MGT 3003: Chapter 7 Decision Making, Learning, Creativity, and Entrepreneurship

decision making
the process by which managers respond to opportunities and threats that confront them by analyzing options and making determinations about specific organizational goals and courses of action
programmed decision
routine, virtually automatic process
non-programmed decision
non routine decision making that occurs in response to unusual, unpredictable opportunities and threats
intuition
feelings, beliefs, and hunches that come readily to mind, require little effort and info gathering and result in on-the-spot decisions
reasoned judgement
decisions that take time and effort to make and result from careful info gathering, generation of alternatives, and evaluation of alternatives
classical model of decision making
prescriptive model of decision making that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action
administrative model
approach to decision making that explains why decision-making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions
bounded rationality
cognitive limitations that constrain one’s ability to interpret, process, and act on info
satisficing
searching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decision
sources of cognitive bias (6)
1. heuristics
2. systematic errors
3. prior hypothesis bias
4. representativeness
5. illusion of control
6. escalating commitment
heuristics
rules of thumb that satisfy the process of making decisions
systematic errors
errors that people make over and over and that result in poor decision making
prior hypothesis bias
a cognitive bias resulting from the tendency to base decisions on strong prior beliefs even if evidence shows that those beliefs are wrong
representativeness
a cognitive bias resulting from the tendency to generalize inappropriately from a small sample or from a single vivid event or episode
illusion of control
the tendency to overestimate one’s own ability to control activities and events
escalating commitment
a source of cognitive bias resulting from the tendency to commit additional resources to a project even if evidence shows that the project is failing
advantages of group decision making (4)
1. superior to individual making
2. choices less likely to fall victim to bias
3. able to draw on combined skills of group members
4. improve ability to generate feasible
disadvantages of group decision making (3)
1. can take much longer than individuals to make decisions
2. can be difficult to get two or more managers to agree because of different interests and preferences
3. can be undermined by biases
groupthink
pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision
devil’s advocacy (3 steps)
1. present chosen alternative
2. critique chosen alternative
3. reassess chosen alternative (accept? modify? reject?)
dialectical inquiry (3 steps )
1a. present alternative #1
1b. present alternative #2
2. debate between alternatives
3. reassess alternatives (accept? combine?)
creativity
a decision maker’s ability to discover original and novel ideas that lead to feasible alternatives courses of action
brainstorming
managers meet face-to-face to generate and debate many alternatives
production blocking
occurs because group members cannot simultaneously make sense of all the alternatives being generated, think up additional alternatives, and remember what they were thinking
nominal group technique
a decision-making technique in which group members write down ideas and solutions, read their suggestions to the whole group, and discuss and then rank the alternatives
delphi technique
a decision-making technique in which group members do not meet face-to-face but respond in writing to questions posed by the group leader