Running head: UNIT 4 DISCUSSION
Unit 4 Discussion: The decision analysis shortcut
Name
Course – Professor’s Name
University
Fall 2015
UNIT 4 DISCUSSION
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Unit 4 Discussion: The decision analysis shortcut
Introduction
There are several different shortcuts that managers tend to use in regards to decision
making. Between these shortcuts are intuition, inconsistency, distortion, and rules. Intuition
refers to making decisions based on “a strong feeling” or instinct that the decision is right.
Inconsistency refers to mental limits, distractions, memory failings and fatigue, which can
influence their decisions and consistency, which is a constant threat to decision making.
Distortion refers to act based on individual pieces of information, such as a first impression
leading to suboptimal judgments. Rules apply to certain guidelines in which people can base
their decisions upon inherent distortions or blindness.
These aspects can influence in decision making in business and collective decisions as
well. For example, we might be using biases and shortcuts while doing things on our daily
routines. When going to the supermarket to buy brands of clothes detergent, for example, a
person might use intuition, inconsistency, distortion, and rules. I sometimes have strong feelings
about a particular brand, and end up buying based on intuition. Moreover, sometimes I have an
inconsistency when buying products because I have different reasoning, distractions, such as
going to the supermarket with other people, which sometimes makes up for inconsistent
decisions. Besides, in occasions, it is common to base buying decisions on a first impression or
commercial, pieces of information of someone who mentioned that the product is safe, and other
factors or pieces of information that come to mind. Moreover, rules might refer to a particular
budget in the household that limit my options of buying products.
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Success Example
There are cases in which quick decision making can be beneficial. For example, a
manager that acts in intuition in cases where there is time sensitive situations. According to
Conner (2013), a manager was put in a position where she had lost her web designer. She had a
time sensitive operation to deal with, so her intuition was to move to a simpler platform. Have
she followed the rules or acted based on the logical thinking that websites should be developed
on particular principles, she could have lost her deadline. Thus, in management, it is important to
have fast critical thinking, which in situations where there is time pressure, might benefit from
using intuition.
Failure Example
Acting under certain shortcuts can be costly for companies. For example, a company that
uses distortions in decision-making might suffer severe financial consequences. A company must
choose which products to sell. In a case where a manager opted for a particular product based on
a piece of information might use distortion as a decision-making factor. If a manager read in an
article that teens are more likely to buy brand X instead of brand Y, he might base his decision in
inventory based on that piece of information. However, that does not take into consideration
many important factors, such as market analysis, competitor analysis, and consumer behavior.
Thus, a manager might invest in a specific brand based on a distortion of information and have
severe consequences financially when that brand does not sell, forcing the company to sell
underpriced to get rid of extra stock.
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Limits
One example of a decision analysis shortcut that could produce disastrous results relates
to pricing seasonal clothing. For example, setting up a rule in which the price will be marked-up
in 60% and discount the retail price by 20% until the inventory is gone ignores the price of
competitors and characteristics of each class of products. Another example is with the use of
intuition. People have different intuitions based on their background and circumstances. A
manager who uses intuition might have a hard time explaining his/her reasoning to the board, as
they might have different options on how to intuitively act in various circumstances.
Improvements
There are several ways in which there can be improvements in the decision analysis
shortcut. First, it is important to adapt an approach to decision making, as well as making people
aware of the changes. When there are group decisions, one idea is to separate individuals in
groups, and ask one of them to think intuitively, the other to develop a rule, and another group to
build an importance weighting model. This can help checking the options and alternatives as well
as seeing ways in which one approach leads to different decisions. Besides, another way to
improve is to examine which sectors of the company or specific operations have their decisions
based purely on intuition. Besides, a manager can perform result checks on the rules of the
institution to see cases in which people are using distortions, which will allow to adjust the
necessary changes in the work environment.
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Testing
There are several ways in which decision analysis shortcut can be tested before being
implemented organization-wide. For example, there are several universities who perform studies
on intuition, in particular, cases. By considering past situations, a manager can calculate the risks
and benefits of that decision-making shortcut in that determined scenario. Another way to test
decisions before applying organization-wide is by having simulations with the employees.
Training would constitute of simulated situations in which intuition is used to verify the
outcomes. If the result is positive in several different simulations, it might be arguable to
implement that particular change as a rule in the company. The organization might also refer to
statistics and keep track of decisions and their outcomes to analyze their effectiveness.
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References
Conner, C. (2013, August 5). Should Intuition Be Running Your Business? Yes… And No.
Retrieved December 05, 2015, from
http://www.forbes.com/sites/cherylsnappconner/2013/08/05/should-intuition-be-runningyour-business-yes-and-no/
Schoemaker, P. H., & Russo, J. E. (1993). A Pyramid of Decision Approaches. California
Management Review, 36(1), 9-31. might be arguable to implement that particular change as a rule in
the company. The organization might also refer to statistics and keep track of decisions and their outcomes
to analyze their effectiveness.
