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Managing Information and Decision-Making (Decision making errors and…
Managing Information and Decision-Making
Decision Making
Bounded Rationality
This is the realistic best position for managers to be in when making decisions
Accepts that managers will not have perfect information.
Decisions made within the parameters of the simplified model of a problem.
These decisions are bound by limitations such as time, money, staff etc. And is therefore a more realistic approach than rationality.
Intuition
Gut feeling
Accumulated judgement
Previous experience
Decisions made based upon the managers general feeling about what is best.
Not just a guess, but instead a considered decision based upon the thoughts of an experienced manager or leader.
Rationality
It is assumed that all managers are rational decision makers
Rational decision making is reliant on perfect information
In the real world, there is never a decision in which perfect information is available.
In reality, this is not the case
Always maximise economic benefit
For example, it may be a rational decision for the business to move overseas, however in reality it may choose not to due to ties to the country it currently operates in.
Conditions of Decision making
Certainty
An outcome where the manager can predict and make an accurate decision
Uncertainty
cannot predict the outcomes
Risk
Can predict some outcomes but not all
Problems and Decisions
Well-structured problems & programmed decisions
Structured problems: Easily defined
Programmed decisions: Easily handled by routine approaches
Procedure ---> Rule ---> Policy
Un-structured problems & non-programmed decisions
Un-structured problems: New/unusual
Non-programmed decisions: Require a custom approach
Unique + Non-Recurring ---> Tailored "one off" solution
http://monash.online.clickview.com.au.ezproxy.lib.monash.edu.au/libraries/videos/3715694
Decision Making Styles
Non-linear
Process information through internal insights, feelings
Preference for internal info
Linear
Preference for external info
Rational and logical thinking
Pros and cons of decision making
Advantages
More complete information & knowledge
More diverse alternatives
Increases acceptance of a solution
Increase legitimacy
Disadvantages
Time consuming
Minority domination
Pressure to conform
Ambiguous responsibility
The value of collaborative decision making
Steve Jobs on the value of collaborative decision of making -No, you see you can't .if you want to hire great people and have them stay working for you, you have to let them make a lot of students and you have to ,you have to be run by ideas, not hierarchy. The best ideas have to win otherwise good people don't stay
Decision making errors and biases
Sunk costs
Randomness
Self-serving
Representation
Hindsight
Availability
Overconfidence
Framing
Confirmation
Selective prerception
Anchoring effect
Immediate gratification
