arouse little controversy
Program: A standardized way of solving a problem
Programs short-circuit the decision making process by letting the decision maker go directly from
problem identification to solution
Some are formal and some just exist “in head”
Ill-Structured Problems
Ill-Structured Problems: A problem for which the existing & desired states are unclear & the method of getting
to the desired state is unknown
These problems are generally unique/unusual
Tend to be complex & involve a high degree of uncertainty
They frequently arouse controversy ad conflict among the people who are interested in the decision
Problems cant be solved through programmed decisions
Need to gather much more info
The Compleat Decision Maker A Rational Decision-Making Model
Model demonstrates that once a problem is identified, a search for new info begins
The info clarifies the nature of the problem and suggests alternative solutions
Solutions are evaluated and the best is chosen for implementation
The chosen solution is monitored over time to evaluate effectiveness
If there are issues, recycling may be affected
Perfect vs. Bounded Rationality
Perfect Rationality: A decision Strategy that is completely informed, perfectly logical & oriented toward
economic gain
The Economic Man ...
This person is the perfect, cool, calculating decision maker
This person can gather info about problems and solutions without cost and is thus completely informed
This person has only ONE criteria for decision making economic gain
In reality this person doesn’t exist
Bounded Rationality: A decision strategy that relies on limited info & that reflects time constraints and political
While managers try to act rationally, they are limited in their capacity to acquire & process info
There are constraints & political considerations (Need to please others etc.)
Framing: Aspects of the presentation of info about a problem that are assumed by decision makers
Could include assumptions about boundaries of problem, possible outcomes of decision, or the
reference points used to decide if a decision is successful
Cognitive Biases: Tendencies to acquire & process info in an error-prone way
Biases constitute assumptions & shortcuts can improve decision-making efficacy
Problem Identification & Framing
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Bounded rationality can lead to difficulties in problem identification…
1.Perceptual Defense: The perceptual system may act to defend the perceiver against unpleasant perceptions
2. 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
3. Problem defined in terms of solution: “Jumping to a conclusion”
4. Problem diagnosed in terms of symptoms: The real problem might not be able to be been seen simply by
surface symptoms
Information Search
This info search may clarify the nature or extent to a problem and begin to suggest alternative solutions
The info search may be slow & costly
Too Little Info
Several cognitive biases contribute to not acquiring enough info…
People tend to be mentally lazy & use the info that is most readily available to them which a lot of the
time is memory
Often people are overconfident in their decision making
Confirmation Bias: The tendency to seek out info that conforms to ones own definition of the solution to a
Too Much Info
Information Overload: The reception of more information than is necessary to make effective decisions
Can lead to errors, omissions, delays & cutting corners
Managers often request info they never use
People value paid advice more over unpaid advice
Alternative Development, Evaluation & Choice
Maximization: The choice of the decision alternative w/ the greatest expected value
For decision-maker working under bounded rationality, this is difficult b/c he may not know all the
alternative solutions, may be ignorant of the ultimate values & probabilities of success of solutions etc.
Cognitive Biases again come into play…
People avoid incorporating known existing data about the likelihood of event into their decisions
Large samples permit more confidence than small samples
Decision makers often over estimate the odds of complex chains of events occurring
People aren’t good at revising estimates of probabilities and values as they acquire additional info
Anchoring Effect: The inadequate adjustment of subsequent estimates from an initial estimate that serves as an
Its possible to reduce some of these cognitive bases by making people more accountable for their decisions
Requiring reports, formal presentations of how decision was reached etc.
The decision maker that is bounded by realty will have to factor in criteria so evaluate alternative solutions
Sacrificing: Establishing an adequate level of acceptability for a solution to a problem and then screening
solutions until one that exceeds this level is found
The decision maker frequently sacrifices
Risky Business
Usually there is risk when choosing between decision alternatives
Research shows that when people view a problem as a choice of losses, they tend to make risky decisions,
rolling the dice in the face of a sure loss
When people frame the alternatives as a choice between gains, they tend to make conservative decisions,
protecting a sure win
Solution Implementation
When a decision is made to choose a particular solution to a problem, the solution must be implemented
The bounded decision maker will attempt to factor in an implementation problems into the choice of
solution but it may be hard to anticipate this
Solution Evaluation
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