Chapter 7: Individual And Group Decision Making Flashcards
Decision
Choice made from among available alternatives
Decision making
The process of identifying alternative courses of action
System 1: intuitive and largely unconscious thinking
System 1 operated automatically and quickly
It is our fast, automatic, intuitive, and unconscious mode
System 2: analytical and conscious thinking
System 2 is out slow, deliberate, analytical, and effortful mode of reasoning
Rational model of decision making
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
4 steps to rational decision making
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
Problems
Difficulties that inhibit the achievement of goals
Opportunities
Situations that present possibilities for exceeding existing goals
Diagnosis
Analyzing the underlying causes
Non rational models of decisions making
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
Bounded rationality
The ability of decision makers to be rational is limited by numerous constraints
Satisficing models
Managers seek alternatives until they find one that is satisfactory, not optimal
Intuition
Making a choice without the use of conscious thought or logical inference
Decision tress
Graph of decisions and their possible consequences, used to create a plan to reach a goal
Seven implementation principles
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”
Analytics
Term used for sophisticated forms of business data analysis, such as portfolio analysis or time series forecast
3 key contributors towards analytics
Use of modelling
Multiple applications
Support from top management
Predictive modelling
Data mining technique used to predict future behavior and anticipate the consequences of change
Heuristsics
Strategies that simplify the process of making decisions
Availability bias
Tendency of managers to use information readily available from memory to make judgements; tending to give more weight to recent events
Representative bias
The tendency to generalize from a small sample or a single event
(Just because something happens once doesn’t mean it will happen again)
Confirmation bias
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
Sunk-cost bias
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
Anchoring and adjustment bias
The tendency to make decisions based on an initial figure
