Management Science

6
“Management Science Decision Tree Process”

MS. RONITA SONIO-FRIAS

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Management Science

“Management Science Decision Tree Process”

• Be able to analyze the ethical practice in

the decision tree analysis.
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Management Science
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Management Science
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Management Science

Applying the Ethical Decision Tree

Decision trees are useful analytic tools for considering the ethical
dimensions of a decision.
Ethics are moral principles that guide a person’s behavior. These morals
are shaped by social norms, cultural practices, and religious influences.
All decisions have an ethical or moral dimension for a simple reason—
they have an effect on others. Managers and leaders need to be aware
of their own ethical and moral beliefs so they can draw on them when
they face decisions. They can then effectively think through an ethical
issue with the same types of approaches they use for other decisions.
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Management Science

Decision Trees
Decision trees are graphical
representations of alternatives and
possible outcomes. The decisions are
represented by the branches of the tree.
Organizations and individuals often use
decision trees as part of their decision-
making process because they are a
means for adding formal structure to
information about a decision. Identifying
the range of possibilities and their
potential consequences helps clarify the
decision and facilitates selection of an
alternative.
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Management Science

Decision tree: An example of a decision tree.

Decision trees can be applied to ethical matters as well. If confronted with an ethical
dilemma, creating a decision tree is a useful method for analyzing what the potential
outcomes of each action would be, and ultimately, how to proceed. It is a particularly
useful tool for considering stakeholders such as employees, customers, shareholders,
and communities. The answers to questions about what stakeholders will be affected
and what the effects will be help build the case for or against each alternative. Often
there will be competing interests, or situations in which two different values are in
competition. For instance, a decision to close a coal mine because coal contributes to
global warming may be positive for society at large, but it imposes high costs on the
employees who will lose their jobs. Decision-tree analysis can help identify or uncover
the potential impacts of alternatives so that a decision maker can select the one that
is most consistent with her ethical and moral beliefs.
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Management Science

Applying the Decision Tree - Decision tree analysis can

be a useful tool for evaluating ethical decisions.
Decision tree analysis provides a visual tool to help
individuals quantify and weigh options against one
another when making a decision. A decision tree
calculates the expected values of competing
alternative. This tells the decision maker which
decision has the highest utility (i.e., is the most
preferred) to the decision maker.
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Management Science

Decision tree: This example of a decision tree

shows the decision maker trying to choose
where to go on vacation.
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Management Science

Creating a Decision Tree

A decision tree consists of 3 types of nodes:
1. Decision nodes: These are commonly represented by squares. Decision
nodes are used when a decision needs to be made between at least two
alternatives.
2. Chance nodes: These may be represented by circles. Chance nodes
represent points on the decision tree where there is uncertainty about
outcomes (so there must be at least two possible outcomes
represented).
3. End nodes: These may be represented by triangles. An end node is
where a decision is made and its value or utility is identified.
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Management Science

Applications of Decision Trees

Decision trees can be applied to ethical considerations. Consider an ethical dilemma
involving a colleague. You are considering three options: report your colleague to a
superior, confront the colleague yourself, or ignore the situation completely. The top
box of the decision tree would state “Colleague Dilemma.”
The next three nodes would then read: “Report colleague to superiors,” “Confront
colleague,” and “Ignore situation. ” Each of these nodes would then have a “Yes” arrow
and a “No” arrow. For each “Yes” and “No,” you would list what the outcome would be,
realizing that in some cases the nodes may need to continue to account for potential
outcomes, some of which may link back to previous options. For example, a “Yes”
decision arrow for “Report colleague to superiors” may result in the situation being
taken care of—or, it could result in an investigation that would impact your standing
within the company and with your peers. If you chose to ignore the colleague and his
unethical behavior is discovered in the future, you could end up in trouble for choosing
not to act earlier.
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Management Science

Cognitive Biases as a Barrier to Decision Making

Individual cognitive biases will influence decision making.
Decision making is inherently a cognitive activity, the result of
thinking that may be either rational or irrational (i.e., based on
assumptions not supported by evidence). Individual characteristics
including personality and experience influence how people make
decisions. As such, an individual’s predispositions can either be an
obstacle or an enabler to the decision-making process.
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Management Science

From the psychological perspective, decisions are often weighed against a

set of needs and augmented by individual preferences. Abraham Maslow’s work
on the needs-based hierarchy is one of the best known and most influential
theories on the topic of motivation—according to his theory, an individual’s most
basic needs (e.g., physiological needs such as food and water; a sense of safety)
must be met before an individual will strongly desire or be motivated by higher-
level needs (e.g., love; self-actualization.
The Myers-Briggs Type Indicator (MBTI) is a widely used diagnostic for
identifying personality characteristics. By categorizing individuals in terms of four
dichotomies—thinking and feeling, extroversion and introversion, judging and
perception, and sensing and intuition—the MBTI provides a map of the
individual’s orientation toward decision making.
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Management Science

Types of Cognitive Bias

Biases in how we think can be major obstacles in any decision-making process.
Biases distort and disrupt objective contemplation of an issue by introducing
influences into the decision-making process that are separate from the decision itself.
We are usually unaware of the biases that can affect our judgment. The most
common cognitive biases are confirmation, anchoring, halo effect, and
overconfidence.
1. Confirmation bias: This bias occurs when decision makers seek out evidence that
confirms their previously held beliefs, while discounting or diminishing the impact of
evidence in support of differing conclusions.
2. Anchoring: This is the overreliance on an initial single piece of information or
experience to make subsequent judgments. Once an anchor is set, other judgments
are made by adjusting away from that anchor, which can limit one’s ability to
accurately interpret new, potentially relevant information.
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Management Science

3. Halo effect: This is an observer’s overall impression of a person,

company, brand, or product, and it influences the observer’s feelings
and thoughts about that entity’s overall character or properties. It is
the perception, for example, that if someone does well in a certain
area, then they will automatically perform well at something else
regardless of whether those tasks are related.
4. Overconfidence bias: This bias occurs when a person
overestimates the reliability of their judgments. This can include the
certainty one feels in her own ability, performance, level of control,
or chance of success.
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Management Science

Group Conflict as a Barrier to Decision Making

Group dynamics, which involves the influence of social behavior, is the primary
determining factor in the success of group outcomes.
Delegating key decision making to groups, teams, or committees occurs often within
organizations. Decisions made by groups can be better informed by broader perspectives
and different sources of information and expertise than those made by an individual
decision maker. Along with these advantages, however, interpersonal and group dynamics
presents dilemmas that can make it more difficult for groups to make effective choices.
Group cohesion, or positive feelings between individuals and productive working
relationships, contributes to effective group decision making. In cohesive groups
information is more easily shared, norms of trust mean it is easier to challenge ideas, and
common values help focus decisions around shared goals. Encouraging constructive
disagreements and even conflict can result in more-creative ideas or more solutions that
are easier to implement.
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Management Science

Group dynamics: the New Zealand All Blacks:Rugby, a game with fifteen players per
team, is the ultimate team game. Group dynamics require all fifteen players to work
together, often demanding tremendous synergy to outlast an opponent. The historic
success of New Zealand’s All Blacks has been attributed not only to skill, but also to
how the team achieves ideal group dynamics.
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Management Science

Groupthink
One of the greatest inhibitors of effective group decision making is
groupthink. Groupthink is a psychological phenomenon that occurs within a
group of people in which the desire for harmony or conformity results in an
irrational or dysfunctional decision-making outcome. By isolating
themselves from outside influences and actively suppressing dissenting
viewpoints in the interest of minimizing conflict, group members reach a
consensus decision without critical evaluation of alternative viewpoints.
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Management Science

Loyalty to the group requires individuals to avoid raising

controversial issues or alternative solutions, and there is a loss of
individual creativity, uniqueness, and independent thinking. The
dysfunctional group dynamics of the in-group produces an illusion
of invulnerability (an inflated certainty that the right decision has
been made). Thus the in-group significantly overrates its own
decision-making abilities and significantly underrated the abilities
of its opponents (the out-group). Furthermore, groupthink can
produce dehumanizing actions against the out-group.
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Management Science

Psychologist Irving Janus, the leading theorist of groupthink, identified ways of preventing it:
⮚ Leaders should assign each member the role of “critical evaluator.” This allows each
member to freely air objections and doubts.
⮚ Leaders should not express an opinion when assigning a task to a group.
⮚ Leaders should absent themselves from many of the group meetings to avoid excessively
influencing the outcome.
⮚ The organization should set up several independent groups working on the same
problem.
⮚ All effective alternatives should be examined.
⮚ Each member should discuss the group’s ideas with trusted people outside of the group.
⮚ The group should invite outside experts into meetings. Group members should be
allowed to discuss with and question the outside experts.
⮚ At least one group member should be assigned the role of devil’s advocate. This should
be a different person for each meeting.
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Management Science

Advantages and Disadvantages of Group Decision Making

Group decision making can lead to improved outcomes, but only if a variety of conditions
pertaining to group chemistry are satisfied.
Advantages of Group Decision Making
Group decision making provides two advantages over decisions made by individuals:
synergy and sharing of information. Synergy is the idea that the whole is greater than the
sum of its parts. When a group makes a decision collectively, its judgment can be keener
than that of any of its members. Through discussion, questioning, and collaboration, group
members can identify more complete and robust solutions and recommendations.
The sharing of information among group members is another advantage of the group
decision-making process. Group decisions take into account a broader scope of
information since each group member may contribute unique information and expertise.
Sharing information can increase understanding, clarify issues, and facilitate movement
toward a collective decision.
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Management Science

Disadvantages of Group Decision Making

Diffusion of Responsibility
One possible disadvantage of group decision making is that it can create a
diffusion of responsibility that results in a lack of accountability for outcomes. In a
sense, if everyone is responsible for a decision, then no one is. Moreover, group
decisions can make it easier for members to deny personal responsibility and blame
others for bad decisions.
Lower Efficiency
Group decisions can also be less efficient than those made by an individual.
Group decisions can take additional time because there is the requirement of
participation, discussion, and coordination among group members. Without good
facilitation and structure, meetings can get bogged down in trivial details that may
matter a lot to one person but not to the others.
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Management Science

Groupthink
One of the greatest inhibitors of Loyalty to the group requires individuals to
effective group decision making is avoid raising controversial issues or alternative
groupthink. Groupthink is a psychological solutions, and there is a loss of individual
phenomenon that occurs within a group creativity, uniqueness, and independent
of people in which the desire for thinking. The dysfunctional group dynamics of
harmony or conformity results in an the in-group produces an illusion of
irrational or dysfunctional decision- invulnerability (an inflated certainty that the
making outcome. By isolating right decision has been made). Thus the in-
themselves from outside influences and group significantly overrates its own decision-
actively suppressing dissenting making abilities and significantly underrates the
viewpoints in the interest of minimizing abilities of its opponents (the out-group).
conflict, group members reach a Furthermore, groupthink can produce
consensus decision without critical dehumanizing actions against the out-group.
evaluation of alternative viewpoints.
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Management Science

The Manager’s Role in Group Decisions

The manager’s role in group decision making is to create a supportive context
for the group.

Decisions are often delegated to groups when members have the experience
and information needed to arrive at the appropriate choice. Managers and
leaders can take actions that support group decision making and lead to good
decision outcomes. Managers can help promote effective decision making by
effectively choosing group members, framing the decision, and organizing the
decision process.
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Management Science

Roles of Manager in a Group Decision Making :

In order to maximize the potential of a group decision process, managers
should take the following important steps:
1. Establish the team goal: By articulating the dimensions of the decision,
including its importance, a manager can reduce ambiguity and help group
members focus their analysis, discussions, and deliberations. A clear
statement of the question to be resolved can help unify the group and
create cohesion that engages members and improves collaboration.
2. Facilitate a working environment: After the decision goal is established, the
working environment must allow for meaningful, honest, and open
communication among group members. The manager can help establish
norms about how members will interact with each other to foster
constructive discourse.
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Management Science

3. Set clear expectations and responsibilities: By setting expectations, managers help

team members understand their decision tasks and parameters (for example,
deadlines). Managers might assign roles to help structure the decision process,
establish a sense of accountability for parts of the group’s work, and clarify
responsibilities.
4. Provide resources: Managers must be mindful that the group has adequate
resources to evaluate alternatives and make its decision. Necessary adjustments may
include providing additional staff, giving more time, or freeing members from other
work assignments so they can fully participate in the decision-making process.
5. Get out of the way: After the manager has established the context for the group to
make its decision, the best thing to do is step back and let the team perform. The most
useful role at this point is that of coach, such as if the group needs help managing
interpersonal relationships or if additional clarity is needed about an alternative.
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Management Science
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Managerial Economics

Q1.1.1-1
“”

Pen & Paper

none
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Management Science

MT 6.1.1
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Organization and Management

Q1.1.1-1

For Flexible Distance Learning:

• Screenshot of hand written answer on bondpaper and uploaded at Edmodo
Apps
For Modular Distance Learning:
• Handwritten bondpaper and submitted at AISAT Campus

• Five days after the discussion.

• September 30, 2020
NO. 6
Management Science
 NO. 1
Organization and Management

Q1.1.1-1

For Flexible Distance Learning:

• Screenshot of hand written answer on bondpaper and uploaded at Edmodo
Apps
For Modular Distance Learning:
• Handwritten bondpaper and submitted at AISAT Campus

• Five days after the discussion.

• September 30, 2020