7.4 Key Takeaways, Knowledge Check and Key Terms
Key Takeaways
In this chapter, we learned that:
- Decision making is a critical component of our success in the workplace.
- Some decisions are obvious and can be made quickly, without investing much time and effort in the decision-making process. Others, however, require substantial consideration of the circumstances surrounding the decision, available alternatives, and potential outcomes.
- Fortunately, there are several methods that can be used when making non-programmed decisions.
- Even when specific models are followed, groups and individuals can often fall into potential decision-making pitfalls. If too little information is available, decisions might be made based on a feeling. On the other hand, if too much information is presented, people can suffer from analysis paralysis, in which no decision is reached because of the overwhelming number of alternatives.
Knowledge Check
Review your understanding of this chapter’s key concepts by taking the interactive quiz below.
Key Terms
Key terms in this chapter include:
- Decision-making
- Stakeholders
- Programmed decisions
- Heuristics
- Non-programmed decisions
- Strategic decisions
- Tactical decisions
- Operational decisions
- Reflective and reactive systems
- Emotional intelligence
- Empathy
- Rational decision making
- Analysis paralysis
- Bounded rationality model
- Intuitive decision-making model
- Creative decision-making model
- Creativity
- Problem identification
- Immersion
- Incubation
- Illumination
- Verification and application
- Fluency
- Flexibility
- Originality
- Brainstorming
- Wildstorming
- Thinking hats
- Overconfidence bias
- Hindsight bias
- Anchoring bias
- Framing bias
- Escalation of commitment
Decision-making is the action or process of thinking through possible options and selecting one. See 7.1 Understanding Decision-making
Stakeholders are all the individuals or groups that are affected by an organization (such as customers, employees, shareholders, etc.). See 7.1 Understanding Decision-making
Programmed decisions are those that are repeated over time and for which an existing set of rules can be developed to guide the process. These decisions might be simple, or they could be fairly complex, but the criteria that go into making the decision are all known or can at least be estimated with a reasonable degree of accuracy. See 7.1 Understanding Decision-making
In programmed decisions, heuristics are mental shortcuts to help reach a decision. For example, a retail store manager may not know how busy the store will be the week of a big sale, but might routinely increase staff by 30% every time there is a big sale (because this has been fairly effective in the past). See 7.1 Understanding Decision-making
Nonprogrammed decisions are novel, unstructured decisions that are generally based on criteria that are not well-defined. With nonprogrammed decisions, information is more likely to be ambiguous or incomplete, and the decision maker may need to exercise some thoughtful judgment and creative thinking to reach a good solution. See 7.1 Understanding Decision-making
Strategic decisions set the course of an organization. See 7.1 Understanding Decision-making
Tactical decisions are decisions about how things will get done. See 7.1 Understanding Decision-making
Operational decisions refer to decisions that employees make each day to make the organization run. See 7.1 Understanding Decision-making
The human brain processes information for decision-making using one of two routes: a reflective system and a reactive (or reflexive) system. The reflective system is logical, analytical, deliberate, and methodical, while the reactive system is quick, impulsive, and intuitive, relying on emotions or habits to provide cues for what to do next. See 7.1 Understanding Decision-making
Emotional intelligence looks at how people can understand each other more completely by developing an increased awareness of their own and others’ emotions. See 3.3 Emotions at Work
Empathy is the ability to put oneself in another’s shoes, whether that individual has achieved a major triumph or fallen short of personal goals. See 3.3 Emotions at Work
The rational decision-making model describes a series of steps that decision makers should consider if their goal is to maximize the quality of their outcomes. In other words, if you want to make sure that you make the best choice, going through the formal steps of the rational decision-making model may make sense. See 7.2 Decision-making Models
The availability of too much information can lead to analysis paralysis, in which more and more time is spent on gathering information and thinking about it, but no decisions actually get made. See 7.2 Decision-making Models
The bounded rationality model of decision making recognizes the limitations of our decision-making processes. According to this model, individuals knowingly limit their options to a manageable set and choose the first acceptable alternative without conducting an exhaustive search for alternatives. See 7.2 Decision-making Models
The intuitive decision-making model has emerged as an alternative to other decision making processes. This model refers to arriving at decisions without conscious reasoning. See 7.2 Decision-making Models
Creative decision making is a vital part of being an effective decision maker. With the flattening of organizations and intense competition among companies, individuals and organizations are driven to be creative in decisions ranging from cutting costs to generating new ways of doing business. See 7.2 Decision-making Models
Creativity is the generation of new, imaginative ideas. See 7.2 Decision-making Models
Problem identification is the step in which the need for problem solving becomes apparent. If you do not recognize that you have a problem, it is impossible to solve it. See 7.2 Decision-making Models
Immersion is the step in which the decision maker consciously thinks about the problem and gathers information. See 7.2 Decision-making Models
During incubation, the individual sets the problem aside and does not think about it for a while. At this time, the brain is actually working on the problem unconsciously. See 7.2 Decision-making Models
Illumination is the insight moment when the solution to the problem becomes apparent to the person, sometimes when it is least expected. See 7.2 Decision-making Models
The verification and application stage happens when the decision maker consciously verifies the feasibility of the solution and implements the decision. See 7.2 Decision-making Models
Fluency refers to the number of ideas a person is able to generate. See 7.2 Decision-making Models
Flexibility refers to how different the ideas are from one another. If you are able to generate several distinct solutions to a problem, your decision-making process is high on flexibility. See 7.2 Decision-making Models
Originality refers to how unique a person’s ideas are. See 7.2 Decision-making Models
Brainstorming is a group process of generating ideas that follow a set of guidelines, including no criticism of ideas during the brainstorming process, the idea that no suggestion is too crazy, and building on other ideas (piggybacking). See 7.2 Decision-making Models
A variation of brainstorming is wildstorming, in which the group focuses on ideas that are impossible and then imagines what would need to happen to make them possible. See 7.2 Decision-making Models
The Edward Debono's model of the Six Thinking Hats provides a different way of thinking about the way we make decisions. The six hats provide us with perspectives from six different perspectives. Similar to the rational decision making model, this model uses hats to represent the steps we need to follow in order to make good decisions. See 7.2 Decision-making Models
Overconfidence bias occurs when individuals overestimate their ability to predict future events. See 7.3 Bias in Decision-making
Hindsight bias is the opposite of overconfidence bias, as it occurs when looking backward in time and mistakes seem obvious after they have already occurred. In other words, after a surprising event occurred, many individuals are likely to think that they already knew the event was going to happen. This bias may occur because they are selectively reconstructing the events. See 7.3 Bias in Decision-making
Anchoring bias refers to the tendency for individuals to rely too heavily on a single piece of information. Job seekers often fall into this trap by focusing on a desired salary while ignoring other aspects of the job offer such as additional benefits, fit with the job, and working environment. See 7.3 Bias in Decision-making
Framing bias refers to the tendency of decision makers to be influenced by the way that a situation or problem is presented. For example, when making a purchase, customers find it easier to let go of a discount as opposed to accepting a surcharge, even though they both might cost the person the same amount of money. See 7.3 Bias in Decision-making
Escalation of commitment occurs when individuals continue on a failing course of action after information reveals it may be a poor path to follow. It is sometimes called the “sunken costs fallacy,” because continuation is often based on the idea that one has already invested in the course of action. See 7.3 Bias in Decision-making
