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2. Describe a time you used satisficing when making a decision. Why did you just make a
decision that was good enough rather than searching for a better decision?
3. Describe a time you used intuition to make a decision. Describe the advantages and
disadvantages of having used intuition to make this decision.
Intuition is defined as making a choice without the use of conscious thought or logical
inference. An advantage of using intuition is that it leads to faster decision making, often
Section 7.1 Key Concepts:
Decision Making
● A decision is a choice made from among available alternatives.
● Decision making is the process of identifying and choosing alternative courses of action.
Interactive Classroom Material:
EXAMPLE: Crisis Leading to the Strategic-Management Process: Starbucks Reclaims Its
Soul
Shortly after CEO Howard Schultz stepped down from Starbucks in 2000, the company seemed
to lose a part of its soul, and the stock price nosedived. Schultz returned as CEO in 2008 and
Two Systems of Decision Making
● Psychologist Daniel Kahneman describes two kinds of thinking that he labels System 1
and System 2.
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o System 1 operates automatically and quickly; it is our fast, automatic, intuitive,
and largely unconscious mode.
o System 2 is our slow, deliberate, analytical, and consciously effortful mode of
reasoning.
The Curse of Knowledge
● Specialization improves efficiency but it also leads to tunnel vision and blind spots.
Rational Decision Making
● The rational model of decision making, also called the classical model, explains how
managers should make decisions.
● It assumes managers will make logical decisions that will be the optimum in furthering
the organization’s best interests.
● Four Stages of Rational Decision Making (Figure 7.1):
o Stage 1: Identify the Problem or Opportunity
▪ Problems are difficulties that inhibit the achievement of goals.
o Stage 2: Think Up Alternative Solutions
o Stage 3: Evaluate Alternatives and Select a Solution
▪ If an alternative isn’t ethical, you shouldn’t give it a second look.
o Stage 4: Implement and Evaluate the Solution Chosen.
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▪ For implementation to be successful, you need to plan carefully and be
sensitive to those affected.
Connect® Exercise
CLICK AND DRAG: Steps in Decision Making
Summary of Activity:
SELF-ASSESSMENT 7.1 CAREER READINESS
Assessing Your Problem-Solving Potential
This 12-question Self-Assessment evaluates students’ approaches to problem solving at work.
Limitations of the Rational Model
● The rational model is prescriptive, describing how managers ought to make decisions, not
how managers actually make decisions.
● The rational model makes three unrealistic assumptions:
Connect® Exercise
CLICK AND DRAG: Hindrances to Decision Making
Summary of Activity:
CAREER
READINESS
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Decision making can be a difficult process if managers are not well versed in recognizing and
addressing various hindrances they face when attempting to make rational decisions. In this
Click and Drag exercise, students will match provided descriptions with the correct hindrance to
decision making.
Nonrational Models of Decision Making
● Nonrational models of decision making explain how managers do make decisions.
● Bounded Rationality and the Satisficing Model
o Herbert Simon’s research found that managers could not act truly logically
because their rationality was bounded by so many restrictions.
● The Intuition Model
o Going with your gut, or intuition, is making a choice without the use of conscious
thought or logical interference.
Interactive Classroom Material:
EXAMPLE: The Power of Intuition
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Steve Jobs all credit some of their best decisions to intuitive decision making. This Example
links to the Practical Action “How to Improve Your Intuition.”
Click for follow-up activity.
Interactive Classroom Material:
PRACTICAL ACTION: How to Improve Your Intuition
This Practical Action links to the previous Example, The Power of Intuition. In the Example,
students learned about how famous entrepreneurs have used intuition. This Practical Action
SELF-ASSESSMENT 7.2 CAREER READINESS
Assessing Your Level of Intuition
This 8-question Self-Assessment helps to determine students’ levels of intuition at their current
Group Exercise #1: Trying to Solve an “Electric” Problem in Managerial Planning
There is a Group Exercise available at the end of this manual that allows students to apply what
they have learned about planning and problem-solving.
Exercise Objectives:
CAREER
READINESS
2. To arrive at a mutual and effective solution as a group, taking into consideration different
7.2 Making Ethical Decisions
POWERPOINT SLIDES:
#12 Making Ethical Decisions
#13 Road Map to Ethical Decision Making: A Decision Tree
#14 The Ethical Decision Tree
Section 7.2 discusses the dismal record of business ethics and presents a decision tree which can
help managers make ethical decisions. Key questions to answer with the ethics decision tree are:
Is the proposed action legal? Does the proposed action maximize shareholder value? Is the
proposed action ethical? Would it be ethical not to take the proposed action?
One way that you could begin your coverage of these topics is to have the students read the
Topics and Tips for Discussion:
1. Think of a time when you were not sure if a course of action you were considering was
ethical or not. How could you have applied the ethical decision tree in Figure 7.3 to help
you make a decision?
2. What are the limitations of using the ethical decision tree presented in the chapter?
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of McGraw-Hill Education.
regulatory ambiguity. It is also difficult to determine if an action would maximize
shareholder value in the long run versus just in the short run.
3. Discuss the extent to which ethics officers and values statements can help companies
avoid unethical actions by their employees.
Ethics officers and values statements provide a good foundation for a company to avoid
unethical actions by its employees, but in and of themselves, they likely do not provide
Section 7.2 Key Concepts:
The Dismal Record of Business Ethics
● Recent high-profile scandals have spurred interest in ethical decision making.
Road Map to Ethical Decision Making: A Decision Tree
● Businesses continually try to balance the pressure to maximize shareholder value while
acting ethically.
● When confronted with a decision, a manager should ask the following questions:
o Is the proposed action legal?
o If “yes,” does the proposed action maximize shareholder value?
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decision or action.
o If “yes,” is the proposed action ethical?
o If “no,” would it be ethical not to take the proposed action?
Group Exercise #2: Ethical Decision Making
Exercise Objectives:
7.3 Evidence-Based Decision Making & Analytics
POWERPOINT SLIDES:
#15 Evidence-Based Decision Making
#16 Seven Implementation Principles of Evidence-Based Management
Section 7.3 discusses implementing evidence-based decision making and the seven principles for
implementing evidence-based decision making. Analytics and Big Data are also discussed.
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of McGraw-Hill Education.
manager must decide if she should use an algorithm or her intuition to decide which candidate to
promote. For a supplemental activity, you could have the students critique the use of algorithms
for hiring decisions. You should have them make their recommendations as to whom Susan
should hire and defend their recommendations.
Topics and Tips for Discussion:
1. Discuss reasons why it might be difficult for managers to use evidence-based decision
making.
The book describes seven reasons why it is hard to use evidence-based decision making.
First, there is there’s too much evidence. As the number of sources of business-relevant
news continues to expand, it is not feasible for managers to process all of it in any
2. Describe industries or products that will undergo dramatic transformation as our ability to
capture and process data improves.
Big Data has the ability to change almost any industry. It is changing healthcare and
3. What concerns should we have about “Big Data?”
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Arguably the biggest concern about “Big Data” is the privacy implications it creates.
Companies gather a lot of information about people, often without them realizing the type
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● Analytics, or business analytics, is the term used for sophisticated forms of business data
analysis.
Interactive Classroom Material:
EXAMPLE: Analytics in Athletics: The Personal “Moneyball” Takeover of Sports
Many people have become aware of the use of analytics in pro-sports as a result of the film
The Uses of “Big Data”
● Big Data are stores of data so vast that conventional database management systems
cannot handle them.
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Interactive Classroom Material:
EXAMPLE: Data, Hacking, and Privacy: Who’s Stealing My Data?!
This Example discusses the data breach at Equifax in May of 2017 which Equifax did not report
Connect® Exercise
CLICK AND DRAG: Use of Big Data
Summary of Activity:
Connect® Exercise
VIDEO CASE: Predictive Advertising
Summary of Activity:
In this Video Case, students will first view a video on new forms of predictive advertising using
Big Data. They will then respond to four multiple-choice questions.
Follow-Up Activity:
7.4 Four General Decision-Making Styles
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#24 Which Style Do You Have?
Section 7.4 discusses the four general decision-making styles of directive, analytical, conceptual,
or behavioral. One’s decision-making style reflects how he or she perceives and responds to
information.
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prefers to use the conceptual approach, there is the possibility for conflict. When using
group decision making, you can reduce conflicts by knowing that others may place more
or less emphasis on having all the facts and more or less emphasis on involving others
than you would prefer to have. You may need to be upfront about how you would prefer
to make a decision and be flexible to the needs of others. An important first step is to be
self-aware of your preferred decision-making style.
Section 7.4 Key Concepts:
Decision-Making Styles
● A decision-making style reflects the combination of how an individual perceives and
responds to information.
● One model of decision-making styles bases it on two dimensions:
● Combining the two dimensions creates four styles of decision making (Figure 7.4).
o Directive
▪ People with this style have low tolerance for ambiguity and are oriented
toward task and technical concerns.
o Analytical
o Conceptual
o Behavioral
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of McGraw-Hill Education.
▪ People with this style work well with others, are supportive and receptive
to suggestions.
▪ Because they tend to be nonconfrontational, they may adopt a wishy-
washy approach to decision making.
● Which style do you have?
o Very few people have only one dominant decision-making style.
SELF-ASSESSMENT 7.3 CAREER READINESS
What Is Your Decision-Making Style?
Connect® Exercise
CLICK AND DRAG: Decision-Making Styles
Summary of Activity:
Group Exercise #3: Your Preferred Decision-Making Style
Exercise Objectives:
1. To assess your knowledge of decision making.
CAREER
READINESS
Click for follow-up activity.
7.5 Decision-Making Biases and the Use of Artificial
Intelligence
POWERPOINT SLIDES:
#26 How to Overcome Barriers to Decision Making
#27 Three Effective Reactions: Deciding to Decide
#28 Nine Common Decision-Making Biases
#29 Artificial Intelligence
Section 7.5 describes nine common decision-making biases of which managers should be aware.
The implications of the use of artificial intelligence are also described.
Topics and Tips for Discussion:
1. Think of the last large-dollar purchase that you made (i.e., new car, new cellphone, etc.)
and consider the extent to which you were influenced in the decision-making process by
the heuristics described in the chapter.
Even when making large-dollar purchases, we as decision makers rely on these decision-
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of McGraw-Hill Education.
framing bias would occur if your sales salesperson convinces you that a “previously-
owned car” is somehow better than a “used car.”
2. Assume you are interviewing job applicants for a managerial position. Provide specific
examples of how you might fall victim to the common decision-making biases when
making your hiring decision.
Hiring managers could be impacted by several of the decision-making biases. If the last
person that the hiring manager hired who graduated from Harvard was a great
3. What are the benefits and potential risks of using artificial intelligence (AI) to make
business decisions?
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o The availability bias: using only the readily available information from memory
to make judgments.
o The representativeness bias: generalizing from a small sample or single event.
o The confirmation bias: seeking information to support one’s point of view and
discounting data that do not.
o The sunk-cost bias: continuing because of money already spent.
▪ This occurs when managers add up all the money already spent on a
project and conclude it is too costly to simply abandon it.
o The anchoring and adjustment bias: making decisions based on an initial figure.
▪ The bias is that the initial figure may be irrelevant to market realities.
o The overconfidence bias: people’s subjective confidence in their decision making
being greater than their objective accuracy.
o The hindsight bias: the tendency of people to view events as being more
predictable than they really are.
o The framing bias: the tendency to be influenced by the way a situation or
problem is presented.
▪ How a problem is framed may lead us to consider certain solutions.
o The escalation of commitment bias: when decision makers increase their
commitment to a project despite negative information about it.
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Connect® Exercise
CLICK AND DRAG: Decision-Making Biases
Summary of Activity:
Decision making is often a biased and flawed process. If people can identify and be aware of
The Decision-Making Potential of Artificial Intelligence
• Thanks to the power of artificial intelligence (AI), we will soon have robots, drones,
driverless cars, and even home appliances and other devices that can make their own
Connect® Exercise
CLICK AND DRAG: Applications and Downsides of Artificial Intelligence
Summary of Activity:
Connect® Exercise
CASE ANALYSIS: How Did Decision Making Contribute to Volkswagen’s Emissions
Cheating Scandal?
Summary of Activity:
Follow-Up Activity:
This activity focuses on a current event in the news. Pick something that involves some type of
decision made by a person, group, or company. In class, place students into groups and then
Kinicki/Williams, Management, 9e: Chapter 7 Individual and Group Decision Making: How Managers
ask students how any relevant biases may have been prevented. Ask each group to share their
findings with the class.
7.6 Group Decision Making: How to Work with Others
POWERPOINT SLIDES:
#30 Group Decision Making: How to Work with Others
#31 Disadvantages of Group Decision Making
#32 Symptoms of Groupthink
#38 Project Post-Mortems
Section 7.6 discusses the advantages and disadvantages of group decision making. The
symptoms of groupthink and recommendations for avoiding it are discussed. The group problem-
solving techniques of consensus, brainstorming, devil’s advocacy, the dialectic method, and
post-mortems are discussed.
Topics and Tips for Discussion:
1. Describe situations where individual decision making probably works better than group
decision making.