1.

Define the problem

Problem – gap between a desired state
and an existing state.
To create a decision on a problem,
managers must:
a. be aware of the gap
b. be motivated to reduce the gap
c. have the knowledge, skills, abilities and
resources to fix the problem
2. Identify decision criteria
Decision criteria – set of standards used to
guide judgements and decisions
Generally, the more criteria a solution
meets, the better that solution will be
3. Weigh the criteria: “ Which criteria are more or
less important”
Absolute comparisons – each criteria is
compared to a standard or ranked on its own
merits
Relative comparisons – each criterion is
compared directly to every criterion
4. Generate alternative courses of action
5. Evaluate each alternative courses of action
6. Compute the optimal decision
- maximizing decisions
- satisficing decisions
1. Bounded rationality – managers try to take a
rational approach to decision making. This is
constrained by:
a. limited resources
b. attention problems
c. memory problems
d. expertise problems
2. Risk and decision making under risky
conditions
a. Rationality assumes decision making
under a certainty, equipped with complete
information and knowledge of all possible
outcomes
b. Most conditions are made under a
condition of RISK.
C. Effects of Framing on decision making
- positive frame: a problem presented as
gain, becomes more risk averse
- negative frame: a problem presented as a
loss, becomes more risk seeking
3. Common decision making mistakes
a. Over reliance on Intuition – can cause
people to become over-confident, careless, and
inconsistent
b. Availability bias – tendency of decision
makers to give preference to recent
information, vivid images that evoke emotions,
and specific acts and behaviors that they
personally observe
 c. Representative bias – unrecognized
tendency of decision makers to judge the
likelihood of an event’s occurrence based on its
similarity of previous events.
d. Anchoring and adjustment bias –
judgement is “anchored “ by an initial value; all
subsequent experiences are judged by their
similarity to the anchor
1. Decision rules – a set of criteria that
alternative solutions must meet to be
acceptable to the decision maker.
2. Multivariable testing – a systematic
approach of experimentation used to analyze
and evaluate potential solutions.
3. Decision software – decisions from
satisficing
4. Escalation of commitment – the tendency to
stick with a “wrong” decision. It usually involves
an increased commitment of resources. To avoid
escalation:
- require progress reports
- use outside auditors
- change managers
- label decisions as experimental projects
ADVANTAGES:
- Groups view problems from several
perspectives, improved problem definition
- groups can find and access more
information and knowledge, allows for more
information
- greater information and knowledge
allows more alternative solutions to be
generated
PITFALLS
- groupthink: pressure within the group for
members to agree with each other, occurs when
a. group is insulated from different perspective
b. leader expresses a strong preference for one
solution
c. no established procedure for defining and
exploring alternatives
d. group members are similar in background
- it takes a considerable time
- one or two people dominate discussions
STRUCTURED CONFLICTS
a. C-type conflict – cognitive conflict, focuses
on problem and issue related differences of
opinion
b. A-type conflict – affective conflict, emotional
reactions to disagreements
a. Nominal Group Technique
- group members independently write
down as many definitions and alternative
solutions as possible
- ideas are then shared at a time
- advantages and disadvantages are
discussed
-ideas independently ranked
b. Delphi Technique
- assemble a panel of experts
- create a questionnaire of open-ended
questions
- analyze, summarize and feedback
members’ responses in a report
- experts list reasons for agreeing or
disagreeing with the report
c. Stepladder Technique
- group members are added to a group
discussion one at a time, existing group
members listen to each new member’s ideas,
and then the group shares ideas it had already
discussed, discusses the old and new ideas and
then makes a decision
d. Electronic Brainstorming
- Four rules:
a. the more ideas, the better
b. all ideas are acceptable
c. use others’ ideas to create more ideas
d. criticism or evaluation of ideas is not
allowed
d. Brainstorming
- Advantages:
a. technology allows everyone to record
their ideas as their ideas are created
b. anonymous process creates free
expression
e. Brainstorming
-Disadvantages:
a. greater expense
b. anonymity may bother people who are
used to having ideas by virtue of their
position
c. some find it difficult to express
themselves in writing