Making Biases in Management

A decision criterion defines what is relevant in a decision. (True; moderate; p. 158) 4. The fourth step of the decision-making process requires the decision maker to list viable alternatives that could resolve the problem. (True; easy; p. 159) 5. Once the alternatives have been identified, a decision maker must analyze each one. True; moderate; p. 159) 6. The step in the decision-making process that involves choosing a best alternative is termed implementation.

Studies of the events leading up to the Challenger space shuttle disaster point to an escalation of commitment by decision makers. (True; moderate; p. 163) 12. Managers regularly use their intuition in decision making. (True; easy; p. 164) 13. Rational analysis and intuitive decision making are complementary. (True; moderate; p. 164) 14. Programmed decisions tend to be repetitive and routine. (True; easy; p. 165) 15. Rules and policies are basically the same.

A policy is an explicit statement that tells a manager what he or she ought or ought not to do. False; moderate; p. 166) 17. The solution to nonprogrammed decision making relies on procedures, rules, and policies. (False; moderate; p. 166) 18. Most managerial decisions in the real world are fully nonprogrammed. (False; easy; p. 167) 19. The ideal situation for making decisions is low risk. (False; moderate; p. 167) 20. Risk is the condition in which the decision maker is able to estimate the likelihood of certain outcomes. (True; easy; p. 167) 21. Risk is a situation in which a decision maker has neither certainty nor reasonable probability estimates. (False; difficult; p. 168) 22.

People who have a low tolerance for ambiguity and are rational in their way of thinking are said to have a directive style. (True; moderate; p. 171) 23. Decision makers with an analytic style have a much lower tolerance for ambiguity than do directive types. (False; moderate; p. 171) 24. Individuals with a conceptual style tend to be very broad in their outlook and will look at many alternatives. (True; moderate; p. 171) 25. Behavioral-style decision makers work well with others. (True; easy; p. 171) 26. Most managers have characteristics of analytic decision makers. (False; moderate; p. 171) 27.

According to the boxed feature, “Managing Workforce Diversity,” diverse employees tend to make decisions faster than a homogeneous group of employees. (False; moderate; p. 172; AACSB: Diversity) The anchoring effect describes when decision makers fixate on initial information as a starting point and then, once set, they fail to adequately adjust for subsequent information.

Answer a. When decision makers tend to think they know more than they do or hold unrealistically positive views of themselves and their performance, they’re exhibiting the overconfidence bias. b. The immediate gratification bias describes decision makers who tend to want immediate rewards and to avoid immediate costs. For these individuals, decision choices that provide quick payoffs are more appealing than those in the future. c. The anchoring effect describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information.

First impressions, ideas, prices, and estimates carry unwarranted weight relative to information received later. d. When decision makers selectively organize and interpret events based on their biased perceptions, they’re using the selective perception bias. This influences the information they pay attention to, the problems they identify, and the alternatives they develop. e. Decision makers who seek out information that reaffirms their past choices and discount information that contradicts past judgments exhibit the confirmation bias.

These people tend to accept at face value information that confirms their preconceived views and are critical and skeptical of information that challenges these views. f. The framing bias is when decision makers select and highlight certain aspects of a situation while excluding others. By drawing attention to specific aspects of a situation and highlighting them, while at the same time downplaying or omitting other aspects, they distort what they see and create incorrect reference points. g. The availability bias is when decisions makers tend to remember events that are the most recent and vivid in their memory.

The result is that it distorts their ability to recall events in an objective manner and results in distorted judgments and probability estimates. h. When decision makers assess the likelihood of an event based on how closely it resembles other events or sets of events, that’s the representation bias. Managers exhibiting this bias draw analogies and see identical situations where they don’t exist. i. The randomness bias describes when decision makers try to create meaning out of random events.

They do this because most decision makers have difficulty dealing with chance even though random events happen to everyone and there’s nothing that can be done to predict them. j. The sunk costs error is when decision makers forget that current choices can’t correct the past. They incorrectly fixate on past expenditures of time, money, or effort in assessing choices rather than on future consequences. Instead of ignoring sunk costs, they can’t forget them. k. Decision makers who are quick to take credit for their successes and to blame failure on outside factors are exhibiting the self-serving bias. . Finally, the hindsight bias is the tendency for decision makers to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known.

They are alert to the smallest deviations and react early and quickly to anything that does not fit with their expectations. Another characteristic of HROs is that they defer to the experts on the front line. Frontline workers—those who interact day in and day out with customers, products, suppliers, an so forth—have firsthand knowledge of what can and cannot be done, what will and will not work. Get their input. Let them make decisions. Next, HROs let unexpected circumstances provide the solution. The fourth habit of HROs is that they embrace complexity.

Because business is complex, these organizations aim for deeper understanding of the situation. They ask “why” and keep asking why as they probe more deeply into the causes of the problem and possible solutions. Finally, HROs anticipate, but alto anticipate their limits. These organizations do try to anticipate as much as possible, but they recognize that they can’t anticipate everything.