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DECISION MAKING :recycle: - Coggle Diagram
DECISION MAKING
:recycle:
PROCESS OF DECISION MAKING
4) Developing Alternatives
6) Selecting an Alternative
7) Implementing the Alternatives
2) Identifying Decision Criteria
8) Evaluating Decision Effectiveness
1) Identifying a Problem
5) Analyzing Altenatives
3) Allocating Weights to Criteria
DECISION MAKING TYPES AND CONDITIONS
2) Types of Problems
Structured Problems - straightforward, familiar, and easily defined problems.
Unstructured Problems - problems that are new or unusual and for which information is ambiguous or incomplete.
3) Decision-Making Conditions
Certainty - a situation in which a manager can make an accurate decision because the outcome of every alternative choice is known.
Risk - a situation in which the manager is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives.
1) Types of Programmed Decisions
Procedure - a series of interrelated steps that a manager can use to apply a policy in response to a structured problem.
Rule - an explicit statement that limits what a manager or employee can or cannot do.
Policy - a general guideline for making a decision about a structured problem.
4) Decisions Under Uncertainty
i. Limited information prevents estimation of outcome probabilities for alternatives.
ii. Limited information forces managers to rely on intuition, hunches, and “gut feelings.”
Maximax: the optimistic manager’s choice to maximize the maximum payoff (return on investment/ final outcome).
Maximin: the pessimistic manager’s choice to maximize the minimum payoff.
Minimax: the manager’s choice to minimize maximum regret (cost).
DECISION MAKING FOR TODAY'S WORLD
1) Guidelines for making effective decisions:
Understand cultural differences
Know when it’s time to call it settled
Use an effective decision making process
2) Habits of highly reliable organizations (HROs)
Are not tricked by their success
Defer to the experts on the front line
Let unexpected circumstances provide the solution
Embrace complexity
Anticipate, but also anticipate their limits
APPROACHES IN DECISION MAKING
1) Rational Decision-Making
Rational Decision-Making - describes choices that are logical and consistent while maximizing value.
Bounded Rationality - decision making that’s rational, but limited (bounded) by an individual’s ability to process information.
Satisfice - accepting solutions that are “good enough.”
2) Intuitive Decision-Making
Making decisions on the basis of experience, feelings, and accumulated judgment.
GROUP DECISION MAKING
Important decisions are often made by groups who will be most affected by those decisions:
Committees
Task Forces
Review Panels
Work Teams**
2) Drawbacks
Time-consuming
Infrequent and often inefficient interaction
Minority domination
Groupthink
Ambiguous responsibility
3) Effective Group Decision Making
More accurate decisions
More heterogeneous representation
More time-consuming
More creative
More effective in accepting final solution
1) Benefits of Group Decision Making
Provides more information
Generates more alternatives
Increases acceptance of a solution
Increases legitimacy of the decision
ERROS IN DECISION MAKING
1) Decision-Making Styles
Linear Thinking Style
A person’s tendency to use external data/facts; the habit of processing information through rational, logical thinking.
Nonlinear Thinking Style
A person’s preference for internal sources of information; a method of processing this information with internal insights, feelings, and hunches.
2) Decision-Making Errors and Biases
c. Confirmation Bias
d. Framing Bias
b. Selective Perception Bias
e. Availability Bias
a. Anchoring Effect
k. Overconfidence
i. Self-Serving Bias
g. Randomness Bias
j. Hindsight Bias
h. Sunk Costs Errors
l. Immediate Gratification
f. Representation Bias