1. The Analytical Mindset: Decision Making OS608 November 8, 2006 Fisher

2. 2 Agenda Collect leadership case analysis Examine the process/concept of analysis and decision making Discuss factors that prevent us from making good decisions “The art of management is the art of making meaningful generalizations out of inadequate facts.” (Teele, as quoted in Garvin and Roberto, p. 7)

3. 3 What is analysis? From Gosling and Mintzberg Loosening up complex phenomena by breaking them into component parts Getting into the essential meanings of structures and systems Approaches to analysis? In small groups, summarize the analysis approach from another module. How can you identify the best analysis approach to use?

4. 4 Decision making Often the outcome of analysis – deciding on a recommendation or course of action What are the factors that impair our ability to make the most effective decisions?

5. 5 What is an “effective” decision? Ford decides (based on extensive cost- benefit analysis) that it would be cheaper to pay restitution to victims than recall and fix Pintos In response to an antitrust suit, AT&T decides to keep its long distance service (most profitable) and sell the local service companies. Source: Fortune 75 Key Decisions: 20 That Made History. June 15, 2005

6. 6 Rationality in DM Traditional economic perspectives assume rationality – that people act in ways that will maximize their self interest Kahneman and Tversky – people quite often are not rational Imperfect perception Not good at making probability judgments Conditioned to value fairness

7. 7 Decision making according to Garvin & Roberto What is G&R’s position on rationality? Event vs. process Inquiry and advocacy Do you see a difference between the two? Is true inquiry really possible? Conflict, consideration, closure

8. 8 Intuition and decision making What is the role of intuition in decision making? Interaction of rational and intuitive decision making. Decision making styles through the career Use of intuition increases over time (expertise, seniority) “But then they reach senior management … and we discover that their judgment or intuition is not what it should be.” (Sadler-Smith & Shefy, p.79)

9. 9 So, if we haven’t gotten here already… What can we do to make more effective decisions?

10. 10 For Monday Read Banaji, Bazerman and Chugh (2003) Foote, Matson, Weiss and Wenger (2002) Lab #2 will be held on Thursday, Nov 9 (tomorrow)