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

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

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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Rationality – depends on the nature of problems Well-Structured Level in Organization Programmed Decisions Programmed Decisions TopPoorly Structured Type of Problem Lower Nonprogrammed Decisions Nonprogrammed Decisions

ProblemClarityProblemClarity Well-definedGoalWell-definedGoal KnownOptionsKnownOptions objectiveEvaluationobjectiveEvaluation NoConstraintsNoConstraints MaximumPayoffMaximumPayoff Assumptions of Rational DecisionMakingAssumptions DecisionMaking

A Model of Bounded Rationality Ascertain the Need for a Decision Simplify the Problem Set“Satisficing”Criteria Identify a Limited Set of Alternatives CompareAlternatives Against Criteria Expand Search for Alternatives Select the First “Good Enough” Choice A “Satisficing” AlternativeExists Yes No

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

Two judgment shortcuts Availability heuristic Representative heuristic

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

Ms. Keller is concerned because GM’s 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 isn’t going to be a 12-month problem in Thailand.”

Analytic Conceptual Behavioral Directive RationalIntuitive Way of Thinking High Low Tolerance for Ambiguity Decision-Making Styles

Group Decision Making More information More alternatives Increased acceptance Legitimacy Time-consuming Majority domination Pressures to conform Unclear responsibility AdvantagesDisadvantages

Strengths of Individuals Groups Consistent Values Clear Accountability Speed Individual Versus Group Decision Making Increased Acceptance Higher Quality Decisions Input and Diversity

Group Decision Making Brainstorming Nominal Group Technique Electronic Meetings

National Culture and Decision Making Degree of Risk DecisionStyle

Summary of the first case summary 91 submissions Average: 6.42

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

Common problems in the Introduction Problem is not clearly stated.

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.

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.

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 …

Common problems in the Introduction Too much background information Using 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.

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.

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…

Problems in the Problem Analysis Don’t forget this part. Too brief. The problem is that current Canadian health system is too costly.

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.

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.

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 …

Common problems in the Criteria Need at least 3 alternatives

Problems in the Alternatives Not analyzing disadvantages and advantages Analyzing each alternative but not based on the criteria presented

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…

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.

Problems in the Action Plan No time line provided

Key factors to get a high score in the case summary Be clear and be really focused Be concise Don’t 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

Be persuasive Keep a clear format