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Decision-Making, Heuristics and Biases in Business

Think about a recent business decision you have made that was either a success or a failure. Your supervisor asked you to email him/her a self-evaluation of this decision as part of your yearly evaluation. You are to be as objective and open minded as possible. Analyze your decision using Bazerman's six steps as a guide: define the problem, identify the criteria, weigh the criteria, generate alternatives, rate each alternative on each criterion, compute the optimal decision. Make sure your email addresses the following issues:
Were there any discrepancies between the calculated "optimal" decision and your actual (or favored) decision? If so, what might account for the discrepancies?
What problems, if any, did you encounter when completing the steps? (For example, were you able to compute an optimal decision? If not, why not?)
Are there any weaknesses in the "fully rational" model of decision-making? If so, what are they?
Source:

Bazerman, M. H. (2006). Judgment in Managerial Decision Making (6th ed.). New York: Wiley.

Problem: Think up an important business decision. Your supervisor had asked that you expand on your self-evaluation by identifying at least two judgment issues that you had to address. Write a memo to your supervisor describing these issues. Explain how you addressed them and the degree to which your decision was based on expedience and/or reflection. Potential issues include: bias, or ethical issues related to the availability heuristic, bias related to the representative heuristic, bias related to anchoring and adjustment, avoiding uncertainty, framing effects, positive illusions, egocentrism, and regret avoidance.

Note: Just address the "potential issues.

Solution Preview

Please see response attached (also presented below). I hope this helps and take care.

RESPONSE:

1. Explain how you addressed them and the degree to which your decision was based on expedience and/or reflection. Potential issues include: bias, or ethical issues related to the availability heuristic, bias related to the representative heuristic, bias related to anchoring and adjustment, avoiding uncertainty, framing effects, positive illusions, egocentrism, and regret avoidance.

I choose the following two examples from the steering committees potential solutions to analyze in terms of these above-mentioned concepts, followed by one possible way to address these issues and judgments made by the steering committee group. I also attached an example, from which I drew which you might find as a useful resource:

a. Agri director disagrees that wages are not adequate - "after all we're using migrant workers" Also argued that JRT provides housing for workers, so that should count as compensation (Cultural and racial bias toward migrant workers: ethical issues of discrimination in the workplace potentially related to the availability heuristic; framing effects).
b. IT manager commented he's been fighting for budget to improve communications but has been denied funding (Bias towards IT importance - bias related to anchoring and adjustment)
Explain how you addressed them and the degree to which your decision was based on expedience and/or reflection:

This is one way you could address the two biased judgments of the steering committee (and your judgments of them) based on a reflective problem-solving model. You might have to tweak to fit you're your scenario for you final copy. Because biases are involved in the steering committee remarks, you could form a group and use the following problem-solving steps to explore the above biases through brainstorming other possibilities and solutions to the problems:

Problem Solving Tasks:

From this perspective, there are five key subtasks involved in problem solving:

1. Define the problem: Make a list of resources -- people, books, web sites, etc. -- that have some connection to and information about the problem you are trying to solve. Use these resources to clarify any unfamiliar terms or concepts ...

Solution Summary

This solution invents two important business decisions and evaluates them by identifying judgment issues (e.g. availability heuristic, biases, uncertainty, framing effects, illusions, egocentrism, and regret). It then looks at how to facilitate discussion of these issues in a company and checks that can be performed to avoid them next time. 1397 words total with references.

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