General Management
a.y. 2016/17
Strategic/Managerial Decision Making
Self-Reinforcing Processes and Resistance to
Change
Gianpaolo Abatecola, PhD.
Abatecola G. (2014b), “Untangling Self-Reinforcing Processes in Managerial Decision Making”, Management Decision, 52(2), 934-949.
DECISION MAKING
Decision making is the selection of a course
of action from among alternatives.
DECISION - MAKING PROCESS
• Setting goals
• Identifying alternatives
• Evaluating alternatives in terms of the goal
sought
• Choosing an alternative, that is, making a
decision
MARGINAL ANALYSIS
Marginal analysis is to compare the
additional revenue and the additional cost
arising from increasing output.
COST-EFFECTIVENESS ANALYSIS
Cost-effectiveness analysis seeks the
best ratio of benefit and cost.
QUANTITATIVE AND
QUALITATIVE FACTORS
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Quantitative factors are factors that can be
measured in numerical terms.
Qualitative, or intangible, factors are those
that are difficult to measure numerically.
PROGRAMMED AND
NONPROGRAMMED DECISIONS
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Programmed decisions are used for
structured or routine work.
Nonprogrammed decisions are used for
unstructured, novel, and ill-defined situations
of a nonrecurring nature.
THE NATURE OF PROBLEMS AND
DECISION- MAKING IN THE
ORGANIZATION
The Hidden Traps in Decision Making (Hammond et al., 1998)
… among the most relevant traps:
The anchoring trap
Data or comments coming from reliable sources may often influence the decision
making process and be misleading mainly in turbulent environments.
The status-quo trap
Decision makers sometimes prefer to stay anchored to the current status in order to
escape from the risk and responsibility of changing.
The confirming-evidence trap
Decision makers sometimes prefer to take into account evidence confirming their
instinct, rather than evidence that does not, because they have already taken their
decision at an unconscious level.
The framing trap
The way in which two solutions are presented may influence a specific choice. If
presented in different ways, equal solutions may lead to different choices.
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Herbert Simon’s bounded rationality
“The capacity of human mind for formulating and solving complex
problems is very small compared with the size of the problems whose
solution is required for objectively rational behavior in the real world – or
even for a reasonable approximation to such objective rationality”
(Administrative Behaviour, 1947).
Key concepts:
• Prescriptive, descriptive (and normative) models
• We are satisficers, not maximizers
• We discount the future
• Bounded rationality  The Science of the Artificial (1969)
• Problem Problem Solving
• We use heuristics
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Heuristics
Newell and Simon (1972) seminally conceived heuristics as those
cognitive shortcuts (i.e. rules of thumb) that our mind is lead to adopt for
supporting its decision-making process, especially in situations of
information asymmetry and time scarcity.
The “availability” heuristic (Tversky and Kahneman, 1973) refers to those
circumstances in which a decision maker, ex ante, evaluates the
probabilities that an event will occur mainly on the basis of how much
his/her brain has recorded in terms of recent happenings of that event.
Or, the “representativeness” heuristic (Nisbett and Ross, 1980) refers to
those circumstances in which a decision maker instinctively judges
someone or something that he or she encounters for the first time mainly on
the basis of the similarities with particular stereotypes that his or her mind
has already developed before.
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Imprinting and Self-Reinforcing Processes
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CREATIVITY
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Creativity refers to the ability and power to
develop new ideas.
Contacts
Gianpaolo Abatecola, PhD.
Associate Professor of Management
University of Rome “Tor Vergata”
Department of Management and Law
Mail to: [email protected]
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Twitter:
Web site:
LinkedIn:
Research Gate:
Academia:
@GAbatecola
http://economia.uniroma2.it/faculty/2/abatecola-gianpaolo
http://it.linkedin.com/pub/gianpaolo-abatecola/42/5b3/549/
http://www.researchgate.net/profile/Gianpaolo_Abatecola
http://uniroma2.academia.edu/GianpaoloAbatecola
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