Topic 5

Decision Making
Dr Lynn Gribble
l.gribble@unsw.edu.au

How many decisions

Food choices?
Boolean choices
Conscious or unconscious,
We cannot separate decision making from
information
is choice a decision too

Information sources
Email
talking with colleagues
printed materials
observations

Sources you might use relevance is

important too
Reference material
books & ebooks
academic journals
magazines
newspapers
statistics: how many people do they talk to, some research information
internet sites:
specialist information

Managers make decisions daily

They make choices between alternative courses of action
All decisions rely upon information
Therefore quality information is critical
Programmed decisions
Non programmed decisions

What type of environment are we in?

Certain - alternatives are considered and the outcomes are known
Risk - Alternatives and outcomes
Uncertain
Have to learn to function on probabilities

Lets explore rational decision making

first
1. Find and define the problem
2. Generate and evaluate alternative solutions
3. Select preferred solution (conduct an ethical check here)
4. Implement the solution
5. Evaluate results

But
While rational decisions are good,
complexity can be confusing

How do you generate possible

solutions?
Benefits?
Costs
Timeliness
Acceptability
Ethical soundness

But how do you choose the

alternative?

Classical :
Behavioural
Judgemental ( Heuristic approach)
Based on the cover. eg: when buying a carrot, you choose the carrot which
has orange color, red shinny apple

Today is exploring how you make decisions ( and how

organisations do this also)
There are many types of decision making
Directive ( you decide) - problem is rarely does one peson have all the
information required
Conceptual- long terms results, brainstorms ideas and may lack data to
support
analytical- direct observations data and facts but is time consuming
behavioral - uses heuristics

What are Heuristics?

Practical
Not perfect
Could be trial and error
Stereotyping is a form of heuristic

Decision making biases increase when

- Uncertainty
- Complexity
- Strength of cognitive bias
- Individual attributes
- past experiences
- Context in which the behavior occurs
- Social norms
- Time (delay - benefits now - costs later)

Analysing and unpacking decisions

- Perceptual filters are:
1 A process by which individuals give meaning (reality) to their environment
by organising and interpreting their sensory impressions
- Factors influencing perception:
1. Perceiver's personal characteristics (interests, biases, and expectation)
2. Target characteristics (distinctiveness, contrast and similarity)
3. Situation (context) factor such as place, time, location, draw attention or
distract from the target

A"ribu'on theory
Covered this in week 2 in rela2on to people but what about
decisions?
How the actions of individuals are perceived by others depends on what
meaning (causation) we attribute to a given behavior.
- internally caused behaviour: under the individuals control
- externally caused behaviour: due to outside factors
This is fundamental attribution error
We do this because of self-serving bias
- Protect self-esteem

Optimism and over confidence

Relates to accuracy of estimating and forecasting
Strongest when there is high uncertainty and low feedback
Exposure to greater risk or missed opportunities.
Confirming evidences
Seek information that will support our existing instinct or point of view
Effects both collection or evidence and interpretation of evidence

Other perceptual filters that we use

on people as well as things
Halo effect
Assumed similarity
Stereo typing
Selectivity
Anchoring and adjustment
Availability
Representativeness
Familiarity

Escalation of commitment
When should we stop?
When our investment of time and emotion keeps us involved even when
there is evidence to stop

Good decision making: pull out emotion feeling (without emotion to make
decision)

Unintended consequences
All actions have outcomes that we may not first see
Limiting what cars can drive on what days
Cull of cobras
Reduction of price of Johnny Walker Red in Japan
Smokers outside buildings and the lack of disposal

To finish up
Critical analysis?
Be aware, about satisficing
Unintended consequences