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Decision Making (HEURISTICS
Short cuts for how we make decisions,…
Decision Making
HEURISTICS
Short cuts for how we make decisions, simplifies strategies
Judgemental Heuristics
mental shortcuts that allow people to solve problems and make judgements quickly and efficiently - rule of thumb
eg: special consideration the night before
Can led to biases
Availability Heuristic
Using information "readily available" from memory as a basis for assessing a current event or situation
eg: fake death certificates
Representativeness heuristic
Assessing the likelihood of something occurring based on its similarity to a stereotyped set of occurrences
eg: when someone is ill, don't usually ask for medical certificate
Anchoring and adjustment heuristic
Making decisions based on adjustments to a previously existing value or starting point
APPROACHES
Problem solvers - willing to make decisions and solve problems, but are reactive
Problem seekers - actively process information and constantly look for problems to solve or opportunities to explore, proactive
Problem avoiders - ignore information, inactive, do not want to deal with problems
INTUITION
Not contradictory to rationality, but a sophisticated form of reasoning based on "chunking" over years of job-specific experience
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Argued that is it a part of every single decision, but varies in its effect
RATIONALITY
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Assumes:
- Problem is clear and unambiguous
- Single well-defined goal
- All alternatives and consequences are known
- No time or cost constraints
not realistic, therefore we have INCOMPLETE INFORMATION
BOUNDED RATIONALITY
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Bounded by limitations and constraints (cognition, resources and time)
Managers "satisfice" - make decisions that are good enough within the parameters of a simplified model
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THE PROCESS
- Recognise the need for a decision
- Generate alternatives
- Assess alternative
- Choose among alternatives
- Implement the chosen alternative
- Learn from feedback (compare, explore why and consider future)
PROBLEMS
- Hard to generate creative alternatives (brainstorming outside the box - set aside current mental models of the world)
eg: IKEA 's child view
- Legality, ethics , economical and ultimately is it practical?
Contemporary Challenges
- Too much data, how do you filter the information?
- Managers being pulled across different ideas (changes in technology)
- Stakeholder vs Shareholder theory
- Accountability
GROUPTHINK
When groups are highly cohesive, they experience the illusion of vulnerability
eg: NASA peer pressure, we're all experts, we don't need any help
DAVENPORT (2009) - Making Better Decisions
Argues that there is a science behind making better decisions
- List a prioritise the decisions that must be made
- Assess the factors that go into each - who, what, how & when?
- Design the roles, processes, systems and behaviours needed
- Institutionalise the decision tools and assistance
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