代写22421: Management Decisions and Control

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    • 代写22421: Management Decisions and Control
    •22421: Management Decisions and Control
    Lecture 9: Making Better Decisions
    •Lecture objectives
    To understand how MAS are used to
    support organisational decision-making:

    •Assumptions of rationality
    •Perceptual biases
    •Decision making heuristics
    •Ethical decision making
    •Theory recap questions
    •Theory recap questions
    Sometimes the most important decision of all is ‘deciding how to decide’.

    What factors influence whether you should follow a rational decision model, or a different decision model? Why?
    •
    •Theory recap questions
    Under what circumstances might historical or sunk costs be relevant to a decision?
    •
    •Theory recap questions
    How can business intelligence systems be used to facilitate rational decision making in organisations?
    •
    •Assumptions of rationality
    •Types of decision making processes
    •Assumptions of rationality
    •Problem is clear and unambiguous
    •All alternatives and consequences are known
    •Preferences are clear
    •Preferences are constant and stable over time
    •No time or cost constraints exist
    •Final choice will yield the maximum payoff
    •
    •Assumptions of rationality
    •That the decision maker behaves rationally.
    •Sheldon vs. Homer
    •Makes decisions based on logic
    •Emotionally detached
    •Highly observant
    •Remembers everything
    •Perceptual Biases
    •Perceptual biases
    •Perceptual biases affect the way that we interpret perceptual information
    –What we (think we) see
    –What we (think we) hear
    –What we (think we) feel, taste, smell etc.

    •
    Q: What colour is this dress?
    •How perceptual biases affect our decision making
    •Visual illusions cause us to interpret what we see in different ways, and often incorrectly.
    –E.g. “the dress” and many others
    –
    •Selective attention causes us to see what we expected to see and ‘miss’ other important things that are going on in our environment.
    –E.g. the monkey business illusion
    –
    •Change blindness causes us to not notice subtle, incremental changes in our environment.
    –E.g. whodunnit
    •
    •The rational decision model
    •Using MAS to overcome perceptual biases
    •Incorporating cybernetic loops in PMS:
    –Establish acceptable standards/expectations
    –Measure actual performance
    –Compare actual to standards
    –Evaluate variance: Is there a problem here?
    –Take corrective action
    •Well-designed PMS can also indicate the causes and consequences of problems
    –E.g. lead and lag indicators
    –Cause-and-effect relations (e.g. strategy map)
    •Decision Making Heuristics
    •Decision making heuristics
    •A heuristic is a kind of mental short-cut that helps simplify problem solving and decision making.

    •Instead of going through each of the steps of the rational decision model, we:
    –Decide based on examples that are easy to recall (availability heuristic)
    –Decide based on how similar the situation is to something we have experienced before (representativeness heuristic)
    –Decide based on our emotional state (affect heuristic)
    –

    •How heuristics affect our decision making
    •Heuristics can be really helpful!
    –They are less cognitively demanding (you don’t need to use as much brain power!)
    –They help us to make decisions quickly
    –They work well when we don’t need to select the best possible alternative
    •
    •How heuristics affect our decision making
    •But … using heuristics can sometimes lead us to the wrong conclusions and decisions.
    –We rely too much on recent or memorable information, and not enough on other important (but boring) information.
    –We make assumptions about probabilities that aren’t based on evidence, and can be incorrect.
    –We let our first impressions or “gut feeling” override other important information.
    •Common decision errors
    •Common decision errors
    Cognitive biases and heuristics can cause human decision makers to make predictable, systematic decision errors.

    •Loss aversion: we are much more sensitive to losses than to gains.
    •Sunk costs: we consider costs which have already been incurred and can’t be reversed when deciding about future actions.
    •Confirmation bias: we search for and interpret information in a way that confirms what we already believe.
    •Self-serving bias: we search for and interpret information in a way that makes us look (and feel!) good.
    •The rational decision model
    •Using MAS to avoid common decision errors
    •Need rules or guidelines for what information to collect and how to use accounting information to evaluate alternatives.
    –Relevant information principles
    –Project proposal/business case templates
    •These rules may be formalised using decision making policies and procedures
    –Capital expenditure approval processes
    –Pricing policies
    –Cost allocation methods
    •Characteristics of relevant information
    •Ethical decision making
    •Ethical decision making
    •The (economically) rational decision is not always the right decision.
    –What is ‘rational’ depends on the criteria that we identify in our decision making process
    –Financial criteria will produce a financially optimal decision, but not always a good decision!!
    •Whenever we have a decision to make we must also consider its ethical dimensions.
    “What ought we do?”
    •Causes of unethical decision making in organisations
    •Goals that reward unethical behaviour
    •Conflicts of interest that motivate people to ignore bad behaviour when they have something to lose by recognising it
    •A tendency to overlook dirty work that’s been outsourced to others
    •An inability to notice when behaviour deteriorates gradually
    •A tendency to overlook unethical decisions when the outcome is good
    •
    •The rational decision model
    •Using MAS to encourage ethical decision making
    •Have a clear mission statement and set of ethical organisational values
    •Lead by example – demonstrate ethical behaviour
    •Encourage a culture of ethical behaviour among employee groups and teams
    •Have an established code of ethics and defined procedures for ethical decision making
    •Ensure employees receive practical ethics training
    •Avoid rewarding unethical behaviour regardless of the outcome
    •Some ethical decision criteria
    •Would I be happy for this decision to be on the public record?
    •Is there a universal rule that applies here?
    •Will the proposed course of action bring about a good result?
    •What would happen if everybody did this?
    •What will this proposed course of action do to my character or the character of my organisation?
    •Is the proposed course of action consistent with my values and principles?
    •Sources of ethical guidance
    •Organisational codes of ethics
    •Professional codes of ethics/conduct
    –E.g. CA/CPA/CIMA
    •Ethics resource centres
    –E.g. St James Ethics Centre
    •Trusted friends and family
    Q: Any questions?
    •Lecture summary
    •Assumptions of rationality
    •Decision-makers have cognitive limitations
    •Perceptual biases
    •Perceptual biases affect the way we interpret information
    •Cybernetic loops in PMS help to identify problems that we may otherwise fail to detect
    •Decision making heuristics
    •“Intuitive” decision making may lead to decision errors and suboptimal choices
    •Need guidelines for how to use accounting information
    •Ethical decision making
    •The rational decision is not always the right one!
    •Need to incorporate ethical considerations into formal organisational systems and processes
    代写•22421: Management Decisions and Control