127) In a short essay, discuss the differences among a procedure, a rule, and a policy. Include specific examples of each to support your answer.
Answer: a. A procedure is a series of interrelated sequential steps that a manager can use for responding to a structured problem. The only real difficulty is in identifying the problem. Once the problem is clear, so is the procedure. For
instance, a purchasing manager receives a request from the sales department for 15 PalmPilots for use by the company's customer service representatives. The purchasing manager knows that there is a definite procedure for handling this decision. The decision-making process in this case is merely executing a simple series of sequential steps.
b. A rule is an explicit statement that tells a manager what he or she can or cannot do. Managers frequently use rules when they confront a structured problem
because they are simple to follow and ensure consistency. For example, rules about lateness and absenteeism permit supervisors to make disciplinary decisions rapidly and with a relatively high degree of fairness.
c. A policy provides guidelines to channel a manager's thinking in a specific direction. In contrast to a rule, a policy establishes parameters for the decision maker rather than specifically stating what should or should not be done. Policies typically contain an ambiguous term that leaves interpretation up to the decision maker. For instance, each of the following is a policy statement: \always comes first and should always be satisfied,\whenever possible,\standards.\
Diff: 2 Page Ref: 128
Topic: Types of Decisions and Decision-Making Conditions
128) In a short essay, discuss six of the twelve common decision errors and biases that managers make.
Answer: a. When decision makers tend to think they know more than they do or hold unrealistically positive views of themselves and their performance, they're exhibiting the overconfidence bias.
b. The immediate gratification bias describes decision makers who tend to want immediate rewards and to avoid immediate costs. For these individuals, decision choices that provide quick payoffs are more appealing than those in the future. c. The anchoring effect describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information. First impressions, ideas, prices, and estimates carry unwarranted weight relative to information received later.
d. When decision makers selectively organize and interpret events based on their biased perceptions, they're using the selective perception bias. This influences the information they pay attention to, the problems they identify, and the alternatives they develop.
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e. Decision makers who seek out information that reaffirms their past choices and discount information that contradicts past judgments exhibit the confirmation bias. These people tend to accept at face value information that confirms their
preconceived views and are critical and skeptical of information that challenges these views.
f. The framing bias is when decision makers select and highlight certain aspects of a situation while excluding others. By drawing attention to specific aspects of a situation and highlighting them, while at the same time downplaying or omitting other aspects, they distort what they see and create incorrect reference points.
g. The availability bias is when decisions makers tend to remember events that are the most recent and vivid in their memory. The result is that it distorts their ability to recall events in an objective manner and results in distorted judgments and probability estimates.
h. When decision makers assess the likelihood of an event based on how closely it resembles other events or sets of events, that's the representation bias. Managers exhibiting this bias draw analogies and see identical situations where they don't exist.
i. The randomness bias describes when decision makers try to create meaning out of random events. They do this because most decision makers have difficulty dealing with chance even though random events happen to everyone and there's nothing that can be done to predict them.
j. The sunk costs error is when decision makers forget that current choices can't correct the past. They incorrectly fixate on past expenditures of time, money, or effort in assessing choices rather than on future consequences. Instead of ignoring sunk costs, they can't forget them.
k. Decision makers who are quick to take credit for their successes and to blame failure on outside factors are exhibiting the self-serving bias.
l. Finally, the hindsight bias is the tendency for decision makers to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known. Diff: 3 Page Ref: 133 Topic: Decision-Making Styles
129) In a short essay, identify and discuss the five habits shared by highly reliable organizations (HROs).
Answer: Karl Weick, an organizational psychologist identifies five shared habits of highly reliable organizations. First, they are not tricked by their success. HROs are preoccupied with their failures. They are alert to the smallest deviations and react early and quickly to anything that does not fit with their expectations.
Another characteristic of HROs is that they defer to the experts on the front line. Frontline workers?those who interact day in and day out with customers, products, suppliers, an so forth?have firsthand knowledge of what can and cannot be done,
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what will and will not work. Get their input. Let them make decisions. Next, HROs let unexpected circumstances provide the solution. The fourth habit of HROs is that they embrace complexity. Because business is complex, these organizations aim for deeper understanding of the situation. They ask \why as they probe more deeply into the causes of the problem and possible solutions. Finally, HROs anticipate, but alto anticipate their limits. These
organizations do try to anticipate as much as possible, but they recognize that they can't anticipate everything. As Weick says, they don't \by acting. By actually doing things, you'll find out what works and what doesn't. Diff: 3 Page Ref: 136
Topic: Types of Decisions and Decision-Making Conditions
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