Bounded Rationality - a Personal Case Study Reflection Essay

2452 Words Aug 6th, 2013 10 Pages
1. Introduction This report discusses a situation I faced as the Project Manager for a local manufacturing company who was contracted to build a quantity of ten C44aci class locomotives for an international coal distributor. Our company is a market leader in the rail industry, offering complete asset management services to its customers through the design, build and maintenance of locomotives. At the time of contract negotiations it was insisted upon by the customer that this new fire detection system be included within the terms of the contract or risk losing the contract to a competitor; under duress it was agreed by the bid team and included within the scope of contractual deliverables. At the time of contract award the system had not …show more content…
Independent research suggests that cognitive biases in managerial decision making consistently demonstrates that managers are boundedly rational, not perfectly rational;

they deal with decision making complexity by using only a sub set of available information which leads to biases in a variety of decision making contexts (Tiwana, Wang, Keil, & Ahluwalia, 2007).

It is clear I was affected by the need for self-verification as defined by Robbins and Judge (2011); to prove to myself that I was capable of handling the new role of Project Manager however the project team was also affected by the common biases known as Anchoring and Overconfidence Bias which ultimately influenced the decision making process and errors in the teams decisions. Instead of searching for alternative suppliers we continued only with the initial information provided by the bid team, this is referred to as the Anchoring Bias which is a tendency to fixate on initial information without adjusting for any subsequent information (Robbins and Judge, 2011). Additionally we were affected by Overconfidence bias at the time of making the decision as we overestimated our abilities to manage the design and implementation without having all the available information on the issue at hand. Robbins and Judge (2011) suggested that overconfidence is most likely to surface when individuals work outside their area of expertise; at the time of making the decision the procurement manager was not

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