Decision making styles

• Example
• William D. Perez’s tenure as Nike’s CEO lasted a short and turbulent
13 months. Analysts attributed his abrupt dismissal to a difference in
decision-making approaches between him and Nike co-founder Phil
Knight. Perez tended to rely more on data and facts when making
decisions, whereas Knight highly valued, and had always used, his
judgment and feelings to make decisions.
• As this example clearly shows, managers have different styles when it
comes to making decisions.
Decision making style
• Your thinking style reflects two things:
• (1) the source of information you tend to use (external data and facts
OR internal sources such as feelings and intuition)
• (2) whether you process that information in a linear way (rational,
logical, analytical) OR a nonlinear way (intuitive, creative, insightful).
Linear and non-linear decision making style
• Linear Thinking Style: a person’s tendency to use external data/facts ; the
habit of processing information through rational and logical thinking
• Non Linear Thinking Style: A person’s preference for internal source of
information ; method of processing information through internal insights,
feelings and hunches
• Managers need to recognize that their employees may use different decision-
making styles.
Decision Making biases and Errors
• When managers make decisions, they not only use their own particular style,
they may use “rules of thumb,” or heuristics, to simplify their decision making.
Rules of thumb can be useful because they help make sense of complex,
uncertain, and ambiguous information.
1. Overconfidence Bias: Holding unrealistically positive views of one self and
one’s performance
2. Immediate Gratification Choosing alternatives that offer immediate rewards
and avoid immediate costs
Prefer decision choices that ensure quick payoff compared to ones that give payoffs in
future
3. Anchoring Effect: Fixating on initial information and ignoring later information
Decision Making biases and Errors
4. Selective Perception: Selecting, Organizing and Interpreting events
based on the decision makers biased perceptions
5. Confirmation bias: Seeking out information that reaffirms past
choices and discounting contradictory information
6. Framing Bias: Selecting and highlighting certain aspects of a
situation while ignoring other aspects
Decision Making biases and Errors
• Availability Bias: Losing Decision making objective by focusing on the most
recent events
Example after seeing the news that people are losing their jobs , you start
believing that u are in danger of being layed off so you start worrying that you
are about to get fired too
• Representation Bias : Drawing analogies and seeing identical situation when
none exist
• Example: when investors automatically assume that good companies make
good investments. However, that is not necessarily the case. A company may
be excellent at their own business, but a poor judge of other businesses.
• Randomness Bias Creating meanings out of random events
Decision Making biases and Errors
• Sunk Cost Error: when the decision makers forget that current choices can
not correct the past and relate only to future
Example: Proud generals, in their safe war rooms, will literally send countless
numbers of soldiers to their unnecessary deaths because the idea of a
withdraw after lives had been lost is perceived as dishonoring the memory of
the soldiers who had died in the failing offensive.
• Self-serving bias: Taking quick credit for success and blaming outside factors
for failures
Example: A student gets a good grade on a test and tells herself that she
studied hard or is good at the material. She gets a bad grade on another test
and says the teacher doesn't like her or the test was unfair.
Decision Making biases and Errors
• Hind sight bias: Explains the tendency of people to overestimate their
ability to have predicted an outcome that could not possibly have
been predicted.
• Example Following exams students often look back on questions and
think that they knew it though they missed it first time around