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69 Cards in this Set

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The nature of decision making:

a) Decision

b) Decision making
a)A choice made from among available alternatives.

b)The process of identifying and choosing alternative courses of action.
Types of Decisions:

a)Programmed Decisions

b)Nonprogrammed Decisions
a)Decisions that are repetitive and routine Contrast nonprogrammed decisions.

b)Decisions that occur under nonroutine, unfamiliar circumstances.
Risk propensity
Willingness to gamble or to undertake risk for the possibility of gaining an increased payoff.

aka.competitiveness
Decision-Making Style
A style that reflects the combination of how an individual perceives and responds to information
a)value orientation

b)tolerance for ambiguity
a)the extent to which a person focuses on either task and technical concerns or people and social concerns when making decisions.


b)the extent to which a person has a high need for structure and control in his/her life (low=Want a lot of structure)
Four Styles of decision making
Analytical Conceptual

Directive Behavioral
Directive
low tolerance for ambiguity; oriented toward task and technical concerns

-efficient, logical, practical, and systematic in problem solving

-action oriented and decisive= like facts

BAD= tend to be autocratic(power and control), focus on short term
Analytical
high tolerance for ambiguity; task and technical

- tendency to overanalyze
- like to consider more info. and alternatives
-careful decision makers who take longer to make decisions but respond well to new/uncertain situations
Conceptual
High tolerance for ambiguity; Focus on people or social aspects of the work situation

-like broad perspective to problem solving and like to consider many options and future possibilities
- long-term perspactive and rely on intuition and discussion w/others to get info.
-take risks and find creative solutions
*Bad= Indecisive
Behavioral
low tolerance for ambiguity; Focus on people/social aspect

-most people oriented d-m style
- supportive, receptive to suggestions, show warmth, prefer verbal to written communications
*BAD? = tendency to avoid conflict and be concerned about others = wishy washy/cant say no
Three Ways to use knowledge of decision making styles:
- Helps you understand yourself. Strengths and waeknesses. Self-Improvement

- Increased ability to influence others. Know how to deal with different styles.

- understand how people look at same info and arrive at different conclusions/decisions. Why conflict may have occurred.
Rational Model of Decision Making
Also called the classical model; the style of decision making that explains how managers should make decisions; it assumes that managers will make logical decisions that will be the optimum in furthering the organization’s best interests.
-best for programmed decisions
Four Stages of Rational Decision Making:
1) Identify the problem or opportunity

2) Think up alternative solutions

3)Evaluate alterantives and select a solution

4)Implement and evaluate the solution chosen
a)Problems:

b)Opportunities
a)Difficulties that inhibit the achievement of goals.

b)Situations that present possibilities for exceeding existing goals.
Diagnosis
Analyzing the underlying causes
Step 2: consider alternatives
-innovation is the physical expression of creativity

-programmed decisions usually have easier and more obvious solutions than nonprogrammed
-nonprogrammed= more creative the better
Step 3: Evaluate Alternatives and Select solution
1) is it ethical?

2) is it feasable?

3) Is it ultimately effective?
Step 4: Implement and Evaluate
-Implemetation more straighforward for programmed decisions

Successful Implementation= (1)Plan Carefully (2) Be sensitive to those effected

Evaluation= things may happen that wern't forseen.
-What to do if it isnt working= (1)Give it more time (2) Change it slightly (3)Try another alternative (4) Start over
Problems w/rational model:

Assumptions
Prescriptive, rather than considering how managers actually make decisions

1)Complet info., no uncertainty
2)Logical, unemotional analysis- No prejudices
3)Best decision for the organization
Nonrational models of decision making
A model of decision-making style that explains how managers make decisions; they assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimum decisions.
*Descriptive, rather than prescriptive= Actual decisions
*Herbert Simon
I. Bounded rationality/Satisficing

a) Bounded rationality
a)One type of nonrational decision making; the ability of decision makers to be rational is limited by numerous constraints.
Constraints to rational decision making:
1)Complexity

2)Time and Money Constraints

3)Different cogantive capacity, values, skills, habits, and unconscious reflexes

4)Imperfect information

5)Information overload

6)Different Priorities

7)Conflicting goals
b) Setisficing Model
One type of nonrational decision-making model; managers seek alternatives until they find one that is satisfactory, not optimal.

*not necessarily a weakness; better than delaying decision making in some cases
II. Incremental Model
One type of non rational model of decision making; managers take small, short term steps to alleviate a problem.
Knowledge Management
Implementation of systems and practices to increase the sharing of knowledge and information throughout an organization; also, the development of an organizational structure—and the tools, processes, systems, and structures—that encourages continuous learning and sharing of knowledge and information among employees, for the purpose of making better decisions.
a)Explicit Knowledge

b)Tacit Knowledge
a)textbook knowledge; Information that can be easily put into words, graphics, and numbers and shared with others. High-tech Solutions

b)Tricks of the Trade; Knowledge that is individual based, intuitive, acquired through considerable experience, and hard to express and to share.
*Sharing contributes to comparative advantage
*Best learned through direct contact= low-tech solutions (networking, Meetings)
Evidence Based Management (not definition)
translating principles based on best evidence into organizational practice; bringing rationality to the decision making process
*Pfeffer and Sutton= "an attitude of wisdom"
-use facts; continuously gather info.
Three Truths of Evidence-based management:
1)There are few really new ideas

2)True is better than new

3)Doing well usually dominates.
Seven Implementation Principles for evidence based management:
1)Treat your organization as an unfinished prototype
2)No brag, just facts- evaluate data before making decisions
3)See yourself and your organization as outsiders do
4)E-B Mgmt. is not just for senior execs.
5)Like everything else, you still need to sell it. Solid evidence may be unexciting, but important. Sell it!
6)If all else fails, slow the spread of bad practice.
7)Best question: what happens if people fail? No learning w/out failure
What makes it hard to be evidence based:
-there may be too much evidenc
-there is not enough GOOD evidence
-the evidence doesnt quite apply
-people are trying to mislead you
-YOU are trying to mislead you
-the side effects outweigh the cure
-stories are more persuasive anyway
Analytics
Term used for sophisticated forms of business data analysis, such as portfolio analysis or time-series forecast.
Three Key Attributes for Analytics
1) The Use of Modeling- Not just descriptive Statistics (Predictive Modeling)

2)Having Multiple applications (that support many parts of the business), not just one

3) Support from the top- companywide support for a quantitative approach
Predictive Modeling
Data mining technique used to predict future behavior and anticipate the consequences of change.
Ethics Officer
A person trained about matters of ethics in the workplace, particularly about resolving ethical dilemmas.
Decision Tree
Graph of decisions and their possible consequences, used to create a plan to reach a goal.
-Helpful when trying to make ethical decisions
Three Questions for ethical decisions:
1) Is the proposed action legal?

2) If YES, Does the proposed action maximize shareholder value?

3) If YES, is the proposed action ethical?

4) If NO, would it be ethical NOT to take the action? (NO= disclose effect to shareholders)
General Moral Principles:
1) Dignity of human life: The lives of people are to be respected.

2) Autonomy: All persons are intrinsically valuable and have a right to self-determination. People have worth, dignity and free choice.

3)Honesty: The truth should be told to those who have a right to hear it.

4) Loyalty: Promises, contracts, and commitments should be honored.
General Moral Principles cont:
5) Fairness: People should be treated justly.

6) Humaneness: a. Our actions should accomplish good and b. we should avoid doing evil

7) The common good: Our actions should accomplish the greatest good for the greatest number of people.
Advantages of Group Decision Making:

*Groups mus be made up of diverse individuals
-Greater pool of knowledge

- Different perspectives

-Intellectual Stimulation

-Better understanding of decision rationale

- Deeper commitment to the decision
Disadvantages of Group decision making:
- A few people ma dominate or intimidate

-Groupthink

-Satisficing: come to a decision that is just "good enough"

- Goal Displacement
Groupthink
A cohesive group’s blind unwillingness to consider alternatives. This occurs when group members strive for agreement among themselves for the sake of unanimity and avoid accurately assessing the decision situation.
Goal Displacement
The primary goal is subsumed to a secondary goal.
4 Characteristics of Groups:
I. They are less efficient: Making decisions takes more time

II. Their size effects decision quality: Larger = lower quality

III. They may be overconfident- Groupthink

IV. Knowledge Counts- individuals should be familiar w/the subject. Know each other= unique info. Don't know= similar info.
When can a group help decision making:
Use group when:
-It can increase Quality

-It can increase Acceptance

-It can increase development
Participative Management (PM)
The process of involving employees in
(1) setting goals,
(2) making decisions,
(3) solving problems, and
(4) making changes in the organization.
Factors that can help PM work:
1)Top management is continually involved
2)Middle and supervisory managers are supportive
3)Employees trust managers
4)Employees are ready
5)Employees don't work in interdependent jobs
6) PM is implemented with TQM
Consensus
General agreement; group solidarity. Members of a group are able to express their opinions and reach an agreement to support the final decision.
*Not "everyone agrees", just willing to work toward decision's success
Dos and Don'ts for Achieving consensus
DO: Be active listeners, involve many members, seek out reasons behind arguments, and Dig for facts

Dont: Avoid log rolling/horse trading, Avoid argument to avoid rocking the boat, put questions to a vote.
A) Brainstorming
Technique used to help groups generate multiple ideas and alternatives for solving problems; individuals in a
group meet and review a problem to be solved, then silently generate ideas, which are collected and later analyzed.

PRO= effective for encouraging expression
CON= can be waste of time , not appropriate for evaluating alternatives/selecting solutions
Electronic Brainstorming/ Brainwriting
Technique in which members of a group come together over a computer network to generate ideas and alternatives.
B)Nominal Group
A group whose purpose it is to generate ideas and evaluate solutions by writing down as many ideas as possible. The ideas are listed on a blackboard, then discussed, then voted on in a secret ballot.
*PRO= generates more ideas than brainstorming
*CON= no reason to tell why people voted the way they did
C)Delphi Group
A problem-solving technique in which a group of physically dispersed experts fills out questionnaires to anonymously generate ideas; the judgments are combined and averaged to achieve a consensus of expert opinion.
Pros and Cons of Delphi group:
PRO: better for when face-to -face discussions are impractical, when disagreements and conflict are likely to impair communication, when groupthink is possible, and when certain individuals are likely to dominate.

CON= contributors cant ask questions of one another
D)Computer-Aided Decision Making:

a) Chauffeur-Aided Decision Making

b) Group-Driven systems
a)ask participants to answer predetermined questions on electronic keypads or dials. Responses can be computer tabulated almost instantly

b)meeting within a room of participants who express their ideas anonymously on a computer network. people feel free to communicate
Pros and Cons of Computer-Aided Decision Making
PRO: Produces greater quality and quantity of ideas than traditional brainstorming/nominal group

CON: Online groups may lead to decreased group effectiveness and member satisfaction and increased time needed to complete tasks.
Four Ineffective Reactions to decision situations:
1)Relaxed Avoidance

2)Relaxed change

3)Defensive Avoidance

4)Panic
1) Relaxed Avoidance
The situation in which a manager decides to take no action in the belief that there will be no great negative consequences.
2) Relaxed Change
The situation in which a manager realizes that complete inaction will have negative consequences but opts for the first available alternative that involves low risk.
3) Defensive Avoidance
When a manager cannot find a good solution and follows by (a) procrastinating, (b) passing the buck, or (c) denying the risk of any negative consequences.
4)Panic
Situation in which a manager reacts frantically to get rid of a problem that he or she cannot deal with realistically.
-3 Effective Reactions

DEF: Deciding to Decide
A manager agrees that he or she must decide what to do about a problem or opportunity and take effective decision-making steps.
Evaluate...
1) Importance- How high a priority is situation?

2) Credibility -How believable is the info about the situation

3) Urgency- How quickly must I act?
Heuristics
Strategies that simplify the process of making decisions.

Rules of thumb
1) Availability Bias
Tendency of managers to use information readily available from memory to make judgments; they tend to give more weight to recent events.
2) Confirmation Bias
Biased way of thinking in which people seek information to support their point of view and discount data that does not.
3) Representativeness Bias
The tendency to generalize from a small sample or a single event.

Ex. Lottery winner
4) Sunk Cost Bias
Biased way of thinking in which managers add up all the money already spent on a project and conclude it is too costly to simply abandon it.
EX. Concorde
5) Anchoring and Adjustment Bias
The tendency to make decisions based on an initial figure.

EX. Base salary on previous year
EX. Real Estate
6) Escalation of Commitment Bias
When decision makers increase their commitment to a project despite negative information about it.

EX. escalating commitment to Vietnam War
prospect theory
decision makers find the notion of an actual loss more painful than giving up the possibility of a gain