Survey of Management

Process of choosing a specific course of action to respond to both opportunities & problems

Recurring opportunities & problems; handled with a routine, repetitive approach, Standard Operating Procedure (SOP). Performance program used

Response to new, unique problems or opportunities where information is ambiguous or incomplete. Involve custom made solutions

• Define problem & establish goals
• Identify criteria
• Allocate weights to criteria
• Develop alternatives
• Evaluate alternatives
• Select best alternatives

We don't make "best" decisions but look & choose "acceptable" responses

Limitations of the mind cause us to construct simplified models where we extract essential features & fail to consider all the complexity of the problem/opportunity

Psychological factors, biases, & filters result in making satisfactory, not optimal decisions

Rule of thumb that simplify making decisions & may lead to errors & biasis in processing & evaluating information

Overly confident that we are correct

Make choices that provide quick rewards

Make choices based on adjustments from some initial amount

Focus on information that reaffirms past choices & discounts information that contradicts past judgments

Decide based on information readily available or easy to remember (vivid, extreme, recent)

Tendency to prefer a sure thing over a risky outcome

Predict the likelihood of an event based on how it resembles other events

Believe we can predict the outcome of random events

Tendency to believe falsely, after the outcome is known, that we could have accurately predicted

• Stick with a decision & invest additional resources even if there is clear evidence to indicate we are wrong
• - Don't want to admit we are wrong
• - Try to recoup lost resources
• - Take more risks when we try to recoup resources than when we try to generate resources

• Greater availability & diversity of skills, knowledge & expertise
• Better memory for information
• Better able to detect errors
• Greater decision acceptance

• Takes more time
• Potential for "group think". Cohesive groups strive for agreement at expense of accurately assessing information
• Potential for conflict. Need balance of conformity & conflict

Groups tend to make more extreme decision (either more risky or conservative)

Potential for "social loafiing". (individuals exert less effort when in a group)

• - Leader urges members to be critical, raise doubts, & readily accept criticism of their own ideas
• - Leader does not share own views until group has considered alternatives
• - Leader encourages members to solicit ideas from people outside the group
• - Assign some member(s) to play deil's advocate
• - Hold second meeting after decision is made & encourage sharing any doubts