Decision Making CHAPTER 11 DONELSON FORSYTH. Groups have great strength but their limitations can only be Ignored at great risk

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1 Decision Making CHAPTER 11 DONELSON FORSYTH Groups have great strength but their limitations can only be Ignored at great risk

2 Decision Making Group Decision-making - cognitive work is often done in groups when dealing w/ complex or important tasks

3 Decision Making Functional Theory of Group Decision-making (ODDI) Orientation Stage Discussion Stage Decision Stage Implementation

4 Orientation Stage Orientation Stage defining the problem and planning process Goals, procedures, and time constraints Shared Mental Model commonly held cognitive representation of the problem

5 Discussion Stage Discussion Stage groups collect, share and process information, and examine alternatives, correct errors Collective Information Processing group members seek out and process information cognitively and socially

6 Discussion Stage Collective Memory the group s combined memories and shared schemas Cross-cuing cues that trigger memories in other group members Transactive Memory dividing information up among group members enhances recall

7 Decision Stage Social Decision Scheme group s method for combining opinions into single group decision Delegating, Averaging, Voting, Consensus, Crowdsourcing Groups prefer consensus on judgment tasks and majority rules on intellectual tasks

Implementation Stage Implementation enacting and evaluating the decision Distributed Justice perceived fairness in rights, resources, and costs

8 Implementation Stage Implementation enacting and evaluating the decision Distributed Justice perceived fairness in rights, resources, and costs Procedural Justice perception of fairness in decision making Voice Effects democratic decisions can increase worker satisfaction and productivity

9 Why Do Groups Fail? Time Management Planning Fallacy underestimating the time and resources needed to complete at task Groups are worse than individuals Parkinson s Law task will expand to fit it allotted time Law of Triviality negative relationship between issue importance and discussion time

10 Why Do Groups Fail? Discussion Problems Poor communication and listening Egocentric Behavior Nonparticipation Sidetracking Interruptions Poor Leadership Negative Attitudes and Emotions

11 Why Do Groups Fail? Decision Avoidance procrastination, bolstering, avoiding responsibility, satisficing Cognitive Limitations complex problems, misusing/overusing information, memory lapses Confirmation Bias tendency to seek information that confirms ideas rather than disconfirms

12 Why Do Groups Fail? Shared Information Bias groups spend most of their time discussing shared or common knowledge Ways to minimize the Shared information bias Strong Leaders Prolonged discussions Group decision support systems (GDSS)

13 Why Groups Fail: Groupthink Groupthink - strong motivation for unanimity that interferes with effective decision-making (Abilene Paradox) Symptoms of Groupthink Overestimation of power and success Close-minded Conformity Pressures Illusion of Unanimity Mindguards

14 Why Groups Fail: Groupthink Causes of Groupthink Cohesion Insulation Rigid Leadership Decision Stress

15 Why Groups Fail: Polarization Deal or No Deal Risky Shift Phenomenon researchers found that groups tended to make more risky decisions than individuals 9 of 10 chance of succeeding (lowest payout) 7 of 10 chance of succeeding 5 of 10 chance of succeeding (medium payout) 3 of 10 chance of succeeding 1 of 10 chance of succeeding (highest payout)

16 Why Groups Fail: Polarization Group Polarization Hypothesis decisions are polarized in the direction of the members prediscussion attitudes Occurs due to social comparison, persuasive-arguments, social identification

17 Implementation Problems Group-serving Attribution blaming failures on external factors Entrapment investing more resources rather than changing decisions

18 Pharmaceutical Task We would like you to play the role of a manager in a pharmaceutical company. It is your job to decide which of two drugs your company will market. This decision is of vital importance to your company. Over the past few years, your company s profits have decreased dramatically. Good marketing choices must be made now to avoid further losses or the company will be in danger of going bankrupt within five years

19 Pharmaceutical Task The two drugs that you will decide between are both meant to reduce cholesterol. As you probably know, Americans today are very concerned with managing their health in general and maintaining low cholesterol levels in particular. Therefore, if the drug chosen is effective, the profit potential will be enormous. In short, making the proper choice between the two drugs could turn your company around completely. Making the wrong choice, on the other hand, could bring about the financial ruin of the company.

20 Drug Facts Drug 1 Positive Facts A daily capsule of Drug #1 has been shown to lessen the frequency and severity of angina (chest pains) and reduces a patient s dependency on nitroglycerine. In an eight-month test of Drug #1 using 23 humans, cholesterol levels dropped 33% and there were no reports of toxic side effects. Drug #1 appears to be especially effective in quickly reducing cholesterol levels that are particularly high (above 330 mg). In one two-month study, it was accidentally discovered that Drug #1 appears to reduce the severity of pain for chronic headache sufferers. Drug #1 appears to be especially effective for elderly patients If Drug #1 is marketed as a preventative, at least 100 million people could be targeted as potential customers, a greater market than any other drug currently being produced. Drug #1 is inexpensive to produce. Drug #1 could be marketed with almost no alterations to current production facilities being necessary. The potential for immediate and early profit from Drug #1 is very strong. Drug 2 Positive Facts Only 20% of patients taking Drug #2 for a three-month period complained of side effects (mild nausea and dizziness). A six-month controlled study of rats and monkeys revealed that Drug #2 elevates HDL levels an average of 20% from pretreatment levels. Of the 245 patients who received Drug #2 for a year, only 10% complained of mild nausea there were no other negative reactions. An eighteen-month follow-up of patients who had previously been given Drug #2 showed no significant long-term side effects. A three-month study of 22 human patients showed that total cholesterol levels decreased by 10% and HDL levels increased by 24%. A 9-month study of cats found that total cholesterol levels decreased by 13% with no serous side effects. The Cholesterol Institute believes that about 1 million people would be potential customers of Drug #2. Experts believe that the risk of potential liability suits is low for Drug #2. Your marketing advisers have informed you that this drug is likely to be financially viable producer of low to moderate levels of profit in the long run. Marketing attitude surveys have shown that consumers would be likely to place confidence in the safety of Drug #2. Several magazines have announced plans to run stories or articles on Drug #2 announcing its release if you choose to market it. Foreign pharmaceutical companies have expressed a great deal of interest in purchasing a marketing share in Drug #2.

21 Drug Facts Drug 1 Negative Facts 4 of 36 rats who were given daily doses of Drug #1 for a twelve month period developed cataracts. Out of 11 beagles who were given daily doses of Drug #1 for a six month period, 2 developed degenerative liver disease. 2 out of 50 human patients who took Drug #1 for a fourteen month period developed cataracts. As of now, there have not been extended, long-term usage trials conducted on human subjects. The president of the American Medical Association has suggested that your company not market Drug #1 without further testing. 2 out of 50 cats given daily doses of Drug #1 died within three months. Your legal department advises you that if toxic effects are found for long-term human usage of Drug #1, then the company that produces the drug could be legally liable. Consumer advocate Ralph Nader publicly criticized Drug #1 on a nationally televised talk show. A well-respected research scientist published an article in the New England Journal of Medicine criticizing research conducted on the effectiveness of Drug #1. A moderate-sized drug store chain has publicly stated that they will not allow their pharmacy to sell Drug #1. A fairly large amount of money will have to be spent to obtain exclusive rights to Drug #1. Because of your company s recent financial troubles, it will be difficult to obtain enough capital to market Drug #1 quantities equal to the demand for the drug. Drug 2 Negative Facts Drug #2 cannot be used by patients who have had a recent heart attack. Drug #2 has been found to raise blood pressure in some patients Drug #2 interacts with a wide variety of other prescription drugs, often in undesirable and unpredictable ways. About 15% of all patients appear to have a strong allergic reaction to Drug #2 and cannot use it. Some humans who have used Drug #2 in testing situations have experienced severe diarrhea and dehydration. Drug #2 is expensive to produce. Drug #2 has a limited market. Drug #2 must be shipped carefully, because heat can cause it to break down therefore shipping costs are high for Drug #2. Drug #2 is expensive for patients to buy, and is likely to be associated with increased insurance rates.

22 Drug Facts Drug 1 Neutral Facts The principle site of action for Drug #1 is in the liver. Drug #1 would most likely be produce in the form of gel caplets. Drug #1 interacts with some other drugs in a way that is common to other prescription medicines. Drug #1 is composed of three natural elements, and two synthetic elements. Drug #1 would probably be delivered to distribution sites from the main factories by truck or train. When marketing Drug #1, the fact that the price of drug ads in medical journals has been gradually increasing over the years would need to be considered. The board of trustees of your company would like to donate a certain, small percentage of the proceeds of Drug #1 to nation charities. Respected colleagues have advised you that it would be wide to re-assigned several members of the company s legal staff to evaluating the implications of Drug #1. Respected colleagues have advised you that it would be wise for company officials to make public appearances in which they could provide the public with information about Drug #1. Drug 2 Neutral Facts Drug #2 should be taken twice daily. Drug #2 is a relatively complex drug consisting of 9 elements Drug #2 appears to be more effective when combined with a sensible dietary practices. Drug #2 would most likely be produced in 300 or 600 mg tablets. Drug #2 would likely be advertised nationally. Drug #2 will be marketed mainly to American citizens. It will be more expensive to deliver Drug #2 to the West Coast than to the East Coast. Drug #2 will be distributed by prescription only. One of the ways sales representatives will attempt to market Drug #2 is through direct contact with drug store managers.

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