Chap 11 - Decision Making

Decision making

The process of developing a commitment to some course of action

Problem

A perceived gap between an existing state and a desired state

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

Program

A standardized way of solving a problem

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

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

Framing

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

Cognitive biases

Tendencies to acquire and process information in an error prone way

Why use groups?

• Decision quality

• Decision acceptance and commitment

• Diffusion of responsibility

• Groups make higher quality decisions than individuals

Diffusion of responsibility

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

Why is decision quality improved in groups? 

• Groups are more vigilant 

• Groups can generate more ideas than individuals can 

• Groups can evaluate ideas better than individuals can (due to checks)

How do groups make higher quality decisions than individuals?

• Group members differ in relevant skills and abilities, as long as they do not differ so much that conflict occurs

• Memory for facts is an important issue

• Individual judgements can be combined by weighting them to reflect the expertise of various members

Disadvantages of group decision making

• Time

• Conflict

• Domination

• Groupthink 

Groupthink

The capacity for group pressure to damage the mental efficiency, reality testing, and moral judgment of decision making groups

Groupthink symptoms

• Illusion of invulnerability (members are overconfident and willing to assume great risks so they ignore obvious danger signals)

• Rationalization

• Illusion of morality

• Stereotypes of outsides

• Pressure for conformity

• Self censorship

• Illusion of unanimity

• Mindguards (members may adopt the role of “protecting” the group from info that goes against its decision)

Devil’s advocate

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

Risky shift

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

The dynamics of risky and conservative shifts for two groups

• Group discussion generates ideas and arguments that individual members have not considered before (this info naturally favours the members’ initial tendency toward risk or toward conservatism)

• Group members try to present themselves as basically similar to other members but “even better”

Evidence based management

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

Crowdsourcing

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

Analytics

Finding meaningful patterns in large datasets

Big data

Copious amounts of information that are often collected in real time and can come from a wide variety of sources, particularly digital