Decision making is
the process by which managers respond to opportunities and threats by organizational goals and course of action
rational decision making models (80
- identifying the problem
- identifying decision criteria
- allocating weights to the criteria
- developing alternatives
- analyzing alternatives
- selecting an alternative
- implementing the alternative
- evaluating the decision’s effectiveness
rational decision making are
consistent, value-maximizing choices with specified constraints and clear goals
assumptions of rationality (not true)
- preferences are clear
- preferences are constant and stable
- problem is clear and unambiguous
- final choice will maximize payoff
- no time or cost contstraint exist
- all alternatives and consequences are known
- single, well defined goal is to be achieved
bounded rationality
- bounded rationality
- incomplete information
- ambiguous information
- time constraints and information costs
- satisficing
factors influencing a satisfaction decision
perceived problem -> information processing biases (triggers -> limited search + limited information) leads to -> satisficing decision
Decision-Making Process
- perception
- what do you see - attribution
- what is the cause of what you see - judgement
- what conclusion do you draw - decision-making
- what do you choose to do
- Perception
a process where individuals organize and interpret their sensory impressions in order to give meaning to their environment
–> people’s behavior is based on their perception of what reality is, not reality itself
expectations and perception
expectations shapes our perception
Attribution Theory
when individuals observe behavior, they attempt to determine whether it is internally or externally caused
internal causes - under that person’s control
external causes - person forced to act in that way
self serving bias
tendency for individual to attribute their own successes to internal factors (themselves) while putting the blame for failures on external factors (other people)
fundamental attribution error
tendency to underastimate the influence of external causes and overastimate the influence of internal factors when making judgments about the behavior of others
self fulfilling prophecy (pygmalion effect)
- others beliefs about us
- cause others actions towards us 3. reinforce our beliefs about ourselves
- influence our actions towards others
- impact other beliefs about us
Judgement - Heuristics
mental shortcuts (cognitive rules of thumb) that help us make decisions about uncertain events
can be both good and bad in decision making
availability heuristic
tendency to judge the frequency or likelihood of an event by the ease with which relevant instances come to mind
- ease of recall
- retrievability
stereotyping is and occurs because
assigning traits to people based on their membership in a social category
occurs because
- categorial thinking (save energy, simplify our understanding)
- help us to fill in missing pieces of information - understand and anticipate others behavior
- help us to identify in group and out group members
stereotyping problems
- overgeneralizes (doesn’t represent everyone in the category)
- basic of systemic and intentional discrimination
representativeness heuristic
tendency to judge the frequency or likelihood of an event by the extent to which it resembles the “typical” case
representativeness heuristic error
misconceptions of chance
= people’s attempt to explain large scale patterns from samples of a much smaller size
anchoring and adjustment heuristic
tendency to judge the frequency or likelihood of an event by using a starting point (anchor) and then making adjustments up or down
decision making biases (biases on viewing yourself)
- overconfidence bias
- confirmation bias
- hindsight
- escalation of commitment
- randomness error
Advice for decision making
- be aware of decision making biases and errors
- having awareness
- seek group consesus
- check with your colleagues and followers before you make up your mind
theory in building Conceptual Framework
- roots in biological heritage
- conditional based on societal use of red
