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Decision Making in Organisations (How organisations make decisions (Goals…
Decision Making in Organisations
Prospect theory
Loss: risk-seeking
Gain: risk-averse
More disappointment when faced with a loss
than satisfaction when faced with a gain
Kahnemahn's Theory
System 1: Automatic
System 2: the brain really has to concentrate
How organisations make decisions
Goals are ambiguous and in conflict, and lack
full support
Limited info-processing abilities
Evaluate alternatives sequentially instead of simultaneously
Evaluate alternatives against implicit favourites
Process perceptually-distorted information instead of factual info
Satisficing
Biases in various stages
of decision making
Identify problem or opportunity
framing
perceptual defence
mental models
discover/select choice
with highest value
anchoring and adjustment
availability heuristic
how easy an example
is recalled
Representativeness heuristic
probability based on
similarity to past incidents
Maximising
Evaluating the selected choice
Self-justification
self-enhancement
sunk cost effect
prospect theory
Optimal decision making
Team norms to encourage critical thinking
Sufficient team diversity
Checks and balances to
avoid dominant participants
Maintain optimal team size
Introduce creative team structures
Creativity
Engage creativity building workshops
Build stimulating environment
Hire people with track record of creativity