Mental shortcuts humans use in making decisions labor saving devices We use heuristics because of our limited info processing capabilities TEST 2 NOTES Heuristics and Decision Making o Keep it simple Advantages of Heuristics Make us efficient and effect Problems with Heuristics Implicitly guides our judgment What is the availability heuristic The availability heuristic is used when managers asses the frequency of an event by the extent to which instances of that event are easily recalled in memory Representativeness Heuristic Reflects the tendency of managers to assess the likelihood of an occurrence by matching it with a preexisting category This heuristic involves the use of stereotype in making judgments Problem with not investing in a new product can result in a miss of opportunities They use of stereotypes don t allow us to see the real person As a result they may lead to decisions that are unethical and illegal o It s just like stereotyping someone Which of the following are true concerning heuristics They make us more efficient they simply complex environments they produce more good than bad decisions and when they lead to errors they are called biases All of the following could cause one to overestimate the frequency of an event In the gamblers fallacy the person believes after a number of unfortunate events that the likelihood of good fortune is When a decision is framed negatively the decision maker Is likely to take more risk 5 steps in the creative process 1 Preparation 2 Concentration 3 Incubation 4 Illumination 5 Evaluation Decision Making and Management Managers make decisions to accomplish organizational goals more efficiently As such decisions are a means to an end rather than an end in themselves Is decision making a function of management o No it is not a separate function of management because it is a part of every function It is most closely associated with planning function Decision Making and Types of decisions In general we can break decisions into 2 types programmed and non programmed o Programmed decisions are specific procedures that have been developed for routine repetitive problems Programmed decisions come from our experience EX high school degree with 8 out of 10 good employees without high school degrees with 4 out of 10 employees o Non programmed decisions are specific solutions that to problems that are novel unique complex and unstructured Every programmed started out as a non programmed Who is gonna make the more programmed decsions first line Decision Making conditions Ambiguity in decision making o The more you don t know the more bad things can happen There are 3 conditions under which managers will make decisions o Certainty Easiest Least common because most people do not know everything The manager knows all the availability alternatives and the outcomes associated with each There is no element of chance that intervenes between an alternative and its outcome The outcomes of alternatives are known with 100 certainty probability of 1 Programmed o Risk o Uncertainty Most common The managers know the alternatives but their outcomes are in doubt The probabilities associated with the different outcomes are between 0 and 1 The key in risk is to make sure your probabilities are correct Could be both programmed or non programmed Most difficult Worst case uncertainty the manager knows nothing Best case uncertainty the manager knows the available alternatives but has no idea of what their outcomes could be Non programmed Models of Decision Making There are 3 models of decision making o Traditional model This mode assumes that decisions are made under conditions of certainty This model makes 2 major assumptions The decision maker is completely rational The decision maker maximizes Economical man completely rations o Behavioral model o Irrational model This model assumes that managers try to be rational in making decisions but their rationality is bounded limited This model assumes that decision makers 1 possess bounded rationality and 2 they satisfice This model assumes that early on in the decision making process that the decision maker picks a favorite Then as the process continues the decision maker selects decision rules and distorts information to make the favorite alternative look better This is irrational decision making because it s based on emotion more than anything else Improving the Decision Making Process Generating Better Alternatives o Brainstorming Group technique Sole task is to generate as many solutions to the problem as they can Belief behind brainstorming is when people interact in an unrestrained setting creativity will result 4 Rules of Brainstorming Criticism evaluation is strictly prohibited Never welcomed Shuts people down Freewheeling is welcomed The weirder the idea the better Quantity of ideas is sought Get anywhere from 50 100 ideas Never go for quality first If we get enough quantity than you will get quality Combination and improvement of ideas is sought Problem with Brainstorming Inhibitions in creating creative ideas cant be completely eliminated due to a of factors such as non verbal communication and power differences among members o Synetics Connection of diverse elements Involves groups whose job is to generate and evaluate solutions Uses fantasy and analogy to help the group become more creative Fantasy Analogy o Nominal Group Technique Employs a facilitator and a technical expert Facilitator makes sure everyone knows the problem and help you generate solutions Technical experts helps you evaluate Problems of Synetics As soon as a group member generates an idea the technical expert evaluates the idea The generation of ideas and the evaluation of ideas occur together stifling creativity Based on the research that has found that 5 individuals working alone generate more creative ideas than these same five individuals would generate working together as a group This technique is different from brainstorming synetics in 2 ways It does not rely upon the free association of ideas When you say one thing I say another that pops in my head It has very structured interaction 5 Steps in Nominal Group Technique Group members are familiarized with the problem Group members working silently and alone generate solutions to the problem Group members share their solutions in a round robin manner Everyone plays equally Everyone can voice their ideas Share and combine to improve upon our ideas Group members evaluate the