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MGHB02H3 (269)
Chapter 11

ch.11 for MGTB23

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Department
Management (MGH)
Course
MGHB02H3
Professor
Samantha Montes
Semester
Winter

Description
WHAT IS DECISION MAKING? Decision Making is the process of developing a commitment to some course of action o Involves making a choice among several action alternatives o Is a process that involves more than simply the final choice o Know how the decision was reached o Involves some commitment of resources Problem is a perceived gap between an existing state and a desired state Well-Structured Problems Well-Structured Problem is a problem for which the existing state is clear, the desired state is clear, and how to get from on state to the other is fairly obvious o Example: Truck Driver How much weight should I carry? Program is a standardized way of solving a problem o Enables the decision maker to go directly from problem identification to solution o Are usually rules, routines, procedures, or rule of thumbs Ill- Structured Problems ill structured problem is a problem for which the existing and desired states are unclear, and the method of getting to the desired state is unknown o example: Should we vaccinate the population against new flu strain when the vaccination have some bad side effects o are usually unusual and never been encountered before o complex and involve high degree of certainty o cannot be solved with programmed decisions THE COMPLEAT DECISION MAKER A RATIONAL DECISION- MAKING MODEL identify problem search for relevant information develop alternative solutions to the problem evaluate alternative solutions chose best solution implement chosen solution monitor and evaluate chosen solution Perfect vs. Bounded Rationality Perfect Rationality is a decision strategy that is completely informed, perfectly logical, and oriented toward economic gain Bounded Rationality is a decision strategy that relies on limited information and that reflects time constraints and political considerations www.notesolution.com o Framing are aspects of the presentation of information about a problem that are assumed by decision makers Assume boundaries of problem, possible outcomes of a decision or reference points used to decide a decision o Cognitive biases are tendencies to acquire and process information in an error-prone way Constitute assumptions and shortcuts that can improve the decision making efficiency, lead to serious errors in judgement Problem Identification and Framing The perfectly rational decision maker should be a great problem identifier Bounded rationality, can lead to the following difficulties in problem identification o Perceptual defence Defends the perceiver against unpleasant perceptions Example: downplaying of recurring problems during shuttle launches when making a decision to launch a shuttle o 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 o Problem defined in terms of solution Jumping to conclusions effectively short-circuits the rational decision-making process o Problem diagnosed in terms of symptoms The problem here involves the cause of the morale problem A concentration on surface symptoms will provide the decision maker with few clues about an adequate solution When a problem is identified, it is necessarily framed in some way o Example: 10000 expenditure as cost, or investment Rational decision makers should try to be very self-conscious about how they have framed problems Information Search Information search may clarify the extent of the problem Can be slow and costly Too Little Information Cognitive Biases o People tend to be mentally lazy and use whatever information is most readily available to them o Tendency for people to be overconfident in their decision making Confirmation Bias is the tendency to seek out information that conforms to one`s own definition of or solution to a problem www.notesolution.comToo Much Information Information overload is the reception of more information that is necessary to make effective decisions o Can lead to errors, omissions, delays, and cutting corners o Use all information at hand, and get confused and permit low-quality information or irrelevant information to influence their decisions o Decisions makers who were overloaded with information were more satisfied than does who did not experience overload Although good information improves decisions, organizational members often obtain more or less information than is necessary for adequate decisions Alternative Development, Evaluation, and Choice Maximization is the choice of the decision alternative with the greatest expected value o Perfectly rational decision maker would choose to implement the alternative with higher expected value Under bounded rationality, cognitive biases comes into play, because they might not know all alternative solutions or be ignorant of the ultimate values and probabilities of success of those solutions that he knows o People avoid incorporating known existing data about the likelihood of events in their own decisions o Large samples warrant more confidence than small samples However focus groups might be given more weight than data fro
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