Unit 1.10 - Decision Making

Question 1

What are the reasons why it’s difficult for humans to make a perfectly rational decision?

Answer 1

• Bounded rationality - people do not have perfect info about the problem and aren’t aware of all the solutions
• Cognitive limits of rationality - people’s ability to analyze only a few things at a time
• Satisficing - searching until you find the first satisfactory solution, and then accept it and stop searching
• Suboptimizing - the best interests of the organization are sacrificed for the interests of a person or group
• Escalation of commitment - investing additional efforts and resources into an idea because of emotional attachment

Question 2

Explain group vs. individual decision making

Answer 2

• Accuracy and judgement
• Individual - superior when situation requires a sequence of multiple stages, the problem is not easily divided, and solution is not easily demonstrated
• Group - superior when problems have multiple parts, members have complimentary skills/info, the problem involves estimation instead of creativity (ex. size of an audience), and the problem involves remembering information
• Creativity
• Individual - works better; the presence of other people can hinder creativity; the idea of “brainstorming” created the myth about groups being more creative together
• Commitment and acceptance
• Group - when people participate in making a decision, they feel greater loyalty to it
• Time and cost
• Group decisions are time-consuming; should be avoided if it’s a time-sensitive issue

Question 3

Define groupthink. What are the 8 dynamics that contribute to it?

Answer 3

Groupthink is a psychological phenomenon that occurs within a group of people in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome

Contributing dynamics:
* Illusion of Invulnerability - groups assume greater risk because individuals in it think they’re unharmable
* Rationalization - Problems that should not be ignored are rationalized away
* Illusion of Morality - group members believe in the inherit morality of their position and ignore the ethical consequences of their decision
* Shared Stereotypes - members develop stereotypes about the leaders outside the group (ex. they’re evil, stupid, etc.)
* Pressure for Conformity - dissenting views are unacceptable; members push each other to lean in one direction
* Self-censorship - members don’t want to rock the boat so they stay quiet
* Illusion of Unanimity - Because no one proposes doubt or disagreement, members perceive unanimous support
* Mind Guards - when members protect the group from info that contradicts their decision

Question 4

Define the risky shift phenomenon and diffusion of responsibility

Answer 4

risky shift phenomenon - in some situations, group decisions are riskier than what individuals would decide on their own, and in other situations, they’re more conservative; when the issue involves accepting something new, individual decision makers are more conservative because they are totally responsible for their decision; groups don’t need to be as conservative, since criticism can be shared among the entire group which is called…

diffusion of responsibility - what causes the risky shift phenomenon

Question 5

What is the Abilene Paradox?

Answer 5

Members of an org take an action contrary to what they really want to do, and as a result, defeat the purposes they are trying to achieve; in low energy environments where members just want to agree

Question 6

What is the difference between programmed decision and non-programmed decisions?

Answer 6

Programmed decisions:
* Repetitive, routine
* Simple decision making procedure can be developed
* Use of mathematics,
statistics, research
* Agreeance of desired
outcome
* First-level management responsibility

Non-programmed decisions:
* Novel, unstructured
* Things you really gotta think about and collaborate on
* Complex
* Different views of desired
results
* Top management responsibility

Question 7

What is the Delphi Technique and the Nominal Group Technique?

Answer 7

Delphi Technique:
1. selecting experts to participate in project
2. presenting the problem to each expert without bringing them together
3. asking them to independently and anonymously solve the problem and explain their reasoning
4. compiling all responses
5. send for review
6. eventually reach a consensus

Disadvantages - time and motivation

Nominal Group Technique:
everyone presents their solutions, discussion occurs, and a vote is taken at the end