MAN3503: Week 2
Elements of Decision Making
Objectives
To review & convey an understanding of:
1.
2.
3.
Activities for this week
Another process
Decision-making abilities
The Problem
Objectives
Conclusion
Activities This Week
Required Reading: Books
Books:
“Strategy” refers to Strategies for Creative
Problem Solving 2nd Ed. By Fogler and
LeBlanc
“Smart” refers to Smart Choices by
Hammond, Keeney and Raiffa
“APA Manual” refers to the APA
Publication Manual from the American
Psychological Association.
Required Reading Preparation
Read the following first:
“Smart” Chapter 10: Psychological Traps
2. “Smart” Chapter 11: The Wise Decision
Maker
Then
1. “Smart” Chapter 2: Problem
2. “Smart” Chapter 3: Objectives
1.
Enablers and Inhibitors
Decision Making
A “soft side” (introduced last week)
“Smart” chapters 10 and 11 focus on the
decision maker
“Smart” chapters 2 and 3 bridge to
techniques
Later lectures will focus on specific process
approaches
The Process from last week
The Past
AND
the
Future
An Alternative Approach
Decision-making Abilities (traps and being wise)
Problem
Objectives
Alternatives
Consequences
Tradeoffs
Uncertainty
Risk Tolerance
Linked Decisions
PrOACT
Problem
Objective
Alternatives
Consequences
Tradeoffs
Uncertainty
Risk Tolerance
Linked Decisions
Abilities: A Broader View 1
Anchor Trap
Include perceptions, popular views,
influence from mass media, limitation
based on historic input / views
The Status Quo trap
Reluctance to change in the decision
maker (also happens in execution and
team building)
Abilities: A Broader View 2
Sunk-Cost
A Problem – admit defeat, avoid good money after
bad, consider marginal return – not only historic
investment loss.
Confirming Evidence & Framing
Filtering input (often unaware of this fact), groupthink, encourage dissent, list positive AND
negative items
Leading questions, positive or negative view (is
this glass half-full or half-empty?)
Make sure you use consistent measures
Abilities: A Broader View 3
Over-confidence, Pessimistic, Bias
Consider stock prices – average, high and
low – big diversions imply risk and room for
inaccuracy (Consider how you could report
the data below) from www.nasdaq.com
Abilities: A Broader View 4
… and prudence
Too much care or optimism – stick with the
data, do not pre-interpret or slant data.
Recallable Items
A few big events obscure the majority that
are normal – sensationalism
Base rate
Beware of “stacking” data and probabilities
Abilities: A Broader View 5
Random is random! Or ?
Computer techniques can help a lot (Monte
Carlo method)
Preparations can alter reality
UNCTAD conference example
Rare may not be unlikely
Birthday and socks examples
Abilities
Wise
Experience
Processes and procedures
History
Procrastination
Focus
Complexity – summary, filter, bundle
Fast vs. thorough
Ethics, values, governance, principles
Problem
Problem: An issue or difficulty that needs
a solution. It has occurred or a known
future event that must be avoided. The
assumption is a that it is definite or likely,
not probable
Often a foundation – foundations are
normally most crucial portion of any
exercise …
often obscured soon after the start …
Problem
Half-full?
Can you measure it?
Good or bad?
Is it apple juice? Wine?
Does it matter? Do you care?
Anyone cares?
What does it impact?
Can you get more?
Will it impact something else?
What about the future?
Is it expensive
Does it age
Conclusion
Added PrOACT as another process approach
Considered decision making abilities
Elements that allow of better decision & traps
The need to understand what your decision is
about (problem or risk)
Know where you want to go (objectives,
values)
Week 1: Aims and stakeholders are relevant
too.