MGT 305 1nd Edition Lecture 16 Outline of Last Lecture I Organizational Communication II Workplace Design and Communication III IV Trends Leadership as a Conversation Privacy and the Internet Outline of Current Lecture I Decision making process II Rational decision making III Bounded rationality IV Intuitive decision making V Evidence based management Current Lecture Decision Making Decision Making Process Step 1 Identifying the problem o More effective to treat underlying problem rather than focusing on the symptoms that stem from it Step 2 Identifying decision criteria o What things are you going to look for Step 3 Allocating weights to criteria o What do you value most Step 4 Developing alternatives o What can be done differently Step 5 Analyzing alternatives o What is the best option These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Step 6 Selecting an alternative o People often ignore the previous steps and go with their gut instinct Step 7 Implementing the alternative Step 8 Evaluate the decision effectiveness o Most people skip this step Managers Making Decisions Rational decision making Assumes we make logical objective and consistent choices that maximize value Maximizing is key o Search until we find the best option best solution o Satisfice people tend to be happier and more fulfilled in life than the maximizes maybe we don t need to be rational Maximizing leafs Assumptions of rationality unrealistic o Rational decision maker would be fully objective and logical o Problem is clear and unambiguous o Decision maker has clear and specific goal o Decision maker knows all possible alternatives and consequences o Rational decision making consistently leads to increased likelihood of achieving that goal o Decisions are make in best interest of organization Bounded rationality Managers make decisions rationally but are limited bounded by their ability to process information Satisfice accept solutions that are good enough o Maybe there isn t enough time or resources to find and evaluate all alternatives Intuitive decision making Making decisions on the basis of experience feelings or accumulated judgment o Good for some things specifically personal decisions but not always good as experiences and personal feelings can vary Research shows that this can be a great method of decision making Components of Intuition o Values or ethics based decisions o Subconscious mental processing o Experience based decisions o Affect initiated decisions o Cognitive based decision Biases and errors influence this can cause problems Evidence based management EBMgt The systematic use of the best available evidence to improve management practice Four components o Decision maker s expertise and judgment o External evidence o Opinions preferences and values of those who have a stake in the decision Decisions are not made in isolation effect many people important to consider opinions preferences of these people o Relevant organizational factors ex culture Case Study Google s hiring interview Ask how many ping pong balls would fit in a bus Many ways to approach this tells company about the person s decision making processes Decision making Biases and Errors Heuristics general rule that simplifies decision making Kahneman and Tversky These general rules become this because they work consistently