MANAGEMENT (5)

Decision Making

Ctlina RADU, MBA, PhD.

Bucharest University of Economic Studies

Proposed Quotes (1)

Group 917:
917: "Stay committed to your decisions,
but stay flexible in your approach
approach.." - Tony
Robbins
Group 918
918:: Whenever
Whenever you see a successful

business, someone once made a courageous

decision.. - Peter F. Drucker
decision

Proposed Quotes (2)

Group 919
919:: Truly successful decision
decision--making

Group 922
922:: On an important decision one

relies on a balance between deliberate and

instinctive thinking.
thinking. - Malcolm Gladwell

rarely has 100%

100% of the information needed for
a good decision,
decision no matter how much one
spends or how long one waits
waits.. And, if one waits
too long, he has a different problem and has to
start all over.
over. This is the terrible dilemma of the
hesitant decision maker.
maker. - Robert K. Greenleaf

The DecisionDecision-Making Process

Identification
of a problem

Identification
of decision
criteria

Evaluation
of decision
effectiveness

Implementation
of the
alternative

Allocation of
weights to
criteria

Development of
alternatives

Selection of
an alternative

Analysis of
alternatives

Bounded Rationality

Rational decision making = Choices are

consistent and value-maximizing within
specified constraints
Bounded rationality = Making decision that
are rational within the limits of a managers
ability to process information
Satisfice = Accepting solutions that are
good enough
Pay attention to emotional influences!

Common Errors Committed in

the DecisionDecision-Making Process (1)

Heuristics = Judgmental shortcuts or rules

of thumb used to simplify decision making;
Useful, but not reliable; they may lead to
errors and biases in processing and
evaluating information.

Common Errors Committed in

the DecisionDecision-Making Process (2)

Overconfidence bias = decision makers tend to

think they know more than they do;
Immediate gratification bias = decision makers
tend to want immediate rewards or to avoid
immediate costs;;
Anchoring effect = decision makers fixate on
initial information as a starting point and then
fail to adequately adjust to subsequent
information;

Common Errors Committed in

the DecisionDecision-Making Process (3)

Selective perception bias = decision makers

selectively organize and interpret events based
on their biased perceptions;
Confirmation bias = decision makers seek out
information that reaffirms their past choices
and discount information that contradicts past
judgments;
Framing bias = decision makers select and
highlight certain aspects of a situation while
excluding others;

Common Errors Committed in

the DecisionDecision-Making Process (4)

Availability bias = decision makers tend to

remember events that are the most recent and
vivid in their memory;
Representation bias = decision makers draw
analogies and see identical situation where
they dont exist;
Randomness bias = decision makers try to
create meaning out of random events
(because of the difficulty of dealing with
chance);

Common Errors Committed in

the DecisionDecision-Making Process (5)

Sunk costs error = decision makers forget that

current choices cant correct the past and
incorrectly fixate on past expenditure of time,
money or effort;
Self-serving bias = decision makers are quick
to take credit for their successes and to blame
f il
failure
on outside
t id factors;
f t
Hindsight bias = decision makers tend to
falsely believe that they would have accurately
predicted the outcome of an event once that
outcome is actually known.

Scope of Decision Making (1)

Individual decision making

Group decision making

Organizational decision making

Metaorganizational decision making

Scope of Decision Making (2)

Decisional Inputs
(Objectives,
information,
resources,
energy)
gy)

Metaorganization
Organization
Group

Interactional
Levels

Individual

Decisional
Outputs

Permeable
Boundaries

(Actions
transactions,
outcomes)

External Environment

Types of Problems
and Decisions

Structured problem = A straightforward, familiar

and easily defined problem
Unstructured problem = A problem that is new
or unusual for which information is ambiguous
or incomplete
Programmed decision = A repetitive decision
that can be handled using a routine approach
Nonprogrammed decision = A unique or
nonrecurrent decision that required a custommade solution

Situations for
Making Decisions

Certainty
C
t i t = A situation
it ti in
i which
hi h a decision
d i i
maker can make accurate decisions because
all oucomes are known
Risk = A situation in which a decision maker
is able to estimate the likelihood of certain
outcomes
t
Uncertainty = A situation in which a decision
maker has neither certainty nor reasonable
probability estimates available

Decision--Making Strategies
Decision
Knowledge
Regarding
the Outcome

Preference for the Outcome

Strong Preference

Weak Preference

High Level
of Knowledge

Computational
Decision-Making
Strategy

Compromise
Decision-Making
Strategy

Low Level
of Knowledge

Judgmental
Decision-Making
Strategy

Inspirational
Decision-Making
Strategy

*** QUOTES ABOUT OUR COURSE ***

Lets look again!

Proposed Quotes (1)

Group 917:
917: "Stay committed to your decisions,
but stay flexible in your approach
approach.." - Tony
Robbins
Group 918
918:: Whenever
Whenever you see a successful

business, someone once made a courageous

decision.. - Peter F. Drucker
decision

Proposed Quotes (2)

Group 919
919:: Truly successful decision
decision--making

Group 922
922:: On an important decision one

relies on a balance between deliberate and

instinctive thinking.
thinking. - Malcolm Gladwell

rarely has 100%

100% of the information needed for
a good decision,
decision no matter how much one
spends or how long one waits
waits.. And, if one waits
too long, he has a different problem and has to
start all over.
over. This is the terrible dilemma of the
hesitant decision maker.
maker. - Robert K. Greenleaf

THANK YOU.
and
and

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