DECISION MAKING
February 10, 2010
Decision-Making Styles
More information
& Alternatives
Overanalyze
Broader perspective
Many alternatives
Intuition & disc.
Indecisive
Supportive
Logical, systematic
Open to suggestions
Action oriented
Facts focused
Wishy-washy
Autocratic, Short-term Conflict Avoidant
Question?
Bill is supportive of his employees and
prefers to have verbal conversations
rather than written memos. His style is:
A. Analytical
Behavioral
C. Conceptual
D. Directive
B.
Which Style Do You Have?
Knowledge of your decision-making
style:
 Helps
 Helps
 Helps
Rational Decision Making
Awareness
Pressure
Resources
Decision Criteria
Weigh Criteria
Rate alternatives on criteria
Weighted score for each alt.
ANALYZING ALTERNATIVES
 Certainty
 Outcome
of an alternative is known
 RISK
 Likelihood
of outcomes may be estimated
 UNCERTAINTY
 Neither
certainty or reasonable probability
estimates are available
TYPES OF DECISIONS
 Programmed
 Well-structured,
repetitive
 Non-programmed
 Uniqued/infrequent
 Complex;
Ill-defined
HOW RATIONAL ARE WE?
 Rationality
Perfectly
Rational/Logical
 Complete Info.
 Certainty
 Maximize/Optimize

 Bounded-Rationality
 Bounded
Rationality
 Incomplete Info.
 Satisficing
 Incremental
WHY DO WE SATISFICE?
Limited
Resources
Information
Overload
Expertise
Problems
Imperfect
Information
Cognitive
Limitations
Politics
COMMON DECISION
MAKING BIASES

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Intuition
Availability Bias
Confirmation Bias
Representative Bias
Cultural Bias
Sunk Cost Bias
Escalation of
Commitment
Anchoring and
adjustment
Framing
A
large car manufacturer has recently been hit
with a number of economic difficulties, and it
appears as if three plants need to be closed and
6,000 employees laid off. The vice-president of
production has been exploring alternative ways
to avoid this crisis. She has developed two
plans:
 Plan A: This plan will save one of three
plants and 2,000 jobs.
 Plan B: This plan has a 1/3 probability of
saving all three plants and 6,000 jobs, but has
a 2/3 probability of saving no plants and no
jobs.
A
large car manufacturer has recently been hit
with a number of economic difficulties, and it
appears as if three plants need to be closed and
6,000 employees laid off. The vice-president of
production has been exploring alternative ways
to avoid this crisis. She has developed two
plans:
 Plan C: This plan will result in the loss of two
of the three plants and 4,000 jobs.
 Plan D: This plan has a 2/3 probability of
resulting in the loss of all three plants and all
6,000 jobs, but has a 1/3 probability of losing
no plants and no jobs.
Framing Effects on Decision
Making
 Positive
Frame
a
problem presented as a gain
 become more risk-averse
 Negative
a
Frame
problem presented as a loss
 become more risk-seeking
+
-
Improving Decision Making
 Decide
to Decide
 How
important is this situation?
 How credible is my information
 How urgent is the situation?
 Minimize
Biases
 Conscious
information processing
 Reality testing—Check your assumptions
Ask questions (and let them answer)
 Look for information that disconfirms your beliefs
 Know your people

The Ethical Decision Tree
Participative Management
 Participative

Management
process of involving employees in setting
goals, making decisions, solving problems,
and making changes in the organization
Advantages of Group
Decision Making
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Disadvantages of Group
Decision Making

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

GROUP VS. INDIVIDUAL
DECISION MAKING
CRITERIA GROUPS INDIVIDUALS
Accuracy
Speed
Creativity
Acceptance
Efficiency
X
X
X
X
X