Making Decisions
LIS 9005
Importance?
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Making decisions is one of the most
important responsibilities of any manager
It is often complex and difficult
It involves risk
But – there are some approaches to
problem-solving and decision making that
we can ‘learn’ to increase our changes of
making the right decisions
What is Decision-making?
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The process by which managers respond to
opportunities and threats by analyzing the
options and making determinations or
decisions about specific organizational
goals and courses of action
Good decisions result in the selection of
appropriate goals and courses of action
that increase organizational performance
Bad decisions decrease performance
(Jones et al)
What outcomes or consequences
are we measuring against?
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What types of ‘performance’?
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Meeting the goals of our library/information centre
Beyond just financial outcomes, we also consider
social aspects (environmental as well, but less
directly pertinent to us) – what of value do we
contribute to society?
How can we maximize that contribution within the
budgets or resources available to us?
Non profits – hard to measure
our contributions, or benefits
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It may be hard to quantify the benefits we provide
However, we can still judge alternatives in our
decision-making process in light of how much each
contributes on a relative basis to the
accomplishment of our goals (and best meeting the
needs of our user groups)
Sometimes we can use ‘surrogate’ measures that
can be counted or quantified to have some measure
of the efficiency (ratio of outputs to inputs) and
effectiveness (degree to which the course of action
supports our overall goals)
‘Routine’ Decisions
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Routine, or ‘programmed’ decisions follow a nearly automatic process,
rules or guidelines for dealing with an expected situation
The ‘heuristic’ has been developed over time and often allows your
employees to take action without you
These only work in the absence of much ambiguity or required
judgment and when there are few anticipated circumstances under
which it should not be applied.
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it is really important to specify WHEN a routine guideline is NOT to be
applied – i.e. what exception conditions may exist?
Examples of routine decisions:
– Traffic light – changes to red – what do you do?
– If a publisher order is outstanding for more than six months, cancel it
– Order more supplies when the inventory level is at a certain point and
order X quantity (e.g. printer paper, toner cartridges)
– when more than five patrons in line at the circulation desk, call a shelver
in from the stacks to work the desk
Non-routine decisions
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These types of decisions address unusual or
unexpected situations, opportunities or threats
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First, gather information about the situation
Identify alternatives and analyze them
Use judgment and intuition to decide between the
alternatives (both are useful….)
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Intuition: using past experience and ‘gut’ feelings about the
alternatives
Judgment: evaluating the information rigorously and accurately
as a basis for the decision
Because of the risk of error, this is the type of
decision-making that is the most important to us
Steps in Decision-making
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Decision-making is a circular process:
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Recognize the need for a decision, gather information
Generate alternatives (gather more information)
Evaluate alternatives
Choose the best alternative for the situation
Implement it
Evaluate it and learn from feedback -leads to another
decision
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Worked? Do nothing further
Didn’t work? Try another alternative
Worked but could be better? Refine or tweak it
So – what can go wrong?
Information gathering….
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Not enough?
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Too much?
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We don’t gather enough information to properly recognize or ‘frame’ the
problem
We don’t gather enough information to generate the best alternatives
We don’t gather enough information to properly analyze and choose
between them
Most of the time, only incomplete information is available to us
High cost to gathering information & we may have time constraints
There is so much information available we cannot sift through to select the
most relevant to this decision
Or the information we can get is ambiguous – we can interpret it in
various ways that may be quite contradictory
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If we wait for complete information or more certainty, the opportunity is
usually gone
Other potential problems…
Alternatives?
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We don’t define alternatives clearly
We can only consider so many alternatives and so much
information….so in many cases, we must limit our
analysis to a few
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Called ‘bounded rationality’
We may ‘satisfice” – look only for a satisfactory
alternative to meet the need, rather than the best
alternative
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We may not even generate good alternatives to choose from, or
not enough different alternatives
And more difficulties…
Estimations and predicting outcomes
 We don’t measure the costs & benefits of each
alternative completely or accurately
 We may be able to make decisions estimating
RISK (we know the possible outcomes and can
assign probabilities to each)
 But we cannot when there is UNCERTAINTY (we
can’t estimate the probability of an alternative, or
we can’t estimate what the outcomes will be)
In the mind of the maker….
The way we think or process
 The worst errors can come from the mind of the
manager – biases, the application of heuristics
improperly, improper perceptions, irrationalities in
our thought processes etc.
 “heuristics” – unconscious routines that we use to
cope with the complexities inherent in most
decisions
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We may apply these in inappropriate circumstances
without realizing that the situation differs…or we may
apply them incorrectly
Anchoring….
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The mind gives more weight to the first information
received
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“first impressions” are lasting impressions?
The first piece of information we get influences our perception and
judgment of subsequent pieces of information
So initial impressions, estimates or data ‘anchor’ our subsequent
thoughts and judgments
The anchors may be a simple as comments, news articles, or as
personal as stereotypes, and may be ‘historical’, such as past
practices, events or trends
Anchors can establish the terms on which a decision will be made,
so are often used in negotiations to set the ‘frame’ or starting point
– helps to keep things towards what the introducer wants
How to avoid Anchoring?
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View the problem from many different perspectives
Think about the problem and come up with your
own ideas and analysis before discussing it with
others
Be open minded and seek a variety of opinions to
get the widest frame of reference and ‘fresh’
viewpoints
Be careful to avoid anchoring advisors and
employees etc. – ask open-ended questions and
don’t express your own opinions first
Be particularly wary of anchors in negotiations –
develop your own starting proposal before you begin
Statis Quo
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This form of bias leads us to strongly favour
alternatives that perpetuate the statis quo
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We tend to reject radically different products, services,
ways of operating
Why? Protects our ego from criticism or regret if we
make bad choices – lower psychological risk by doing
nothing
Also – sins of ‘commission’ are usually punished more
severely in our society that those of ‘omission’
Sometimes we don’t want to rock the boat, or we are
afraid of the risk involved in making the wrong
decision…. So we do nothing until the opportunity passes
We may be afraid of change itself….
How to avoid Statis Quo bias?
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Ask yourself if you would choose the status quo if
it weren’t currently the statis quo – would you
choose it from amongst other alternatives?
Don’t exaggerate the effort or cost involved in
making a change
Continually evaluate the statis quo – its ‘value’ will
change over time
Make sure you generate good alternatives for
comparison…and don’t ‘default’ to the statis quo
because you’re having trouble making a decision
Don’t stop with ‘if it ain’t broke, don’t fix it’ –
challenge things – yes – but could it work better?
Sunk Costs
Our tendency to make choices now to justify
our past choices – we don’t want to admit
mistakes
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We forget that the costs incurred in the past are no
longer relevant – ‘water under the bridge’ and we
should only be considering FUTURE costs that differ
between alternatives
We often throw good money after bad, trying to make
our chosen alternative work….when we should
discontinue it and try another solution
Accept that sometimes good decisions lead to bad
outcomes – take your lumps and move on!
Avoid Sunk cost bias
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Make a conscious effort to set aside sunk costs, both
economic and psychological
Solicit input from people who were not involved with the
first decision and therefore have no commitment or
baggage to overcome
Be reflective – ask yourself why admitting to an earlier
mistake is bothering you
Remember - even good decisions may have bad outcomes
Look at other’s analyses carefully for sunk-cost biases
Ensure your organizational culture tolerates ‘mistakes’ and
rewards owning up and rectifying them
Reward the quality of decision making rather than just the
outcomes of decisions
Confirming Evidence
Leads us to “filter” information, seeking out
information that supports our existing point of
view and avoid information that doesn’t
 We may avoid collecting information from certain
sources, or we may interpret what is presented in a
biased way, giving more weight to supporting data and
discounting contradicting views
 We have two fundamental tendencies that cause this:
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We subconsciously decide what we want to do before we figure
out why we want to do it
We are more engaged by things we like than by things we don’t
like, so are more drawn to information that supports our
subconscious leanings
Avoiding Confirming Evidence Bias
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Your subconscious choice may well be the best
decision – but make sure!
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Be self-critical – are you examining all the evidence with
equal rigor?
Appoint a devil’s advocate, or be one yourself – develop
the best arguments against your preferred alternative
Be aware of your motives and tendencies and make a
conscious effort to look for information that disproves or
does not support your ideas
Don’t ask others leading questions that ‘beg’ for
confirming evidence, be neutral and open-ended in
soliciting opinions
Make a conscious effort to avoid ‘Yes-men’
Framing
If we ‘frame’ the question or problem improperly to
begin with, we can cut out many important
alternatives that should be considered
 People tend to adopt the ‘frame’ of the problem as
presented, rather than restating the problem themselves
 Two major frames that can distort our decision-making:
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Gains versus losses – people are risk averse if a problem is framed
in terms of gains, but will take on risk if the issue is posed in
terms of avoiding losses
Different Reference points – the numbers used and the ‘reference
point’ can affect our choices. E.g. Presenting a 50/50 chance with
a zero reference point (i.e. $500 gain OR $500 loss possibilities)
versus presenting with a higher reference point of say $1000, with
outcomes both positive, but with the exact same economic
outcome (i.e. Outcome of $1500 or $500). We will tend to reject
the first but accept the second.
Avoiding ‘framing’
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Never automatically accept the first frame –
always try to reframe the question in other ways
Look for distortions caused by frames
Pose problems as neutrally as possible
Use multiple reference points and restate a
problem using various reference points
Consciously think about framing in your decisionmaking – how might your decision change with a
different frame?
examine how others frame issues and challenge
them with other frames for that situation
Problems in Estimating and
Forecasting
It’s hard to estimate or forecast uncertain events and
we seldom get good feedback about how accurate
we were in the past, so we don’t always get better
at these estimations
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We may be overconfident about our accuracy in forecasting
We may be overly cautious and adjust high-risk decisions,
deliberately erring on the conservative side or planning for the
worst-case scenario even if very unlikely
We may be overly influenced by the events from the past that were
the most dramatic for us, especially where we lost or were
wrong….or when something catastrophic happened
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We may see catastrophic events as more likely than they are
We may see our risk of failure in estimating or predicting as more likely
than it is
Avoiding
Forecasting/Estimating biases
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Be disciplined and methodical about making estimates
Estimate the extremes of a range of possibilities before
you select the outcome you think most likely (avoids
anchoring by the estimate)
Use sensitivity analysis and try to assign numeric
probabilities to outcomes
Clearly communicate the amount of ‘softness’ in your
estimates and the assumptions they are based on
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Insist that those providing input to you do the same
Try to use actual statistics of past events where you can
Try to be ‘balanced’ in your recall of your own track
record in making this type of estimate or prediction – try
not to be overconfident or overly conservative
Decision making and groups…
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Pros of involving others?
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Cons?
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Diversity of viewpoints leads to better alternatives being
considered
Less chance of errors based on personal biases (assuming
they’re different)
Draws on the competencies, experience and
intuition of several people in making decisions
Takes much more time
Group biases such as Group think
Group decision making should be used when the problem
is broad, ambiguous and far-reaching in its impact – i.e.
major strategic decisions, and when buy-in is important
for implementation
Group decision-making bias
Groupthink
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When groups value agreement and harmony in the group
more than making the best decision
These groups will ignore contradictory information,
reinforce each other in decisions and convince each other
that they’re right…and will often ostracize or punish
‘dissenters’ – discourage members from raising issues that
challenge the majority opinion
There are some very famous cases of bad decision making
with high costs that occurred due to operation of ‘group
think’: governmental agencies seem particularly prone to it
How to avoid Groupthink?
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Devil’s Advocate
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Dialectical Inquiry
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Appoint people to critically analyze the strengths and
weaknesses of the preferred alternative, or to promote
less favoured alternatives
Assign two groups of managers to a problem, who
present their alternatives, analyses and conclusions to a
panel of top managers
They then critique each other’s positions
Promote diversity among decision makers
Foster a culture that encourages divergent thinking
and challenging (respectfully) in decision-making
Making Decisions
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Is more Art than Science
Managers must use both their intuition and their
judgment to make good decisions in an environment
of uncertainty and ambiguity
They must even make decisions about the amount
of time and effort that is warranted by a certain
decision or problem… the amount of their time and
resources that should be devoted
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there is an ‘opportunity’ cost to any decision – the foregone
alternatives you didn’t pursue)
There is also an opportunity cost to everything you
spend time on – you can’t spend it on something else