Decision MakingDecision Making

I. Define the problemI. Define the problem

A. Ethics – take into account (#1 A. Ethics – take into account (#1 escalation?)escalation?)

B. Level of participationB. Level of participation

- to group or not to group?- to group or not to group?

- advantages?- advantages?

C. Distinguish problem from symptoms. C. Distinguish problem from symptoms. Consider opportunities (#2 advice)Consider opportunities (#2 advice)

Advice to ManagersTHE 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 Decision making biases/heuristics (#3 & 4)(#3 & 4)

Escalation of commitment – increased commitment to a Escalation of commitment – increased commitment to a decision despite negative information (double down after decision despite negative information (double down after you lose a hand)you lose a hand)Availability – base judgments on information that is Availability – base judgments on information that is readily available (recency errors in performance readily available (recency errors in performance appraisal)appraisal)Representativeness – base judgments of probability on Representativeness – base judgments of probability on things with which they are familiar (recent 3 graduates)things with which they are familiar (recent 3 graduates)Anchoring – giving disproportionate weight to first Anchoring – giving disproportionate weight to first information you hearinformation you hearGroupthink – tendency to withhold individual opinion in Groupthink – tendency to withhold individual opinion in order to go along with the group (#4.5 & 5)order to go along with the group (#4.5 & 5)

Advice to ManagersSOURCES 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.

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.

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.

Realize that a sign of good decision making is the ability to recognize when a decision needs to be reversed.

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.

Advice to ManagersSOURCES OF ERROR IN DECISION MAKING (cont’d)

Symptoms of groupthink

1. Illusion of invulnerabilityGroup members are very optimistic and take excessive risks.

2. Belief in inherent morality of the groupGroup members fail to consider the ethical consequences of decisions.

3. Collective rationalizationsGroup members ignore information that suggests they might need to rethink the wisdom of the decision.

4. Stereotypes of other groupsOther groups with opposing views are viewed as being incompetent.

Symptoms of groupthink (cont’d)

5. Self-censorshipGroup members fail to mention any doubts they have to the group.

6. Illusion of unanimityGroup members mistakenly believe they are all in total agreement.

7. Direct pressure on dissentersMembers who disagree with the group’s decision are urged to change their views.

8. Emergence of self-appointed mind guardsSome group members try to shield the group from any information that suggests that they need to reconsider the wisdom of the decision.

Advice to ManagersGROUP 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.

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.

Encourage group member to be critical of each other’s ideas and to raise any doubts or misgivings they may have.

Advice to ManagersGROUP MAKING DECISIONS (cont’d)

II. Set Objectives/CriteriaII. Set Objectives/Criteria

Alternatives by Criteria (1-5)Alternatives by Criteria (1-5)

33

.1.1

55

.4.4 33

.3.3

44

.2.2

Merge with Merge with CompaqCompaq

55

.1.1

44

.4.4

44

.3.3

44

.2.2

Joint Venture Joint Venture with with SamsungSamsung

11

.2.2

33

.4.4 55

.3.3

33

.2.2 Design new Design new products products internallyinternally

Global Global ExpansionExpansion

(.1)(.1)

Market Market PenetrationPenetration

(.4)(.4)

Net Profit Net Profit ContributionContribution

(.3)(.3)

Revenue Revenue

GrowthGrowth

(.2)(.2)

III. Generate AlternativesIII. Generate Alternatives

Innovation and Creativity Innovation and Creativity

Brainstorming (4 rules)Brainstorming (4 rules)

Nominal Group Technique ( #6)Nominal Group Technique ( #6)

Dialectic InquiryDialectic Inquiry

Devil’s advocacyDevil’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 innovative, but can’t you show us how you do it?”

Brainstorming rules: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 TechniqueThe Nominal Group TechniqueA 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 AlternativesIV. Analyze Alternatives

Compare alternatives using established Compare alternatives using established criteriacriteria

Cost-benefit analysisCost-benefit analysis

CreativityCreativity

I. Creative ProcessI. Creative Process

1. Establish opportunity or problem 1. Establish opportunity or problem recognition recognition

2. Immersion – collect/recall information 2. Immersion – collect/recall information and generate hypothesesand generate hypotheses

3. Incubation – subconscious manipulation3. Incubation – subconscious manipulation

4. Insight – AHA (often during unrelated 4. Insight – AHA (often during unrelated activity)activity)

5. Verification – test it out 5. Verification – test it out

II. Enhancing CreativityII. Enhancing Creativity

A. Create a culture of creativity (#1 & #3)A. Create a culture of creativity (#1 & #3)

B. Reduce mental locks (#2)B. Reduce mental locks (#2)

C. Puzzles (Prussia’s, #4 & # 5)C. Puzzles (Prussia’s, #4 & # 5)

26 = L of the A

52 C in a D

18 H on a GC

90 D in a RA

4 Q in a G

24 H in a D

Instructions:> Or = to 4 ltrs

Each must contain center ltr

At least one 9 ltr wrd

Use each ltr only wunc

EE LL RR

II CC

MM PP AA

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