lecture 2 : decision making Flashcards
(13 cards)
decision making is
the process by which managers respond to threats and opportunities by analyzing options and making determinations about spesific organizational goals and courses of actions
triangle of management
we want to be :
- efficient (low waste)
- effective (high attainment)
- happy (sustainable)
steps of decision making
- identifying the problem
- problem : a disprepancy between the existing and desired situation - identifying the decision criteria
- factors that contribute to the decision : outcome that is desired, costs that will be incurred, risks that are likely to be encountered - allocating weights to the criteria : give priority to the decision(s)
- developing alternatives : list down all alternatives
- analyzing the alternatives : evaluate all the alternatives listed against the criteria
- selecting an alternative : select the best alternative
- implementing the alternative : put the selected alternative into action
- evaluating the decision’s effectiveness : decide if the problem is resolved
rational decision making is when
decisions are consistent, value-maximizing choices with specified constraints and clear goals. But, humans are not always rational
bounded rationality
when managers can’t make the best decision all the time because of factors :
1. time constraints and information costs : managers don’t have enough time or cost to evaluate and consider all possible alternatives
2. satisficing : the decision chosen is not the best one because managers just choose the satisfactory one, or good enough one
3. bounded rationality (too extensive) : the information or alternatives is too many that managers cannot evaluate all, decision making is limited to individual’s cognitive limitations
4. incomplete information
5. ambiguous information : the information is unclear
factors that influences a satisficing decision
perceived a problem –> that triggers –> limited search and limited information –> that leads to –> satisficing decision
decision-making process
- perception = what do you see?
- attribution = what causes what you see?
- judgement = what decision do you draw?
- decision-making = what do you choose to do?
perception
a process by which individuals organize or interpret their sensory impressions to give meaning to their environment
factors that affects perception
- surroundings
- context
- expectations
- selective attention
attribution
when an individual observe behavior, they intend to determine if it is internally or externally caused
- internal causes : under that person’s control
- external causes : that person is forced to act that way
types of attribution
- self-serving bias = the tendency for individuals to attribute their successes towards internal factors (themselves) while putting the blame for their failures towards external factors (other people)
- errors and biases in attributions/the fundamental attribution error = the tendency for individuals to underestimate the influence of external factors and overestimate the influence of internal factors when making judgements about a person’s behavior
- the self-fulfilling prophecy (pygmallion effect) = other people’s beliefs about us causes their actions towards us that reinforces our beliefs about ourselves and influences our actions towards them that impacts their beliefs towards us
judgement
additional : self-fulfilling prophecy is part of judgement as well
- stereotyping : assigining traits to people based on their memberships in a social group
occurs because :
a. categorical thingking : save energy, simplify our understanding
b. helps us fill in missing pieces of information : help us understand or anticipate a person’s behavior
c. helps us recognize members of ingroups and out groups
- heuristics : mental shortcuts (cognitive rule-of-thumb) that helps us make a decision in a uncertain situation
availability heuristics : our tendency to judge the frequency or likelihood of an event to happen based on the ease of relevant instances to come to mind, based on ease of recall or retreivability
decision-making
- anchoring and adjustment heuristic : the tendency of individuals to judge the likeliness or frequency of an event based on an anchor or the starting point given and make adjustments from there
- the impact of the first offer : an initial offer creates a psychological anchor
- overconfidence bias : the unrealistic positive views about ourselves, the better-than-average mindset, we usually on remember our successes
- escalation of commitment : the tendency of individuals or organizations to keep going in a failing course of actions
- randomness error : our tendency to make meaning out of random events that can lead to superstitions - unreleastic religious beliefs or practices
