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Decision - Coggle Diagram
Decision
Making decision
Bounded rationality
escalation of commitment
Challenger
The role of intuition
Affect-initiated decisions:Managers make decisions based on feelings or emotions
Cognitive-based decisions:Managers make decisions based on skills, knowledge and training
Experience-based decisions:Managers make decisions based on their past experiences
Values or ethicsbased decisions:Managers make decisions based on ethical values or culture
Subconscious mental processing:Managers use data from subconscious mind to help them make decisions
Assumption of rationality
The problem is clear and unambiguous.
A single, well-defined goal is to be achieved
All alternatives and consequences are known.
Preferences are clear.
Preferences are constant and stable.
No time or cost constraints exist.
Final choice will maximise payoff.
Decision-making conditions
Certainly
a situation in which a manager can make accurate decisions because the outcome of every alternative is known.
It is more idealistic than realistic
Risk
conditions in which the decision maker is able to estimate the likelihood of certain outcomes.
Uncertainty
influenced by the limited amount of information/psychological orientation of the decision maker.
Types of problems and decisions
Well-structured problems and programmed decisions
The goal of the decision maker is clear, the problem is familiar, and information about the problem is easily de ned and complete.
a repetitive decision that can be handled by a routine approach.
A procedure is a series of sequential steps that a manager can use to respond to a structured problem.
A rule is an explicit statement that tells a manager what they can or cannot do
A third guide for making programmed decisions is a policy
The customer always comes rst and should always be satis ed . • We promote from within, whenever possible . • Employee wages shall be competitive within community standards.
Unstructured problems and non-programmed decisions
problems that are new or unusual and for which information is ambiguous or incomplete.
unique and non-recurring and require custom-made solutions.
Decision-making styles
Linear– non-linear thinking style profile
The rst, linear thinking style , is characterised by a person’s preference for using external data and facts and processing this information through rational, logical thinking to guide decisions and actions. The second, non-linear thinking style , is characterised by a preference for internal sources of information (feelings and intuition) and processing this information with internal insights, feelings and hunches to guide decisions and actions. Look back at the earlier Nike example and you will see both styles described.
Decision-making biases and errors
overconfidence bias, immediate gratification bias, anchoring effect, selective perception bias, confirmation bias, framing bias, availability bias, representation bias, randomness bias, sunk costs error, self-serving bias and hindsight bias