DECISION MAKING

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DECISION MAKING

COMMON DECISION MAKING ERRORS AND BIASES

HINDSIGHT

Reduces ability to learn from the past.

Tendency to believe falsely, after the outcome is known that prediction is correct

RISK AVERSION

Tendency to prefer a sure thing over a risky outcome.

RANDOMNESS

Create meaning in random events

Tendency to believe the prediction on outcomes of an event.

ESCALATION OF COMMITMENT

Staying with a decision even when there is clear evidence it is wrong.

AVAILABILITY

The easier something is to recall, the more important it seems.

Tendency to base judgements on information that is readily available.

CONFIRMATION

Have good information and strongly believe in own opinions

Seek information that confirms past choices, and reduce information that contradicts them.

ANCHORING

Tendency to grip on initial information and fail to adequately adjust for subsequent information

OVERCONFINDENCE

Too optimistic.

Given factual questions and asked to judge the probability that the answers are correct.

DECISION IN MANAGEMENT FUNCTION

CONTROLLING

What type of management information system should the organization have?

When is a performance deviation significant?

How should those activities be controlled?

What activities in organization need to be controlled?

LEADING

When is the right time to stimulate conflict?

How will a specific change affect worker productivity?

What is the most effective leadership style in a given situation?

How do I handle employees who appear to be low in motivation?

ORGANIZING

When should the organization implement a different structure?

How should jobs be designed?

How much centralization should there be in the organization?

How many employees should I have report directly to me ?

PLANNING

How difficult should individual goals be?

What should the organization's short-term objective be?

What strategies will best achieve those objective

What are the organization's long-term objective