LO 8-1 Identify the primary types of decisions managers make to solve problems.

The ability to make decisions and solve problems is a key aspect of organizational behavior. Programmed decisions are automatic responses to routine and recurring situations. Non-programmed decisions address new or nonroutine problems for which there are no proven answers.

LO 8-2 Apply a rational model of decision making to solve problems and make decisions.

The first step in the five-step decision-making model is to define the problem in clear and concise terms. Second, we identify and weigh decision criteria. Next, we generate multiple alterna­tives to solve the defined problem. The fourth step is to rate the alternatives on the basis of defined decision criteria. Finally, we choose, implement, and evaluate the decision.

LO 8-3 Identify factors that influence the way we make decisions in the real world.

Bounded rationality is the idea that we are restricted by a variety of constraints when making decisions. This is in contrast with complete rationality, which assumes that we take into account every single criterion or possible alternative to make a decision. Satisficing decisions aim for acceptable results rather than for the best or optimal solutions. Intuition is an unconscious pro­cess of making decisions based on imagination and possibilities.

Heuristics are shortcuts or “rules of thumb” that allow us to make judgments and decisions quickly and efficiently. Availability heu­ristics allow us to base judgments on examples and events that immediately spring to mind. The anchoring and adjustment heuris­tic is a process of basing decisions on the first piece of informa­tion we are given without taking other probabilities into account. Representativeness heuristic bases a decision on our existing mental prototype and similar stereotypes.

Confirmation bias is the tendency to seek out information that fuels our preexisting views and to discount information that conflicts with our worldview. Ease-of-recall bias is the propen­sity to over-rely on information recollected from memory when making a decision. Hindsight bias is the tendency to overesti­mate the ability to predict an outcome of an event. Projection bias is the inclination to believe that other people think, feel, and act the same way we do. Escalation of commitment is the increased commitment to a decision despite negative informa­tion. Sunk cost bias is the decision to continue an investment is based on past investments of time, effort, and/or money. Framing error is the tendency to highlight certain aspects of a situation depending on whether they are positive or negative to solve a problem while ignoring other aspects. Lack of par­ticipation error is the inclination to exclude certain people from the decision making process. Randomness error is the tendency for people to believe they can predict the outcome of chance events based on false information or superstition.

LO 8-4 Explain a basis for resolving ethical dilemmas in organizations.

We define ethics as moral principles that manage our behavior. Most individuals and companies frequently face large and small ethical dilemmas, which are conflicts between two or more mor­ally unpleasant alternatives. The key to being an ethical person or organization is to consistently choose to do the right thing.

LO 8-5 Contrast various approaches to ethical decision making.

The utilitarian approach focuses on taking action that results in the greater good for the majority of people. The rights approach bases decisions on moral principles that least infringe on the entitlements of others. The justice approach encourages making decisions on the basis of the fairness.