Management (ch_8)

Question 1

What is decision?

Answer 1

Making a choice from 2 or more alternatives

Question 2

Name 8 steps in The Decision-Making Process

Answer 2

1) Identifying a problem
2) Identifying Decision Criteria
3) Allocating Weights to the Criteria
4) Developing alternatives
5) Analyzing alternatives
6) Selecting an alternative
7) Implementing an alternative
8) Evaluating Decision Effectiveness

Question 3

What is a problem?

Answer 3

A discrepancy between an existing and desired state of affairs

Question 4

What is a decision criteria?

Answer 4

Criteria that define what is relevant in making a decision

Question 5

Which question you need to ask yourself to evaluate the effectiveness of the decision?

Answer 5

• Was the problem correctly defined?
• Were errors made when evaluating alternatives?
• Was the right alternative selected but poorly implemented?

Question 6

Give the examples of decisions in the management functions

Answer 6

1) Planning:
- What are the organization’s long-term objectives?
2) Organizing:
- How much centralization should be in the organization?
3) Leading:
- How will specific change affect worker productivity?
4) Controlling:
- What activities in the organization need to be controlled?

Question 7

What is Rational Decision-Making?

Answer 7

Describes choices that are logical and consistent and maximize value.

Question 8

Decribe Rational Decision-Making?

Answer 8

1) The problem is clear
2) A single, well-defined goal
3) All alternatives and consequences are known
4) Preferences are clear, constant and stable
5) No time or cost constraints
6) Final choice will maximize payoff

Question 9

What is Bounded Rationality?

Answer 9

Decision making that’s rational but limited by an individual’s ability to process information

Question 10

What is escalation of commitment?

Answer 10

Increased commitment to a previous decision despite the evidence that it might have been wrong

Question 11

Describe Bounded Rationality

Answer 11

Decision makers:

• won’t seek out or have knowledge of all alternatives
• will satisfice (accept solutions that are “good enough”)
• can be influenced by escalation of commitment

Question 12

What is intuitive decision making?

Answer 12

Making decisions on the basis of experience, feelings, and accumulated judgement

Question 13

Name 5 components of intuition

Answer 13

1) Experience-Based decisions
2) Affect-intiated decisions (based on feelings or emotions)
3) Cognitive-Based decisions (based on skills, knowledge, and training)
4) Subconscious Mental Processing (based on data from subconsious mind)
5) Value- or Ethics-Based decisions (based on ethical values or culture)

Question 14

What is Evidence-based management?

Answer 14

The systematic use of the best available evidence to improve management practice.

Question 15

Name and describe 7 types of decisions

Answer 15

1) for structured problems (straigthforward, familiar, easily defined)
2) Programmed Decision (repitive decision handled by a routine approach)
3) using Procedure (a series of steps that decision maker can use to respond to a structured problem)
4) according to the Rule (tells decision maker what can or cannot be done)
5) according to the Policy (a guideline for making a decision)
6) for unstructured problems (new or unusual, information is ambiguous or incompete)
7) Non-programmed decisions (unique and nonrecurring, require custom-made solutions)

Question 16

Name 3 decision-making conditions and describe them

Answer 16

1) Certainty (decision maker can make accurate decisions because the outcome of every alternative is known)
2) Risk (decision maker is able to estimate the likelihood of certain outcomes)
3) Uncertainty (decision maker is not certain about the outcomes and cannot even make reasonable probability estimates)

Question 17

What is Maximax, maximin, minimax?

Answer 17

Maximax: the optimistic manager’s choice to maximize the maximum payoff (best of the best)
Maximin: the pessimistic manager’s choice to maximize the minimum payoff (best of the worst)
Minimax: the manager’s choice to minimize his maximum regret (best of the worst loss)

Question 18

What are heuristics?

Answer 18

Rules of thumb that managers use to simplify decision making.
It doesn’t mean that these rules are reliable, because they may lead to errors and biases in processing and evaluating information

Question 19

What is overconfidence bias?

Answer 19

Unrealistically positive views of one’s self and one’s performance

Question 20

What is immediate gratification bias?

Answer 20

Decision makers who want immediate rewards and to avoid immediate costs

Question 21

What is Anchoring effect?

Answer 21

How decision makers rely on initial information too much and then, fail to adequately adjust for subsequent information.

Question 22

What is Selective Perception?

Answer 22

Selecting, organizing, and interpreting events based on the decision maker’s biased perceptions. (teacher may have a favorite student because they are biased by in-group favoritism. The teacher ignores the student’s poor attainment.)

Question 23

What is Confirmation Bias?

Answer 23

The human tendency to search for, favor, and use information that supports one’s pre-existing views on a certain topic
(People who support or oppose a particular issue will not only seek information to support it, they will also interpret news stories in a way that upholds their existing ideas)

Question 24

What is Framing bias?

Answer 24

Decision makers select and highlight certain aspects of a situation while excluding others

Question 25

What is Availability bias?

Answer 25

Decision makers rely on immediate examples that come to a given person's mind when evaluating a specific subject. (Which job is more dangerous—being a police officer or a logger? While high profile police shootings might lead to you think that cops have the most dangerous job, statistics actually show that loggers are more likely to die on the job than cops.)

Question 26

What is Representation bias?

Answer 26

Decision makers estimate the probability of an event based on how closely it resembles other events or sets of events. (Investors automatically assume that good companies make good investments. However, that is not necessarily the case.)

Question 27

What is sunk-costs fallacy?

Answer 27

Decision makers keep bringing some activity to an end because they have already invested time, effort, or money into it, whether or not the current costs outweigh the benefits.

Question 28

What is Randomness bias?

Answer 28

Describes the actions of decision makers who try to create meaning out of random events. (If you are certain your lucky tie will help you earn a client's business at a meeting later today, you're committing a randomness error)

Question 29

What is Self-serving bias?

Answer 29

Decision makers take credit for positive events or outcomes, but blaming outside factors for negative events (A student gets a good grade on a test and tells herself that she studied hard or is good at the material. She gets a bad grade on another test and says the teacher doesn't like her or the test was unfair).

Question 30

What is Hindsight bias?

Answer 30

Decision makers are convinced they accurately predicted an event before it occurred. It causes overconfidence in one's ability to predict other future events and may lead to unnecessary risks.

Question 31

Name first 7 Decision-Making Errors and Biases.

Answer 31

1) Overconfidence 2) Immediate Gratification 3) Anchoring Effect 4) Selective Perception 5) Confirmation 6) Framing 7) Availability

Question 32

Name 5 other Decision-Making Errors and Biases

Answer 32

8) Representation 9) Randomness 10) Sunk Costs 11) Self-serving 12) Hindsight

Question 33

What can be done to make effective decisions?

Answer 33

1) Understand cultural differences. 2) Create standards for good decision making. 3) Use an effective decision-making process. 4) Develop your ability to think clearly.

Question 34

What does Design Thinking mean?

Answer 34

Approaching management problems as designers approach design problems.

Question 35

What is Big Data?

Answer 35

The vast amount of quantifiable information that can be analyzed by highly sophisticated data processing