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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
Top 10 Reasons To Launch Your Company Today
1.You can't get in as much trouble (because you won't have as much money to spend) 2. There's much less noise (i.e. competition) 3. Expectations are lower 4. It's easier to recruit 5. It's easier to retain people 6. Rents are cheaper 7. Professional services are more available 8. There's lots of used equipment available 9. Everyone is available for meetings 10. You can build a stronger company
- 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
re
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
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