In the article The Hidden Traps in Decision Making. John Hammond, Ralph Keeney and Howard Raiffa (2006) summarized the inherent difficulty in decision making very well by stating that "...in making decisions, you may be at the mercy of your mind's strange workings." they also list nine psychological traps that may affect a way that a decision maker makes business decision. 1. The anchoring trap makes people give inappropriate weigh to the first information we receive. In business, for example, although it seems the decision that a manager predict how much product need to be produced by taking the former sales reports as a reference is reasonable, the old sales numbers become anchors because it may let a manager put too much attention on past event but not give enough weigh to other factors. Under this situation, it can lead to a poor forecast. Also the anchoring trap is related to the often observed primacy effect, wherein disproportionate consideration is given to early information and initial impressions. 2. The status-quo trap means people may have biases on the situation we feel comfortable with so that we will not choose other alternatives even they are better. In order to make decisions rationally and objectively, a decision maker always have to keep in mind that the decision will be acted under the status quo and never consider status quo as the only alternative. Also the status quo trap, not surprisingly, is a bias towards the current order. In business, the status quo is often the easiest and seemingly less risky path. 3. The sunk-cost trap is another serious bias. People always believe that successfully past decision even though it does not work anymore at the present. In order to put the suck cost away, a decision maker can list en other people's viewpoints and those people must to be those who did not experience the earlier decisions. Systems Thinking 3
4. The confirming-evidence trap makes people find out the information to support an existing predilection, rather than to conflict it. On the other hand, people will try to discount the opposing information. In order to avoid the confirming-evidence trap, a decision maker can set up a clincher, let other people argue it, and listen people's advice. Also the confirming evidence trap leads us to seek out evidence that supports our perspective and interpret new information consistent with our biases. 5. The framing trap happens at the beginning of the decision process. When it occurs, the decision goes wrong because a decision maker has already misstated the problem. Also the framing trap can lead to different answers to essentially identical questions, depending on how the questions are positioned. 6. The Estimating and Forecasting Traps have three minor traps, a. The overconfidence trap makes people overestimate the accuracy of the forecasts. b. The prudence trap causes people to be overcautious when people make decision under uncertain or risky situation. c. The recall ability trap leads people to give incorrect weigh to recent, dramatic events. Also the estimating and forecasting traps sometimes manifest in overconfidence in projections, sometimes in overly conservative estimates and other times in overemphasis on the ability to recall inputs to the projections. Alas, all traps play tricks on our decision-making abilities, often leading us unwittingly down a destructive decision path. The article rightly emphasizes the facts that a good decision not only relies on clearly defining the alternatives, collecting the correct information, and so on during the decision-making process, but also relate to the benefits and costs which are weighed accurately. Furthermore, the background, the experience of a decision maker will be one of the factors Systems Thinking 4
which affect the decision making. Except the factors of individuals, the economic circumstances will influence the decision and its action too. Introduction to the group scenario The group scenario is one in which members of two opposing arguments accept supporting information and dismiss conflicting information. In a group persons go into a regression to defend themselves against the conflicts provoked or revealed by their participation in the group. There is a formation of a group mentality, which is a groups will. This is a system where there is denial, avoidance, and anonymous input for that the individual members deny. At one level the group gives importance to work that the group has taken up, in addition there is the need to undertake creative work, and the third is the work-group methods to remain in contact with reality (Books Llc 2010),. Introduction to Systems Thinking Systems thinking is related to learning, development, and management that are based on the assumption that the component parts of the system will act differently when isolated from the system environment/other parts. This means the development of a holistic approach related to seeing the whole rather than disjointed parts. The value of systems thinking is that it is a way of understanding reality that stresses on the relationships among the systems parts rather than the parts themselves. The importance of systems thinking arises because it gives a more accurate picture of reality so that it can achieve results one wants. It also emphasizes that systems must be arranged in a particular way to carry out its purpose optimally (Books Llc 2010). Problem recognition and definition The problem definition is an important function. The reason is that it helps identify the question to be considered, or solved. It also focuses the attention of the group on the situation. It Systems Thinking 5
is a misgiving, or an objection. The problem recognition is the recognition of the gap between the present state and the desired state. The recognition of the problem begins from ascertaining the objectives of the decision maker. The problem recognition is the identification problem. In the context of a group the manner in which the problem is posed can influence how the group or the individuals think of it. It is helpful to view the problem from different perspectives and it is necessary to view the problem on ones own before consulting others. Often the problem lies in ones own wounded self-esteem. Root Cause Analysis The root cause analysis is a method that is used to perform a system-based review of critical incidents. This included the identification of root and contributory factors, identification of risk reduction, and development of action plans along with measurement strategies. This is a process of finding the real cause of the problem and dealing with it. Usually, those situations that are recurring with greatest frequency and consume the greatest amount of resources to rectify should be applied root cause analysis. Once the root cause is identified it needs to be found out what is a cost to remove the root cause. The fundamental premise behind root cause analysis is that problems are best solved by addresses or eliminating root causes. The objective of the root cause analysis is that problems are best solved by attacking the root causes rather than the external symptoms (Lincoln. J, 2010). Defining the problem and its scope The definition of the hiatus between the present state and the desired state, or a deviation from a norm, standard, or status quo is the problem definition. There are several issues related to defining the problem. The original problem statement may be misleading. Further, there may appear to be not easy solution in sight. Further, the solutions often become problems. Most Systems Thinking 6
importantly, a problem has many factors. Most importantly, problems have characteristics like there is an inherent doubt, uncertainty, difficulty, or a question for solution. The scope defines the area in which the problem has been defined. The area in which the problem has an impact it is the context in which the problem is associated. The scope sets the boundaries of the problem. In practice if a problem has to be addressed it is important to clearly describe the scope of the problem (Lincoln. J. 2010). The role of research and evidence The role of research is that of examination, observation, and investigation. Different perspectives are used for find the truth. The method of investigation is to choose the areas that interest a person and then following up on such investigations. Research refers to strict inquiry to seek facts, provide support to or disprove theories, develop applications, or to pursue truth. It is a process of re-examination. While carrying out research the application of the scientific method means the application of the scientific methods. The result is that the researcher provides scientific information and theories. In social sciences, researchers use multiple methodologies and use both quantitative and qualitative methods. Practitioners from different disciplines use different methods to gain a degree of autonomy. Research also extends to studies that are carried out by businesses and other companies that seek ways of communicating with customers so as to develop, price, and distribute a product effectively. Evidence in research is usually of two types, the first is related to the research that has been collected by the researcher. These mean interviews, experiments, surveys, or observation. On the other hand evidence can be from second hand research or evidence collected from different texts that have been supplied and compiled by other like books and websites (Proctor. T, 2010). Systems Thinking 7
What goes wrong in decision-making? There are several things that can go wrong in decision making. The first is anchoring. Anchoring means that the mind gives disproportionate weight to the first information it receives. In this contexts initial impression, estimates, or thoughts anchor subsequent thoughts and judgments. Another factor that misleads decision-making is that decision makers display a strong bias towards those alternatives that perpetuate the status quo. This is rooted in the decision-makers need to protect its ego. Another reason why decision making goes wrong is because of the sunk-cost trap. These are old investments of time and money that are now irrecoverable. In companies this often means that failed projects should be continued. The next reason that makes decision making go wrong is the Confirming-Evidence trap. In particular this means that we decide what to do before we decide why we want to do it. Too much importance is given to information that supports our stand and little importance is given to information that is not in accordance to our stand. Finally, the framing trap is an important reason for incorrect decision-making (Hammond. J, Keeney. R, & Raiiffa,H, 2006),. Focusing on solutions While focusing on solution one must focus on the right path to a solution. Understanding the problems enables one to see a solution. The approach is to look for a path to the solution and to verify the solution reached. Usually, a solution can be found if the unknowns are analyzed and understood. In research a solutions plan is developed (Proctor. T, 2010). Chapter 7 of: Making Strategy Work: Leading Effective Execution and Change explicitly talks about the critical importance of managing change. Hrebiniak believes that (1) managing strategic change is terribly complex and difficult, and (2) "the emphasis in strategy-execution program or processes has not focused enough on certain aspects of change management that Systems Thinking 8
directly affect execution results.
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References
Books Llc (2010), Systems Analysis: Systems Design, Nessi, Function Model, Problem Frames Approach, Idef1x, Failure Mode and Effects Analysis
Hammond. J, Keeney. R, & Raiiffa,H, (2006), Harvard Business Review Special Topic on Decision-making: The Hidden Traps of Decision-making, retrieved on January 30, 2011 from: http://faculty.insead.edu/popescu/UDJcore/XtraMaterial/Harvard%20Business%20Revie w%20Online%20%20The%20Hidden%20Traps%20in%20Decision%20Making.htm
Hrebiniak, L. G. (2005). Making Strategy Work. New Jersey: Wharton School Publishing. Lincoln. J, (2010), Root Cause Analysis: Getting to the Bottom of the Problem, John Wiley & Sons, Incorporated,
Proctor. T, (2010), Creative Problem Solving for Managers: Developing Skills for Decision Making and Innovation, E3, Taylor & Francis,