Chapter 7: Individual And Group Decision Making

Question 1

Decision

Answer 1

Choice made from among available alternatives

Question 2

Decision making

Answer 2

The process of identifying alternative courses of action

Question 3

System 1: intuitive and largely unconscious thinking

Answer 3

System 1 operated automatically and quickly

It is our fast, automatic, intuitive, and unconscious mode

Question 4

System 2: analytical and conscious thinking

Answer 4

System 2 is out slow, deliberate, analytical, and effortful mode of reasoning

Question 5

Rational model of decision making

Answer 5

Also known as the classical model

Style fo decision making that explains how managers should make decisions

It assume managers will make logical decisions that will be the optimum in furthering the organizations best interests

Question 6

4 steps to rational decision making

Answer 6

1) identify the problem or opportunity
2) think up alternative solutions
3) evaluate alternatives and select a solution
4) implement and evaluate the solution chosen

Question 7

Problems

Answer 7

Difficulties that inhibit the achievement of goals

Question 8

Opportunities

Answer 8

Situations that present possibilities for exceeding existing goals

Question 9

Diagnosis

Answer 9

Analyzing the underlying causes

Question 10

Non rational models of decisions making

Answer 10

Model that explains how managers make decisions

They assume that decision making it nearly always uncertain and risky, making it difficult for managers to make optimum decisions

Question 11

Bounded rationality

Answer 11

The ability of decision makers to be rational is limited by numerous constraints

Question 12

Satisficing models

Answer 12

Managers seek alternatives until they find one that is satisfactory, not optimal

Question 13

Intuition

Answer 13

Making a choice without the use of conscious thought or logical inference

Question 14

Decision tress

Answer 14

Graph of decisions and their possible consequences, used to create a plan to reach a goal

Question 15

Seven implementation principles

Answer 15

1) treat your organization as an unfinished prototype
2) no brag, just facts
3) see yourself and organizations as outsiders do
4) evidence base management is not just for senior executives
5) like everything else, you still need to sell it
6) if all else fails, slow the spread of bad practice
7) The best diagnostic question, “what happens when people fail”

Question 16

Analytics

Answer 16

Term used for sophisticated forms of business data analysis, such as portfolio analysis or time series forecast

Question 17

3 key contributors towards analytics

Answer 17

Use of modelling
Multiple applications
Support from top management

Question 18

Predictive modelling

Answer 18

Data mining technique used to predict future behavior and anticipate the consequences of change

Question 19

Heuristsics

Answer 19

Strategies that simplify the process of making decisions

Question 20

Availability bias

Answer 20

Tendency of managers to use information readily available from memory to make judgements; tending to give more weight to recent events

Question 21

Representative bias

Answer 21

The tendency to generalize from a small sample or a single event

(Just because something happens once doesn’t mean it will happen again)

Question 22

Confirmation bias

Answer 22

Biased way of thinking in which people seek information that supports their point of view and discount data that doesn’t

“Weed is bad”, 6 million results on google

Question 23

Sunk-cost bias

Answer 23

Way did thinking in which managers add up all the money already spent on a project and conclude it is too costly to simply abandon

Question 24

Anchoring and adjustment bias

Answer 24

The tendency to make decisions based on an initial figure

Question 25

Overconfidence bias

Answer 25

Bias in which people’s subjective confidence in their decision making is greater than their objective accuracy

Question 26

The hindsight bias

Answer 26

The tendency of people to view events as being more predictable than they really are

Question 27

Framing bias

Answer 27

The tendency of decision makers to be influenced by the way a situation or problem is presented to them

Question 28

Escalation of commitment bias

Answer 28

When decision makers increase their commitment to a project despite negative information about it

Question 29

Advantages to groups

Answer 29

1) greater pool of knowledge
2) different perspectives
3) intellectual stimulation
4) better understanding of decision rationale
5) deeper commitment to the decision

Question 30

Disadvantages to groups

Answer 30

A few people dominate or intimidate

Groupthink

Question 31

Groupthink

Answer 31

Groups blind unwillingness to consider alternatives

Strive for animity opposed to a good decision

Question 32

Goal displacement

Answer 32

The primary goal is subsumed to a secondary goal

Question 33

Minority dissent

Answer 33

Dissent that occurs when a minority in a group publicly opposed the belief. attitudes, ideas, procedures or policies assumed by the majority of the group

Question 34

Consensus

Answer 34

Group agreement

Question 35

Devils advocacy

Answer 35

Taking the side of an unpopular point of view for the sake of argument

Question 36

Project post mortem

Answer 36

A review of recent decisions in order to identify possible future improvements

Question 37

5 key stakeholders

Answer 37

Shareholders 
Employees 
Customers 
Suppliers
Communities