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Managing information and decision making (Decision making conditions,…
Managing information and decision making
Decision making conditions, styles and errors
Conditions of decision making
Certainty
Accurate decisions can be made as every outcome is known
Risk
Estimate the likelihood of certain outcomes
Uncertainty
Neither certain nor reasonable probability estimates
Decision Making styles
Linear
External data
Facts
Rational, Logical thinking
Non linear
Internal data
internal insights, feelings hunches
ERRORS
overconfidence
immediate gratification
anchoring effect
self serving
randomness
representation
availability
framing
confirmation
selective perception
sunk costs
hindsight
How do managers arrive at decisions?
Rationality
Choices which are consistent and value maximising
Economic benefits are maximised
Problem is clear and well-defined, all consequences are known, there are no time or cost constraints, the choice made with maximise the pay-off
Bounded Rationality
Decisions made within limitations and constraints
"Good enough", "satisficing"
Intuition
A product of: previous experience, gut-level feeling, and accumulated judgement
Subjective
Managerial problems and decisions
well-structured problems + programmed decisions
problems are easily defined
routine approach to decision making
unstructured problems + non-programmed decisions
decisions need a custom approach
new or unusual problems
Group Decision-making
Disadvantages
• Time consuming
• Minority domination
• Pressure to conform
• Ambiguous responsibility
adv
Advantages
• More complete information & knowledge
• More diverse alternatives
• Increases acceptance of a solution
• Increase legitimacy