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Chapter 11


Department
Management (MGH)
Course Code
MGHD27H3
Professor
Joanna Heathcote
Chapter
11

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CHAPTER 11- DECISION MAKING
WHAT IS DECISION MAKING?
The process of developing a commitment to some course of action
PROBLEM A perceived gap between an existing state and a desired state
oWELL-STRUCTURED PROBLEMS A problem for which the existing state
is clear, the desired state is clear and how to get from one state to another is
fairly obvious
oOrgs try to make programs to help with the decision making process for well
structure problems
PROBLEMS A standardized way of solving a problem
oILL-STRUCTURED PROBLEMS A problem for which the existing and
desired states are unclear and the method of getting to the desired state is
unknown
Generally unique in nature, complex and have never been encountered
before
THE COMPLEAT DECISION MAKER-A RATIONAL DECISION-MAKING
MODEL
oPERFECT VERSUS BOUNDED RATIONALITY
PERFECT A decision strategy that is completely informed, perfectly
lofical, and oriented toward economic gain
Can gather info about problems and solutions w/o cost and is
thus completely informed
Is perfectly logical
Has only one criterion for decision making-economic gain
BOUNDED RATIONALITY A decision strategy that relies on
limited info and that reflects time constraints and political
considerations
FRAMING Aspects of the presentation of information about
a problem that are assumed by decision makers
COGNITIVE BIASES tendencies to acquire and process info
in an error-prone way
oThey improve the efficiency but they are more likely to
make serious errors
oPROBLEM IDENTIFICATION AND FRAMING
Perceptual defence perceptual system may act to defend the
perceiver against unpleasant perceptions
Problem defined in terms of functional specialty they will think its
all their fault when the cause can be found elsewhere
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Problem defined in terms of solution jumping to conclusions
regarding the problem to a particular solution
Problem diagnosed in terms of symptoms surface symptoms that are
thought to define the whole problem, poor solution results
When a problem is identified it is important to note how it is framed
(negatively or positively)
oINFORMATION SEARCH
TOO LITTLE INFO people often remember only the recent vivid
events, people are also tempted to be overconfident in their decision
making
CONFIRMATION BIASThe tendency to seek out information
that conforms to ones own definition of or solution to a problem
TOO MUCH INFORMATION Information overload- The reception
of more information than is necessary to make effective decisions
It can lead to errors, omissions, delays, and cutting corners
Sometimes managers try to use all the info at hand and get
confused and deliver a low-quality solution
Most managers:
oGather too much info that is not relevant
oUse info that they collected and gathered after a
decision to justify that decision
oRequest info that they do not use
oRequest more info regardless of what is already
available
oComplain that there is not enough info to make a
decision even though they ignore available info
oALTERNATIVE DEVELOPMENT, EVALUATION AND CHOICE
MAXIMIZATION The choice of the decision alternative with the
greatest expected value
ANCHORING EFFECT The inadequate adjustments of subsequent
estimates from an initial estimate that serves as an anchor
To prevent basic cognitive biases we can make them do a
rational report and make them provide reasonings for their
solutions
oMust be implemented before the decision is made
however
SATISFICING Establishing an adequate level of acceptability for a
solution to a problem and then screening solutions until one that
exceeds this level is found
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