Foundations of Decision Making Objectives: Describe the decision-making process Analyze the rational decision-making model Explain the limits of rationality.

Foundations of Decision Making

Objectives:

Describe the decision-making process

Analyze the rational decision-making model

Explain the limits of rationality

Discuss the bounded-rational decision

maker

What is decision making process?

Identificationof a problem

Identification of decision criteria

Allocation of Weights to criteria

Selection of an alternative

Analysis ofalternatives

Development of alternatives

ImplementationOf alternative

Evaluation of decisioneffectiveness

What is the problem?

A discrepancy between an existing and desired state of affairs Something that you are not satisfied

with Something that you feel is not right Something that prevents you from

achieving your goal(s) Implies an opportunity for further

improvement

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- Tony Kontzer

Rationality – depends on the

nature of problems

Well-Structured

Le

vel i

n O

rga

niz

atio

n

ProgrammedDecisions

ProgrammedDecisions

TopPoorly Structured

Ty

pe

of

Pro

ble

m

Lower

NonprogrammedDecisions

NonprogrammedDecisions

ProblemProblemClarityClarityProblemProblemClarityClarity

Well-definedWell-definedGoalGoal

Well-definedWell-definedGoalGoal

KnownKnownOptionsOptionsKnownKnownOptionsOptions

objectiveobjectiveEvaluationEvaluation

objectiveobjectiveEvaluationEvaluation

NoNoConstraintsConstraints

NoNoConstraintsConstraints

MaximumMaximumPayoffPayoff

MaximumMaximumPayoffPayoff

AssumptionsAssumptionsof Rationalof RationalDecisionDecisionMakingMaking

AssumptionsAssumptionsof Rationalof RationalDecisionDecisionMakingMaking

A Model of Bounded Rationality

AscertainAscertainthe Need the Need

for a Decisionfor a Decision

SimplifySimplifythe Problemthe Problem

SetSet““Satisficing”Satisficing”

CriteriaCriteria

Identify aIdentify aLimited Set Limited Set

of Alternativesof Alternatives

CompareCompareAlternativesAlternatives

Against CriteriaAgainst Criteria

ExpandExpandSearch forSearch for

AlternativesAlternatives

Select theSelect theFirst “GoodFirst “Good

Enough” ChoiceEnough” Choice

A “Satisficing”A “Satisficing”AlternativeAlternative

ExistsExists

Yes

No

How does the bounded rationality affect the management?

Define clear policy, procedures,and rules Provide two-way multiple communication channels Realize the effects of organizational culture on individual behavior

Two judgment shortcuts

Availability heuristic

Representative heuristic

GM is rushing to build the factory with round-the-clock construction. The reason for GM’s hurry is that it believes it must establish beachheads now – even if it loses money for a while – to cash in on future Chinese market growth.

Ms. Keller is concerned because GM’s factory in Thailand, is scheduled to open in early 1999 and now has steel girders in place but no roof. “They should just stop it,” Ms. Keller said. “This isn’t going to be a 12-month problem in Thailand.”

AnalyticAnalytic ConceptualConceptual

BehavioralBehavioralDirectiveDirective

Rational IntuitiveWay of Thinking

High

Low

To

lera

nce

fo

r A

mb

igu

ity

Decision-Making Styles

Group Decision Making

More information

More alternatives

Increased acceptance

Legitimacy

Time-consuming

Majority domination

Pressures to conform

Unclear responsibility

Advantages Disadvantages

Strengths ofStrengths ofIndividualsIndividuals

Strengths ofStrengths ofGroupsGroups

Consistent ValuesConsistent Values

Clear AccountabilityClear Accountability

SpeedSpeed

Individual Versus GroupIndividual Versus GroupDecision MakingDecision Making

Increased AcceptanceIncreased Acceptance

Higher Quality DecisionsHigher Quality Decisions

Input and DiversityInput and Diversity

Group DecisionMaking

Brainstorming

Nominal GroupTechnique

ElectronicMeetings

NationalNationalCulture andCulture and

Decision MakingDecision Making

DegreeDegreeof Riskof Risk

DecisionDecisionStyleStyle

Summary of the first case summary

91 submissions Average: 6.42

Total score

4

5

6

7

8

1 10 19 28 37 46 55 64 73 82

Student

Scor

e Series1

Winners

Winner for the Overall Quality Heather Morrow

Winners for the Best Format Shaen Ann Stesco

Joe Costa

Introduction

1

1.5

2

2.5

31 12 23 34 45 56 67 78 89

Student

Scor

e

Introduction

Problem Analysis

0.5

1

1.5

2

2.5

3

1 13 25 37 49 61 73 85 97Student

Sco

re

Problem Analysis

Criteria

0

0.5

1

1.5

2

2.5

31 11 21 31 41 51 61 71 81 91

Student

Scor

e

Criteria

Alternatives

1

1.5

2

2.5

31 12 23 34 45 56 67 78 89

Student

Scor

e

Alternatives

Action Plan

1

1.5

2

2.5

31 12 23 34 45 56 67 78 89

Student

Sco

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Action Plan

Persuasivness

1

1.5

2

2.5

31 13 25 37 49 61 73 85 97

Student

Scor

e

Persuasivness

Consistency

1

1.5

2

2.5

31 12 23 34 45 56 67 78 89

Student

Scor

e

Consistency

Readibility

0

0.5

1

1.5

2

2.5

31 11 21 31 41 51 61 71 81 91

Student

Sco

re

Readibility

Grammar/Spelling

0

0.5

1

1.5

21 13 25 37 49 61 73 85 97

Student

Scor

e Grammar/Spelling

Conciseness

0.5

1

1.5

21 12 23 34 45 56 67 78 89

Student

Sco

re

Conciseness

Overall Quality/Originality

1

1.5

2

2.5

3

1 13 25 37 49 61 73 85 97Student

Scor

e OverallQuality/Originality

Common problems in the Introduction

Problem is not clearly stated.

For example,With the many problems plaguing thecurrent health care system such as highcosts, the current method of compensation,little patient involvement in their owntreatment, and an emphasis being placed oncurative measures as opposed topreventative ones, a new integrated health caresystem has attempted to form. This integratedhealth system should include a capitation system

ofremuneration and education of preventativemeasures rather than curative ones to both theprimary-care provider and the patient.

Common problems in the Introduction

no clear problem and recommendatione.g.,Current problems of the Canadian Health caresystem include emergency overcrowding,doctor shortages, and increased waiting time.Due to the aging population, fundingconstraints, and family physicians having heavyworkloads, we need to shift toward a newparadigm. The new paradigm needs to be onethat gives people the opportunity to lead a rich,healthy life. Rather than just treating illness,the health care system should be maintainingand promoting wellness.

Common problems in the Introduction

listing all alternatives.For example,… There was do nothing option and

a consumer awareness model. Upon further evaluation the consumer model was deemed to have the best fit… The model included …

Common problems in the Introduction

Too much background informationUsing 80-90 words to explain the issue

that the case summary is focusing;Using 40 words introducing the MSH

background, 30 words explaining why the time frame is chosen.

Among 170 words, 15 words addressing the problem, and 25 words stating suggestion and time frame.

Common problems in the Introduction

No suggestione.g.,The Ontario Health Care System in Canada hasfinancial concerns. … The bottom line is thatthe current health care system must bereorganized to relieve the financial burden thatit is carrying without sacrificing its quality ofcare, illness prevention and patient

satisfaction.

Problems in the Problem Analysis

Discuss the need to solve the problem rather than analyze causes of the problem.

e.g.,The problem is deciding on an appropriate

method of physician remuneration and compensation that is consistent with the goals of the proposed HIS. The need to review the present method is caused by many factors…

Problems in the Problem Analysis

Don’t forget this part.

Too brief.The problem is that current

Canadian health system is too costly.

Common problems in the Criteria

Criteria not clearly statede.g.,We want solutions that will be effective now and

into the future. We also want to look to the long term to see which option will help decrease health care expenditures. Patients must feel as though their needs are being met and that they are receiving quality health care. Finally, we want to change the way physicians are practicing medicine so they include health promotion and prevention activities in their day to day routine.

Common problems in the Criteria

List criteria without any explanationse.g.,Enhancement of patient focus and

decision making must be addressed. Also the program must focus on not only a curative but also a holistic approach emphasizing health promotions and preventions.

Common problems in the Criteria

not explain criteria but discuss how to meet the criteria

e.g.,The process must be more cost efficient. An

appropriate funding structure for physicians must reduce overall costs to the hospital. This can be accomplished by introducing competition between physicians for the right to treat a customer. This can also be accomplished through …

Common problems in the Criteria

Need at least 3 alternatives

Problems in the Alternatives

Not analyzing disadvantages and advantages Analyzing each alternative but not based on the criteria presented

Problems in the Action Plan

Focus on elaborating the benefits of the choice too much.

I recommend IHS would coordinate…, this system would also reduce … Furthermore, a modified IHS is appealing to all stakeholders because…

Problems in the Action Plan

Not clear enoughThe first step would be to get rid of the fee

for services and use the funding based on the capitation model from the case study. The second would be to bring the files together on a computer system which would be accessible to the primary health team member to help the flow of information to be streamlined.

Problems in the Action Plan

No time line provided

Key factors to get a high score in the case summary

Be clear and be really focused Be concise Don’t forget to explain Be consistent Focus on only one same problem

throughout the case summary Analyze criteria against each of criteria Provide action plan according to your

recommendation

Be persuasive Keep a clear format