Foundations of Decision Making

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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

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What is decision making process?
Identification of decision criteria
Allocation of Weights to criteria
Identification of a problem
Analysis of alternatives
Selection of an alternative
Development of alternatives
Implementation Of alternative
Evaluation of decision effectiveness
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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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• 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

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Rationality depends on the nature of problems
Top
Poorly Structured
Nonprogrammed Decisions

Type of Problem
Level in Organization
Programmed Decisions
Well-Structured
Lower
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Problem Clarity
Well-defined Goal
Assumptions of Rational Decision Making
No Constraints
Known Options
Maximum Payoff
objective Evaluation
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A Model of Bounded Rationality
Ascertain the Need for a Decision
Set Satisficing Criteria
Identify a Limited Set of Alternatives
Compare Alternatives Against Criteria
Select the First Good Enough Choice
Yes
Simplify the Problem
Expand Search for Alternatives
A Satisficing Alternative Exists
No
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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

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Two judgment shortcuts

• Availability heuristic
• Representative heuristic

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• GM is rushing to build the factory with
  round-the-clock construction. The reason for GMs
  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.

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• Ms. Keller is concerned because GMs 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
  isnt going to be a 12-month problem in
  Thailand.

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Decision-Making Styles
High
Analytic
Conceptual
Tolerance for Ambiguity
Behavioral
Directive
Low
Way of Thinking
Rational
Intuitive
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Group Decision Making
Advantages
Disadvantages

• More information
• More alternatives
• Increased acceptance
• Legitimacy

• Time-consuming
• Majority domination
• Pressures to conform
• Unclear responsibility

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Group Decision Making
Brainstorming
Nominal Group Technique
Electronic Meetings
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National Culture and Decision Making
Decision Style
Degree of Risk
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Summary of the first case summary

• 91 submissions
• Average 6.42

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Winners

• Winner for the Overall Quality
• Heather Morrow
• Winners for the Best Format
• Shaen Ann Stesco
• Joe Costa

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Common problems in the Introduction

• Problem is not clearly stated.

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For example,

• With the many problems plaguing the
• current health care system such as high
• costs, the current method of compensation,
• little patient involvement in their own
• treatment, and an emphasis being placed on
• curative measures as opposed to
• preventative ones, a new integrated health care
• system has attempted to form. This integrated
• health system should include a capitation system
  of
• remuneration and education of preventative
• measures rather than curative ones to both the
• primary-care provider and the patient.

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Common problems in the Introduction

• no clear problem and recommendation
• e.g.,
• Current problems of the Canadian Health care
• system include emergency overcrowding,
• doctor shortages, and increased waiting time.
• Due to the aging population, funding
• constraints, and family physicians having heavy
• workloads, we need to shift toward a new
• paradigm. The new paradigm needs to be one
• that gives people the opportunity to lead a rich,
• healthy life. Rather than just treating illness,
• the health care system should be maintaining
• and promoting wellness.

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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

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Common problems in the Introduction

• Too much background information
• Using 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.

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Common problems in the Introduction

• No suggestion
• e.g.,
• The Ontario Health Care System in Canada has
• financial concerns. The bottom line is that
• the current health care system must be
• reorganized to relieve the financial burden that
• it is carrying without sacrificing its quality of
• care, illness prevention and patient satisfaction.

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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

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Problems in the Problem Analysis

• Dont forget this part.
• Too brief.
• The problem is that current Canadian health
  system is too costly.

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Common problems in the Criteria

• Criteria not clearly stated
• e.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.

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Common problems in the Criteria

• List criteria without any explanations
• e.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.

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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

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Common problems in the Criteria

• Need at least 3 alternatives

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Problems in the Alternatives

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

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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

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Problems in the Action Plan

• Not clear enough
• The 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.

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Problems in the Action Plan

• No time line provided

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Key factors to get a high score in the case
summary

• Be clear and be really focused
• Be concise
• Dont 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

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• Be persuasive
• Keep a clear format