Chapter 11 - Decision Making

Question 1

What is decision making?

Answer 1

The process of developing a commitment to some course of action

• Decision making involves making a choice among several action alternatives
• Decision making is a process that involves more than simply the final choice among alternatives
• “Commitment” refers to the dedication of resources such as time, money, or personnel
• Decision Making = Problem Solving

Question 2

What is a well-structured problem? What is an ill-structured problem?

Answer 2

Well-Structured Problem:
A problem for which the existing state is clear, the desired state is clear, and how to get from one state to the other is fairly obvious

Ill-Structured Problem:
A problem for which the existing and desired states are unclear and the method of getting to the desired state is unknown

Question 3

What is perfect rationality? What is bounded rationality?

Answer 3

Perfect Rationality:
A decision strategy that is completely informed, perfectly logical, and oriented toward economic gain

Bounded Rationality:
A decision strategy that relies on limited information and that reflects time constraints and political considerations

Question 4

What is framing?

Answer 4

Aspects of the presentation of information about a problem that are assumed by decision makers

Question 5

What are cognitive biases?

Answer 5

Tendencies to acquire and process information in an error-prone way

Question 6

What is availability bias?

Answer 6

The tendency to favor information that can be accessed quickly and easily

Question 7

What is conformation bias?

Answer 7

The tendency to seek out information that conforms one’s own definition of or solution to a problem

Question 8

What is not-invented here bias?

Answer 8

The tendency to ignore or harbour negative attitudes toward ideas from outside one’s own organization or project team

Question 9

What is information overload?

Answer 9

The reception of more information than is necessary to make effective decisions

Question 10

What is maximization?

Answer 10

The choice of the decision alternative with the greatest expected value

Question 11

What is the anchoring effect?

Answer 11

The inadequate adjustment of subsequent estimates from an initial estimate that serves as an anchor

Question 12

What is satisficing?

Answer 12

Establishing an adequate level of acceptability for a solution to a problem and then screening solutions until one that exceeds this level is found

Question 13

What are risk cultures?

Answer 13

A common organizational understanding of how much risk is tolerated and how risk is framed

Question 14

What are sunk costs?

Answer 14

Permanent Losses of resources incurred as the result of a decision

Question 15

What is an escalation of commitment?

Answer 15

The tendency to invest additional resources in an apparently failing course of action

Question 16

What is hindsight?

Answer 16

The tendency to review the decision-making process to find what was done right or wrong

Question 17

What are the advantages of groups? What are the disadvantages?

Answer 17

Advantages:
- Decision Quality
- Decision Acceptance & Commitment
- Diffusion of Responsibility

Disadvantages:
- Time
- Conflict
- Domination
- Groupthink

Question 18

What is the diffusion of responsibility?

Answer 18

The ability of group members to share the burden of the negative consequences of a poor decision

Question 19

What is a risky shift?

Answer 19

The tendency for groups to make riskier decisions than the average risk initially advocated by their individual members

Question 19

What is a devil’s advocate?

Answer 19

A person appointed to identify and challenge the weakness of a proposed plan or strategy

Question 20

What is a conservative shift?

Answer 20

The tendency for groups to make less risky decisions than the average risk initially advocated by their individual members

Question 21

What is evidence-based management?

Answer 21

Making decisions through the conscientious, explicit, and judicious use of the best available evidence from multiple sources

Question 22

What is crowdsourcing?

Answer 22

Outsourcing aspects of a decision process to a large collection of people

• Two basic ideas underpin the effective use of crowdsourcing for decision making. One is that the information required to make a particular decision is not available to those charged with making that decision. The other is that a large collection of diverse individuals is likely to contain either a single superior solution to a problem or, on average, the collection will be correct