Decision making steps and contextEthics and decision makingTypes of decisionsDecision environments

Copyright 2008 John Wiley & Sons, Inc.

Decision MakingDecision Making: The process of choosing a course of action for dealing with a problem or opportunity.13-*

ODDIESteps in systematic decision makingOBSERVE: Recognize and define the problem or opportunityDIAGNOSE: Identify and analyze alternative courses of action, and estimate their effects on the problem or opportunityDECIDE: Choose a preferred course of actionIMPLEMENT: Implement the preferred course of actionEVALUATE: Evaluate the results and follow up as necessaryDid you include the right people (Lack-of-participation error)?13-*

Ethics (study of standards regarding good character and behavior)Steps in systematic decision makingOBSERVE: Check for moral problems.DIAGNOSE: Check implications for all stakeholders and for the common good etc.DECIDE: Check that the choice reflects the best ends and uses the right means.IMPLEMENT: Check consistency and integrity (not just intentions).EVALUATE: Check actual ends and means versus desired ends and means.Ethics double checks (criteria questions): Utility, Rights, Justice, Caring13-*

Spotlight Questions:How would I feel if my family found out about this decision?How would I feel if this decision were published in the local newspaper?What would the person you know or know of who has the strongest character and best ethical judgment do in this situation?What if you were running for a political office?13-*

Types of DecisionsProgrammed decisionsImplement solutions that have already been determined by past experience as appropriate for the problem at hand.Ex: How to hire a new staff personNonprogrammed decisionsAre created to deal specifically with a problem at handCrisis decisions: occur when an unexpected problem can lead to disaster if not resolved quickly and appropriatelyEx: Handling a new competitor

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Three Decision EnvironmentsCertain decision environments Provide full information on the expected results for decision-making alternatives. (ex: investing in a savings account, min. wage job)Risk decision environmentsProvide probabilities regarding expected results for decision-making alternatives. (ex: likelihood of a candidate accept a job)Uncertain decision environmentsProvide no information to predict expected results for decision-making alternatives. (ex: starting a new company)

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sextant n. A navigational instrument containing a graduated 60-degree arc, used for measuring the altitudes of celestial bodies to determine.

Decision making modelsJudgmental heuristics and biasesVroom et al.s model, deciding who decidesCreativity

Copyright 2008 John Wiley & Sons, Inc.13-*

Copyright 2008 John Wiley & Sons, Inc.

13-*The Reality of DM

Views of Decision MakingClassical assumes:We face a clearly defined problem- a world of complete certaintyWe know all possible action alternatives and their consequencesWe then choose the optimum solutionFocuses on what should be done

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2. Behavioral assumes:People are acting only in terms of what they perceiveBounded rationality- suggests that, while individuals are reasoned and logical, humans have their limitsSatisficing decision makers choose the first alternative that appears to give an acceptable or satisfactory resolution of the problemMost human decision making, whether individual or organizational, is concerned with the discovery and selection of satisfactory alternatives; only in exceptional cases is it concerned with the discovery and selection of optimal decisions.Focuses on what is

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3. Intuitive thinking: approaches problems in a flexible and spontaneous fashionEx: Don DraperKey under risk and uncertaintyVs. systematic thinking (rational and analytical)

Ways to Improve Your IntuitionDrop the problem for a whileSpend some quiet time by yourselfTry to clear your mindUse images to guide your thinkingLet ideas run freely without a specific goal

13-*Views of Decision Making

Judgmental HeuristicsJudgmental heuristics- Simplifying strategies or rules of thumb used to make decisions.

They make it easier to deal with uncertainty and limited information; but they interfere with the quality of the decision.

NOTE: Problems 1- 5 are not in the slides posted on BeachBoard

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Availability heuristicBases a decision on recent events relating to the situation at hand.

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Representativeness heuristicBases a decisions on similarities between the situation at hand and stereotypes of similar occurrencesIgnoring base-rate information

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Representativeness What this MeansMost people choose C.Think about itWhat is more likely getting 6 heads on 10 flips of a coin, orGetting 6,000 heads on 10,000 flips of a coin?Sample size is rarely part of our intuition. People think how representative it would be for 60% of babies to be born boys in a random event.Consider in advertising: Four out of five dentists surveyed recommend sugarless gum for their patients who chew gum.

Anchoring and adjustment heuristicBases a decision on incremental adjustments to an initial value determined by historical precedent or some reference point

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Other DM BiasesConfirmation trap- The tendency to seek confirmation for what is already thought to be true and to not search for disconfirming informationHindsight trap-The tendency to overestimate the degree to which an event that has already taken place could have been predictedEscalating Commitment- continuation and renewed effort on a previously chosen course of action, even though it is not working

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13-*Confirmation trap- The tendency to seek confirmation for what is already thought to be true and to not search for disconfirming informationA description of a person called Jane includes mixed items that sometimes describe her as introverted and sometimes as extraverted. A couple of days later, if you were asked to assess her for an extraverted job (real estate agent) vs. librarian's job, you would be better at remembering the attributes that supported the job for which you are assessing.

Other DM Biases Examples

13-*Hindsight trap-The tendency to overestimate the degree to which an event that has already taken place could have been predictedYou are traveling by car in an unfamiliar area, and your girlfriend/boyfriend/sign. other is driving. When you approach an unmarked fork in the road, your GF/BF/SO decides to go to the right. Four miles and 15 minutes later it is clear that you are lost. You blurt out I knew you should have turned left at the fork.

Other DM Biases Examples

Knowing when to quit:Escalation of CommitmentResources are committed to an initial course of actionAction does not produce desired returnMore resources committed to turn things aroundCost of failure increasesMore resources investedWhy?Decision makers ignore the cognitions of othersEmphasis on sunk -- not opportunity -- costsEmotional investment; competitiveness; reputational concerns

ExampleOnce large numbers of U.S. troops are committed to direct combat, they will begin to take heavy casualties in a war they are ill-equipped to fight Once we suffer large casualties, we will have started a well-nigh irreversible process. Our involvement will be so great that we cannot -- without national humiliation -- stop short of achieving our complete objectives. Of the two possibilities I think humiliation will be more likely than the achievement of our objectives -- even after we have paid terrible costs.

(George Ball, Undersecretary of State, in a 1965 letter to U.S. President Lyndon Johnson)

Implications of Commitment EscalationResearch shows that people tend to:Allocate more money to failing projects and divisions than to successful onesEspecially when they are personally responsible for the original investment decision

If at first you dont succeed, try, try again.

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Knowing who to involve in DM:The Vroom-Yetton-Jago model is a decision making tree that enables a leader to examine a situation and determine which style or level of involvement to engage.

By asking oneself a series of questions about the nature of the problem, decision, and consequences, the leader can decide just how much involvement others should have in the decision.

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Vroom et als. Key Problem AttributesQuality Requirement (QR): How important is the technical quality of the decision?Commitment Requirement (CR): How important is subordinate commitment to the decision?Leader's Information (LI): Do you (the leader) have sufficient information to make a high quality decision on your own?Problem Structure (ST): Is the problem well structured (e.g., defined, clear, organized, lend itself to solution, time limited, etc.)?Commitment Probability (CP): If you were to make the decision by yourself, is it reasonably certain that your subordinates would be committed to the decision?Goal Congruence (GC): Do subordinates share the organizational goals to be attained in solving the problem?Subordinate conflict (CO): Is conflict among subordinates over preferred solutions likely?Subordinate information (SI): Do subordinates have sufficient information to make a high quality decision?

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Who Should Participate in the Decision?

Decision Making StyleDescriptionIndividualAutocratic l (Al)Leader solves the problem along using information that is readily available to him/herIndividualAutocratic ll (All)Leader obtains additional information from group members, then makes decision alone.Consultative l (Cl)Leader shares problem with group members individually, and asks for information and evaluation. Group members do not meet collectively, and leader makes decision alone.Consultative ll (Cll)Leader shares problem with group members collectively, but makes decision aloneTeam/Group (G)Leader meets with group to discuss situation. Leader focuses and directs discussion, but does not impose will. Group makes final decision.

Creativity in DM EXAMPLES NOT ON BBCreativity generates unique and novel responses to problems.

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Ways to Foster CreativityDiversify teams to include members with different backgrounds, training, and perspectivesEncourage analogical reasoningStress periods of silent reflectionRecord all ideas so that the same ones are not rediscoveredEstablish high expectations for creativityDevelop a physical space that encourages fun, divergent ideas

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Creativity in Team DM is Higher When:Task Expertise existsCreativity Skills exist: examples: linguistic ability, willingness to engage in divergent thinking, and intelligenceTask Motivation exists : Individuals are motivated by and derive satisfaction from task accomplishmentThe decision maker emphasizes engagement in the creative process and counsels individuals to share their ideas with othersThe decision maker encourages subordinates to recognize ambiguity, contact others with different views, and be prepared to make considerable changes and/or compromisesExternal support exists13-*

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