Hidden Traps In Decision Making

Hidden Traps In Decision Making Q1. Referring to the hidden traps in decision making, briefly describe one decision you (or someone you know) made that may have been influenced negatively by one of the traps (please stipulate which bias you are referring to). [>60 words]Approximately five years ago, my mom fell prey to the status-quo trap. She made a decision not to pursue other investment opportunities for her 403B funds after her job turned the responsibility of managing these funds over to the employees. With limited investment knowledge, my mom used this as a convenient reason to do nothing thus, leaving her 403B funds invested the same way her employer had always done. This was a big mistake because the company had her entire funds invested in stocks and during that time the stock market went belly up and so did her investment. It was a bad decision for my mom because she did not force herself to develop some investment skills. She took what she thought was an easy and safe option by going with the status-quo or simply going with the flow because it was comfortable and she thought less risky than doing it herself. My moms way of thinking was typical for victims of the status-quo trap.Q2. Many decision makers fall into the trap of seeking confirmatory evidence. What does this statement mean, and what other types of information should managers also consider to avoid this bias? [>60 words]Decision makers fall into the trap of seeking confirmatory evidence when they approach decision making with a closed mind by intentionally ignoring information that does not confirm their perceptions or hypotheses regardless of whether the information is true. These decision makers have a tendency to test ideas in a one-sided way, focusing on one possibility, their way or idea, thus ignoring alternatives. They tend to seek information to confirm rather than challenge or falsify their hypothesis, thus falling prey to selective collection of evidence. To avoid the confirmatory evidence trap, decision makers should seek advice from others whose opinions they respect and as stated in the article, The Hidden Traps in Decision Making, avoid surrounding themselves with yes-men. Managers can also avoid the confirmatory trap by building counterarguments against their own decisions by selecting and ranking possibly several alternatives in the order of strongest to least strong reason to do something else. People tend to gather and recall information from memory and interpret it in a bias way. For example, if a manager has an employee in his department that is labeled as a troublemaker, the manager will take notice of any negative actions surrounding the employee, with less attention to other employees committing the same negative infractions. A tendency to do this over time unjustifiably strengthens the managers belief that the employee is a troublemaker, which is also suggests that people are bias towards confirming their existing beliefs.Q3. What is a prescriptive model of decision making? H ow does this contrast with a descriptive model (empirical accounts) of decision making? Name and briefly explain a prescriptive decision making model you have learnt from another class in your degree studies. [>50 words] [See lecture notes and do some internet sleuthing (cite any references. PS. Wikipedia has an incorrect defn. so leave it alone)]A prescriptive model of decision making is an analytical approach to decision making following an accepted standard model that produces a correct solution based on the proper data input. In essence, it implies what people should and can do based on a solution derived from a normative decision making theory that produces an optimum output. Like the word prescription in a medical sense, the prescriptive model is the best recommended cure for the problem based on extensive research. Descriptive models, unlike prescriptive models, are theories of choice related to the mental state of the decision maker influenced by misconceptions, biases and o ther tricks of the mind. Therefore, the descriptive model is more prone than the prescriptive model to being afflicted by the hidden decision making traps referred to in the article.One current decision making model that I am currently learning how to do in my quantitative analysis class is linear programming which consist of determining a way to achieve the best outcome ranging from maximum to lowest profit for a given outcome. In order to do this I Input my values and limitations into a pre done excel formula spreadsheet and it computes the best possible outcome by using an excel computer known as solver.Q4. What is meant by the term bounded rationality? [>40 words] [See lecture notes and do some internet sleuthing]I see bounded rationality as the best satisfactory rational choice made by a decision maker based on his ability and also influenced by his time and resource constraints. However, the decision maker is aware that his decision may not be the optimum solution but it is go od enough at that point in time for his situation. For example: when taking a test, I, the decision maker, choose and write down what I perceive as the correct answers to the test questions gathered from the available resources I had on hand to use in preparing for the test within an allotted time frame.   Q5. Provide examples of three structured decisions and three unstructured decisions that you, as a person, have had to make. Briefly explain why each example is structured/unstructured. [>75 words] [See lecture notes and do some internet sleuthing (cite any references)] Structured decisions, as stated in the Decision Support Encyclopedia on line, are decisions in which all three decision components (the data, process, and evaluation) are determined since these type decisions are made on a regular basis in business environments. These structured decision support systems may use a checklist or form to ensure that all necessary data are collected and that the decision making process is not skewed by the absence of data. Unlike structured decision, unstructured decision makers do not follow a systematic routine to arrive at an answer; they use their expertise or experience to reach a conclusion.The following are examples of structured decision making because standard formulas were in place for analyzing collected data to reach a precise output:(1) The ROI (return on investment) of a piece of equipment in a manufacturing plant. I was assigned to a task force during one of my summer jobs to help collect recorded revenue output generated from the use of a piece of equipment in production and input the data into a spreadsheet that used a standard accepted formula to determine the revenue collected over a specific period to determine if the equipment output was justifying its cost. This is an example of a structured decision that is made on a regular basis in business environments to justify equipment costs.(2) During a summer employment in a production facility I was responsible for testing production samples on a routine basis in a quality control testing lab with the responsibility of notifying the production manager if his production crew was generating a quality product. This is a structured decision because the production samples were routinely taken and tested in a laboratory with standard test procedures and the results were compared to a standard set of product specifications to determine if a quality product is being produced. (3) In my family business my responsibility for generating employees pay checks is done using struct ured decisions because I use standard accounting software that uses recorded hours and set employee pay scales to generate pay checks.The following are examples of unstructured decisions because I did not follow a set routine to accomplish the desired end results. I had to use my ability and available resources to set up a plan for accomplishing the desired outcome:(1) Assigned research paper. Last semester I had to do a research paper on an assigned topic following no given step by step instructions for how to research and format the paper. I had to use my knowledge gathered through my academic career to generate the research paper. (2) High school science fair project. Using my science expertise and knowledge I designed experiments necessary for testing a hypothesis and displaying the results.(3) Scoring the most points in a video game against my roommate. This was accomplished using unstructured decision making because I had to rely on my video game playing experience and experti se to score points in the game.   Q6 Click here to display a list of HBR articles related to management decision making. Choose any two of these articles and write an article summary of each. Click here for guidelines for writing article summaries. [about 200-250 words for each summary] The Judgment DeficitByChristopher Simmons The article The Judgment Deficit by Amar Bhide appeared in the September 2010 issue of Harvard Business Review. In this article, Bihide insists that the replacement of human judgment with computer models was instrumental in the recent near-collapse of the global economy. He further insists that the human judgment model is no better than the computer model if it is allowed to escalate out of control with no forms of control stops such as the right blend of centralized and decentralized controls. Behide uses financial examples such as the recent housing crisis and technology examples consisting of the sophisticated programming of IBMs Deep Blue computer to Microsofts Windows technology and their influences on the economy to show the pros and cons of each model in both a centralized and a decentralized setting. The outcomes in these examples show the importance of balancing authority and autonomy in decision making. According to Bhide, problems began to arise in the economy with the conversion from the old fashioned way (book keeping, accurate committees, and autocrats) to the new fashion way of using statistical models and algorithms in decision making. By doing this, some of the human filtering processes used in the human judgment model were omitted thus making it rather easy to make bad decisions. This kind of bad decision making continued to spiral out of control over the past months creating our present day financial crisis. The article does not say that use of statistical models and algorithms are the sole cause of the financial crisis and should not be used, instead it states that we must learn to harness and control these models and not rely solely on them. In the article The Judgment Deficit Bhide explains that the right blend of the computer models and the human authority models are necessary to keep our economy in balance. Make Better DecisionsByChristopher Simmons The article Make Better Decisions by Thomas H. Davenport appeared in the November 2010 issue of Harvard Business Review. In this article, Davenport insists that recent large number of well publicized poor decisions made in both the public and private sectors have resulted because of the lack of focus on improving decision making techniques. He asserts that there are just as many opportunities to improve decision making as there are to improve any other process. He appears to condone the need for more businesses to incorporate structured decision making techniques. Davenport states that a number of useful insights for improving the decision making process have been around for a long time but have remained unnoticed by many organizations. Recently, few businesses have actually paid attention to recent popular business books that are addressing a large number of decision making alternatives and have actually adopted some of these alternatives with good results. However, the need is increasing to recognize and incorporate the recent ly publicized decision making techniques into business operations. Davenport suggests that the framework for improving decisions can focus on examining the accessible components of decision making such as which decisions need to be made, what information is supplied, and the key roles in the process rather than focusing directly on the manager. He states that smart organizations that incorporate a framework for improving decisions can accomplish this in four steps consisting of identification of the important decisions that require immediate attention, identification of the key factors that go into each important decision, design the steps to incorporate the decision making process, and finally, enlist experts to work with company executives in improving the process. Davenport identifies two organizations that have successfully incorporated decision making techniques and the outcomes of their success. He states that analytics and decision automation are among the most powerful tools for improving decision making however he warns managers not to incorporate analytical models into their operation that they do not understand. He also states that it is important to keep track of and monitor the models to determine if they are working and always have a human backup in place just in case a model malfunctions. In the article Make Better Decisions Davenport stress that organizations encouragement for their manager to employ better decision making techniques does not guarantee that they will make better decisions but it can result in the likelihood that they probably will. (No attachments) Comments: Mon Aug 30 11:05:26 EDT 2010 Section Instructor Adrian Gardiner Chris Excellent work. Exceeds expectations Way to go. woo woo Sun Aug 29 23:35:55 EDT 2010 Student Christopher Simmons The HTML video u referred us to method did not work for me when i clicked enable HTML it would not let me paste anything in the box. Also on q 6 it will not indent the lines when clearly did it when i typed it up for the summary