CHAPTER TWO Flashcards
There are 8 steps to the decision making process, explain each one:
Step 1: Identify the Problem → discrepancy between an existing and a desired condition
Step 2: Identify Decision Criteria → criteria that defines what’s important or relevant to resolving the problem (every decision maker has a criteria guiding their decisions)
Step 3: Allocate Weights to the Criteria → rarely are the relevant criteria equally important, the decision maker needs to weigh the items in order to give them the correct priority in the decision
Step 4: Develop Alternatives → LIST viable alternatives that could resolve the problem (need to be creative)
Step 5: Analyze Alternatives → once the alternatives are identified, you must evaluate/assess each value for every alternative
Step 6: Select An Alternative → choose the best alternative or the one that generated the highest total in step 5.
Step 7: Implement the Alternative → put the decision into action by revealing it to those affected and getting their commitment to it
Step 8: Evaluate Decision Effectiveness → evaluate the outcome or result of the decision to see whether the problem was resolved
What are the approaches to decision making?
Rationality → make logical, objective and consistent choices to maximize value (should prevent emotions to influence their choices)
Bounded Rationality → where managers make decisions rationally but are limited (bounded) by their ability to process information. Managers satisfice: solutions that are “good enough”
Intuition → making decisions on the basis of experience, feelings, and accumulated judgment (feelings or emotions, cognitive skills, past experiences, ethical values, subconscious mind)
Evidence-Based
Management → the systematic use of the best available evidence to improve management practice (hard computer data, opinions of experts)
Crowdsourcing → relying on a network of people outside the organizations traditional set of decision makers to solicit ideas via the internet
Explain the two types of problems and their related decisions
Structured problems → straightforward, familiar, and easily defined
^ this results in a…
Programmed decision → repetitive decision that can be handled by a routine approach (manager relies on procedure, rule, or policy)
Procedure: series of sequential steps a manager uses to respond to a structured problem
Rule: explicit statement that tells a manager what can or cannot be done
Policy: guideline for making a decision (parameters for the decision maker)
————————————–
Unstructured problems → new or unusual problems for which information is ambiguous or incomplete
^ this results for managers to rely on…
Nonprogrammed decisions → unique and nonrecurring and involve custom-made solutions
Explain the 4 decision making styles
Directive style → low tolerance for ambiguity and seek rationality, they are efficient and logical, but their efficiency concerns result in decisions being made with minimal information and with few alternatives assessed. (fast decisions and focus on short run)
Analytic style → high tolerance for ambiguity, more comfortable when uncertainty is involved in a decision, careful decision makers with the ability to adapt to or cope with new situations
Conceptual style → very broad in their outlook and consider many alternatives (high tolerance in ambiguity), focus is long range and they are very good at finding creative solutions to problems
Behavioral style → decision makers who work well with others, concerned with the achievement of peers and those working for them, receptive to suggestions from others, avoid conflict and seek acceptance by others
Give examples and describe the types of biases and errors decision makers make:
Overconfidence bias → when decision makers think they know more than they do or hold unrealistic positive views of themselves and their performance
Immediate gratification bias → decision makers who want immediate rewards and would like to avoid immediate costs (decision choices that provide quick payoffs)
Anchoring effect → decision makers that focus on initial information as a starting point and fail to adjust to other information later
Selective perception bias → when decision makers selectively organize and interpret events based on their biased perceptions (influences the information they pay attention to)
Confirmation bias → decision makers tendency to process information by looking for, or interpreting information that is consistent with their existing beliefs
Framing bias → decision makers select and highlight certain aspects of a situation while excluding others
How can one improve decision making?
Design Thinking → approaching management problems as designers approach design problems (how an object or process might be redesigned – sometimes to the point of being completely redone)
Look not only rationally but at the emotional aspects/elements as well
Opening up your perspective and gaining insights by using observation and inquiry skills (not relying simply on rational analysis)
Big Data and Artificial Intelligence
Big Data → refers to huge and complex sets of data (composed of so much information that traditional data-processing application software is unable to deal with them)
This big data has opened the door to widespread use of artificial intelligence
Artificial Intelligence → using the power of computers to replicate the reasoning functions of humans (ability to learn and solve complex problems)
These two analytics are rapidly changing how managers make decisions:
AI increasingly facilitates machine learning (method of data analysis that automates analytical model building). It is where systems can learn from data, identify patterns, and make decisions with little or no human assistance
Deep learning → uses algorithms to create hierarchical levels of artificial neural networks that simulate functions of the human brain. Enables machines to process data in nonlinear fashion
Analytics → use of mathematics, statistics, predictive modeling and machine learning to find meaningful patterns and knowledge in a data set
