Transcript Decision Making

Decision Making
I. Define the problem
A. Ethics – take into account (#1
escalation?)
B. Level of participation
- to group or not to group?
- advantages?
C. Distinguish problem from symptoms.
Consider opportunities (#2 advice)
Advice to Managers
THE DECISION MAKING PROCESS
 Realize that different members of an organization are going to define the
same problem or opportunity in different ways depending on their
personalities, abilities, knowledge, expertise, and the groups they belong to.
 Carefully examine how you define problems and opportunities. Explore the
implications of defining these problems and opportunities in different ways.
 Realize there are limits to the amount of information you and your
subordinates can take into account when making decision. Focus on
information that is most relevant to the decision at hand.
Decision making biases/heuristics
(#3 & 4)
Escalation of commitment – increased commitment to a
decision despite negative information (double down after
you lose a hand)
Availability – base judgments on information that is
readily available (recency errors in performance
appraisal)
Representativeness – base judgments of probability on
things with which they are familiar (recent 3 graduates)
Anchoring – giving disproportionate weight to first
information you hear
Groupthink – tendency to withhold individual opinion in
order to go along with the group (#4.5 & 5)
Advice to Managers
SOURCES OF ERROR IN DECISION MAKING
 Do not give vivid instances of an event or cause too much weight in
decision making. If a vivid or extreme instance comes to mind, think about
the extent to which less extreme or vivid events and causes have
occurred.
 When making decisions, be sure to consider events and causes beyond
the most recent ones.
 When trying to estimate the likelihood of an event or cause occurring,
take into account the number of times that this even or cause has actually
occurred. Remember, rare events are unlikely to be repeated.
Advice to Managers
SOURCES OF ERROR IN DECISION MAKING (cont’d)
 Whenever you are making a decision based on adjusting some initial
amount (such as a worker’s salary or marketing expenditures), stop and
determine whether the initial amount was originally set too high or too low.
 Realize that a sign of good decision making is the ability to recognize
when a decision needs to be reversed.
 When deciding whether to commit resources to a course of action, take
into account the costs only if the resources you are about to commit. Do
not take into account costs that have already been incurred.
 If you are deciding whether to commit more resources to a course of
action that has already resulted in some losses of money, time, or effort,
ask yourself whether you would commit the resources if you had not
already experienced the losses but had your current knowledge.
Symptoms of groupthink
1. Illusion of invulnerability
Group members are very optimistic and take excessive risks.
2. Belief in inherent morality of the group
Group members fail to consider the ethical consequences of decisions.
3. Collective rationalizations
Group members ignore information that suggests they might need to
rethink the wisdom of the decision.
4. Stereotypes of other groups
Other groups with opposing views are viewed as being incompetent.
Symptoms of groupthink (cont’d)
5. Self-censorship
Group members fail to mention any doubts they have to the group.
6. Illusion of unanimity
Group members mistakenly believe they are all in total agreement.
7. Direct pressure on dissenters
Members who disagree with the group’s decision are urged to change
their views.
8. Emergence of self-appointed mind guards
Some group members try to shield the group from any information that
suggests that they need to reconsider the wisdom of the decision.
Advice to Managers
GROUP MAKING DECISIONS
 Use groups to make decisions when the decision requires a wide range
of skills, knowledge, and expertise, or more information than a single
individual could be expected to consider and remember, or when
acceptance by others is necessary to implement the decision. But keep in
mind that group decision making is time-consuming.
 Use individuals to make decision when an individual has all the skills
and knowledge necessary to make a good decision, when an individual
can gather and accurately take into account all necessary information, and
when acceptance by others for successful implementation is either
unnecessary or likely to occur regardless of their involvement in decision
making.
Advice to Managers
GROUP MAKING DECISIONS (cont’d)
 Encourage group member to be critical of each other’s ideas and to
raise any doubts or misgivings they may have.
 In the groups you lead, wait to express your own opinions until the group
has had a chance to evaluate the different alternatives.
 Whenever a decision-making group is cohesive, follow the five steps to
help prevent groupthink.
 Impress on group members that each of them is responsible for helping
the group make a good decision.
II. Set Objectives/Criteria
Alternatives by Criteria (1-5)
Revenue
Growth
(.2)
Net Profit
Contribution
(.3)
Market
Penetration
(.4)
Global
Expansion
(.1)
Merge with
Compaq
4
.2
3
.3
5
.4
3
.1
Design new
products
internally
3
.2
5
.3
3
.4
1
.2
Joint Venture
with
Samsung
4
.2
4
.3
4
.4
5
.1
III. Generate Alternatives
Innovation and Creativity
Brainstorming (4 rules)
Nominal Group Technique ( #6)
Dialectic Inquiry
Devil’s advocacy
Brainstorming example –
Ideo Inc.
(the mouse, Palm V etc., no-mess toothpaste tube for
P&G)
1. Ideo Manager: “Genius is 99%
perspiration
and 1% inspiration.” To get to that 1%, Ideo uses
brainstorming and rapid prototyping.
2. Customers: Cisco, NEC, Steelcase, Kodak,
etc.
3. Clients said “it’s nice you’re so
can’t you show us how you do it?”
innovative, but
Brainstorming rules:
1. Defer judgment (otherwise you’ll interrupt the flow of
ideas)
2. Build on the ideas of others (it’s far more productive
than merely hogging the glory for your own insights)
3. Stay focused on the topic (no tangents)
4. One person at a time (so you don’t drown out that
quiet, brilliant mumbler in the corner of the room)
5. Go for quantity (when Ideo staffers brainstorm, they
shoot for 150 ideas in 30 to 45 minutes)
6. Encourage wild ideas (to paraphrase Einstein, “If at
first an idea doesn’t sound absurd, then there’s no hope
for it”)
7. Be visual (sketch ideas to help people understand
them).
The Nominal Group Technique
A small group of 4-5 people gathers around a table. Leader
identifies judgment issue and gives participants procedural
instructions.
Participants write down all ideas that occur to them, keeping
their lists private at this point. Creativity is encouraged during
this phase.
Leader asks each participant to present ideas and writes them
on a blackboard or flipchart, continuing until all ideas have been
recorded.
Participants discuss each other’s ideas, clarifying, expanding,
and evaluating them as a group.
Participants rank ideas privately in their own personal order and
preference.
The idea that ranks highest among the participants is adopted as
the group’s judgment.
The Dialectic Decision Method
1. A proposed course of action is generated
2. Assumption underlying the proposal are identified
3. A conflicting counterproposal is generated based on different
assumptions
4. Advocates of each position present and debate the merits of their
proposals before key decision makers
5. The decision to adopt either position, or some other position, e.g., a
compromise, is taken
6. The decision is monitored
A Devil’s Advocate Decision Programs
1. A proposed course of action is generated
2. A devil’s advocate (individual or group) is assigned to criticize
the proposal
3. The critique is presented to key decision makers
4. Any additional information relevant to the issues is gathered
5. The decision to adopt, modify, or discontinue the proposed
course of action is taken
6. The decision is normal
IV. Analyze Alternatives
Compare alternatives using established
criteria
Cost-benefit analysis
Creativity
I. Creative Process
1. Establish opportunity or problem
recognition
2. Immersion – collect/recall information
and generate hypotheses
3. Incubation – subconscious manipulation
4. Insight – AHA (often during unrelated
activity)
5. Verification – test it out
II. Enhancing Creativity
A. Create a culture of creativity (#1 & #3)
B. Reduce mental locks (#2)
C. Puzzles (Prussia’s, #4 & # 5)
26 = L of the A
52 C in a D
Instructions:
18 H on a GC
> Or = to 4 ltrs
Each must contain center ltr
90 D in a RA
4 Q in a G
24 H in a D
At least one 9 ltr wrd
Use each ltr only wunc
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