Chapter 11: Decision Making

Question 1

Decision Making

Answer 1

The process of developing
a commitment to some
course of action.

Question 2

3 things about decision-making definition…

Answer 2

1) decision
making involves making a choice among several action alternatives

2) decision making is a process that involves more than simply the final choice
among alternatives

3) “commitment” refers to the dedication of resources such as
time, money, or personnel

Question 3

Problem

Answer 3

A perceived gap
between an existing state
and a desired state

Question 4

Well-structured problem

Answer 4

A problem for
which the existing state is
clear, the desired state is
clear, and how to get from
one state to the other is
fairly obvious.

Question 5

What is a program?

Answer 5

A standardized
way of solving a problem.

Question 6

ill structured problems

Answer 6

A
problem for which the
existing and desired states
are unclear and the method
of getting to the desired
state is unknown.

Question 7

ill problems are often unique. That is, they are…

Answer 7

unusual and have not been
encountered before. In addition, they tend to be complex and involve a high degree of
uncertainty.

Question 8

Perfect rationality

Answer 8

A
decision strategy that
is completely informed,
perfectly logical, and
oriented toward
economic gain.

Question 9

Traits of a perfect rationality person…

Answer 9

• Can gather information about problems and solutions without cost and is thus
  completely informed.
• Is perfectly logical: If solution A is preferred over solution B, and B is preferred over
  C, then A is necessarily preferable to C.
• Has only one criterion for decision making: economic gain

Question 10

Bounded rationality

Answer 10

A
decision strategy that relies
on limited information and
that reflects time constraints
and political considerations

Question 11

Framing and cognitive biases both illustrate…

Answer 11

the operation of bounded rationality, as
does the impact of emotions and mood on decisions

Question 12

Framing

Answer 12

Aspects of the
presentation of information
about a problem that are
assumed by decision makers.

Question 13

Cognitive Biases

Answer 13

Tendencies
to acquire and process
information in an error-prone
way.

Question 14

Bounded rationality can lead to the following difficulties in problem identification…

Answer 14

• Perceptual defence
• Problem defined in terms of functional specialty
• Problem defined in terms of solution
• Problems diagnosed in terms of symptoms

Question 15

Once a problem is identified, a…

Answer 15

search for information is instigated

Question 16

Problem in information search

Answer 16

1) Too little information
2) Too much information

Question 17

Too little information - Availability bias

Answer 17

The
tendency to favour
information that can be
accessed quickly and easily

Question 18

Too little information - Confirmation bias

Answer 18

The
tendency to seek out
information that conforms
to one’s own definition of or
solution to a problem.

Question 19

Too little information - Not-invented-here-bias

Answer 19

The tendency to
ignore or harbour negative
attitudes toward ideas
from outside one’s own
organization or project
team.

Question 20

Too much information - Information overload

Answer 20

The
reception of more information
than is necessary to make
effective decisions.

Question 21

Too much information can lead to…

Answer 21

errors, omissions, delays, and cutting
corners. In addition, decision makers facing overload often attempt to use all the information at
hand, then get confused and permit low-quality information or irrelevant
information to influence
their decisions.

Question 22

Despite the setbacks, decision makers seem to think that more information is better, why?

Answer 22

1) even if decisions do not improve with additional information, confidence in the decisions
will increase

2) decision makers may fear being “kept in the dark” and associate the
possession of information with power.

Question 23

Research reveals that people have a cognitive bias to value advice for which…

Answer 23

they have paid over free advice of equal quality.

Question 24

Maximization

Answer 24

The choice of the decision alternative with the greatest expected value.

Question 25

four frequently violated standard statistical principles

Answer 25

1) People avoid incorporating existing data about the likelihood of events (“base rates”) into their decisions. 2) Large samples warrant more confidence than small samples. Despite this, data from a couple of (vivid) focus groups might be given more weight than data from a large (but anonymous) national survey. 3) Decision makers often overestimate the odds of complex chains of events occurring— the scenario sounds sensible despite being less likely with every added link in the chain. 4) People are poor at revising estimates of probabilities and values as they acquire additional information.

Question 26

Anchoring effect

Answer 26

The inadequate adjustment of subsequent estimates from an initial estimate that serves as an anchor.

Question 27

Satisficing

Answer 27

Establishing an adequate level of acceptability for a solution to a problem and then screening solutions until one that exceeds this level is found

Question 28

When people view a problem as a choice between losses, they tend to make...

Answer 28

risky decisions

Question 29

When people frame the alternatives as a choice between gains, they tend to make...

Answer 29

conservative decisions, protecting the sure win.

Question 30

Problems in Solution Evaluation

Answer 30

1) Justification 2) Hindsight

Question 31

Justification

Answer 31

substantial dissonance can be aroused when a decision turns out to be faulty. One way to prevent such dissonance is to avoid careful tests of the adequacy of the decision.

Question 32

Sunk costs

Answer 32

Permanent losses of resources incurred as the result of a decision.

Question 33

Escalation of Commitment

Answer 33

The tendency to invest additional resources in an apparently failing course of action.

Question 34

Reasons that escalation of commitment occurs:

Answer 34

1) Dissonance reduction 2) A social norm that favours consistent behaviour by managers 3) Decision maker motivation to not appear wasteful 4) Decision makers may see the problem as a decision between a sure loss of x dollars (which have been sunk) and an uncertain loss of x + y dollars (maybe the additional investment will succeed).

Question 35

Ways to prevent tendency to escalate commitment to a failing course of action...

Answer 35

- Be alert for excessive optimism - Shift the frame to saving rather than spending - Set specific goals for the project in advance that must be met if more resources are to be invested. This prevents escalation when early results are “unclear.” - Place more emphasis when evaluating managers on how they made decisions and less on decision outcomes. - Separate initial and subsequent decision making so that individuals who make the initial decision to embark on a course of action are assisted or replaced by others who decide if a course of action should be continued.

Question 36

Hindsight

Answer 36

The tendency to review the decisionmaking process to find what was done right or wrong.

Question 37

People in a positive mood tend to..

Answer 37

remember positive information

Question 38

People in a negative mood tend to remember..

Answer 38

negative information

Question 39

People in a positive mood tend to evaluate

Answer 39

objects, people, and events more positively

Question 40

People in a positive mood tend to provide...

Answer 40

more negative evaluations.

Question 41

People in a good mood tend to overestimate...

Answer 41

the likelihood that good events will occur and underestimate the occurrence of bad events. People in a bad mood do the opposite

Question 42

People in a good mood adopt..

Answer 42

simplified, shortcut decision-making strategies, more likely violating the rational model.

Question 43

People in a negative mood are prone to approach decisions in a more...

Answer 43

deliberate, systematic, detailed way.

Question 44

Positive mood promotes more...

Answer 44

creative, intuitive decision making.

Question 45

Stages of decision making

Answer 45

1) Problem identification 2) information search 3) Development of alternative solutions 4) Evaluation of alternative solutions 5) Solutions choice 6) Solution Implementation 7) Solution evaluation

Question 46

Why use groups decision making?

Answer 46

1) Decision Quality 2) Decision Acceptance and Commitment 3) Diffusion of Responsibility

Question 47

Group decision making - Decision Quality

Answer 47

- Groups are more vigilant than individuals. - Groups can generate more ideas than individuals can. - Groups can evaluate ideas better than individuals can.

Question 48

Group decision making - Decision Acceptance and Commitment

Answer 48

- People wish to be involved in decisions that will affect them. - People will better understand a decision in which they participated. - People will be more committed to a decision in which they invested personal time and energy.

Question 49

Group decision making - Diffusion of Responsibility

Answer 49

The ability of group members to share the burden of the negative consequences of a poor decision.

Question 50

Groupds should perform better than individuals when the following are true...

Answer 50

- The group member differ in relevant skills and abilities, as long as they do not differ so much that conflict occurs - Some division of labour can occur - Memory for facts is an important issue - Individual judgments can be combined by weighting them to reflect the expertise of the various members

Question 51

Disadvantages of Group Decision Making

Answer 51

1) Time 2) Conflict 3) Domination 4) Groupthink

Question 52

Groupthink

Answer 52

The capacity for group pressure to damage the mental efficiency, reality testing, and moral judgment of decision-making groups.

Question 53

Devil's advocate

Answer 53

A person appointed to identify and challenge the weaknesses of a proposed plan or strategy.

Question 54

Risky shift - Groups decision

Answer 54

The tendency for groups to make riskier decisions than the average risk initially advocated by their individual members.

Question 55

Conservative shifts - Group Decision

Answer 55

The tendency for groups to make less risky decisions than the average risk initially advocated by their individual members.

Question 56

Why do risky and conservative shifts occur when groups make decisions?

Answer 56

1) Group discussion generates ideas and arguments that individual members have not considered before. 2) Group members try to present themselves as similar to others but “even better.” Thus, they try to one-up others in the discussion by adopting a slightly more extreme version of the group’s initial stance

Question 57

Contemporary Approaches to Improving Decision Making

Answer 57

1) Evidence-based management 2) Crowdsourcing 3) Analytics and Big Data

Question 58

Evidence-based management

Answer 58

Making decisions through the conscientious, explicit, and judicious use of the best available evidence from multiple sources.

Question 59

Crowdsourcing

Answer 59

Outsourcing aspects of a decision process to a large collection of people.

Question 60

Analytics

Answer 60

Finding meaningful patterns in large datasets

Question 61

Big Data

Answer 61

Copious amounts of information that are often collected in real time and can come from a wide variety of sources, particularly digital.