What is the situation in which a manager can make accurate decision because the outcome of every alternative is known?

Answer: According to Karl Weick, an organizational psychologist, organizations that can spot
the unexpected and quickly adapt to the changed environment are known as highly reliable
organizations (HROs). According to him, HROs share the following five habits:
a. HROs are not tricked by their success. They are preoccupied with their failures. They are alert
to the smallest deviations and react early and quickly to anything that does not fit with their
expectations.
b. HROs defer to the experts on the front line. Frontline workers those who interact day in and
day out with customers, products, suppliers, and so forth have firsthand knowledge of what can
and cannot be done, what will and will not work. These organizations get their input and allows
them to make decisions.
c. HROs let unexpected circumstances provide the solution.
d. HROs embrace complexity. Because business is complex, these organizations recognize that it
"takes complexity to sense complexity." Rather than simplifying data, these organizations aim
for deeper understanding of the situation.
d. HROs anticipate, but also recognize their limits. These organizations try to anticipate as much
as possible, but they recognize that they can't anticipate everything.

Answer:
a. When decision makers tend to think they know more than they do or hold unrealistically
positive views of themselves and their performance, they are exhibiting the overconfidence bias.
b. The immediate gratification bias describes decision makers who tend to want immediate
rewards and to avoid immediate costs. For these individuals, decision choices that provide quick
payoffs are more appealing than those in the future.
c. The anchoring effect describes when decision makers fixate on initial information as a starting
point and then, once set, fail to adequately adjust for subsequent information. First impressions,
ideas, prices, and estimates carry unwarranted weight relative to information received later.
d. When decision makers selectively organize and interpret events based on their biased
perceptions, they are using the selective perception bias. This influences the information they
pay attention to, the problems they identify, and the alternatives they develop.
e. Decision makers who seek out information that reaffirms their past choices and discount
information that contradicts past judgments exhibit the confirmation bias. These people tend to
accept at face value information that confirms their preconceived views and are critical and
skeptical of information that challenges these views.
f. The framing bias is when decision makers select and highlight certain aspects of a situation
while excluding others. By drawing attention to specific aspects of a situation and highlighting
them, while at the same time downplaying or omitting other aspects, they distort what they see
and create incorrect reference points.
g. The availability bias is when decisions makers tend to remember events that are the most
recent and vivid in their memory. The result is that it distorts their ability to recall events in an
objective manner and results in distorted judgments and probability estimates.
h. When decision makers assess the likelihood of an event based on how closely it resembles
other events or sets of events, they commit the representation bias. Managers exhibiting this bias
draw analogies and see identical situations where they do not exist.
i. The randomness bias describes the actions of decision makers who try to create meaning out of
random events. They do this because most decision makers have difficulty dealing with chance
even though random events happen to everyone and there is nothing that can be done to predict
them.
j. The sunk costs error occurs when decision makers forget that current choices cannot correct
the past. They incorrectly fixate on past expenditures of time, money, or effort in assessing
choices rather than on future consequences.
k. Decision makers who are quick to take credit for their successes and to blame failure on
outside factors are exhibiting the self-serving bias.
l. The hindsight bias is the tendency for decision makers to falsely believe that they would have
accurately predicted the outcome of an event once that outcome is actually known.

Answer: Some problems are straightforward. The decision maker's goal is clear, the problem is
familiar, and information about the problem is easily defined and complete. Hence, these are
called structured problems. For instance, when a server spills a drink on a customer's coat the
customer is upset and the manager needs to do something. Because it is not an unusual
occurrence, there is some standardized routine for handling it. For example, the manager offers
to have the coat cleaned at the restaurant's expense. This is called a programmed decision, a
repetitive decision that can be handled by a routine approach. Because the problem is structured,
the manager does not have to go to the trouble and expense of going through an involved
decision process.
Not all the problems managers face can be solved using programmed decisions. Many
organizational situations involve unstructured problems, which are problems that are new or
unusual and for which information is ambiguous or incomplete. Whether to build a new
manufacturing facility in China is an example of an unstructured problem. When problems are
unstructured, managers rely on nonprogrammed decision making in order to develop unique
solutions. Nonprogrammed decisions are unique and nonrecurring and involve custom-made
solutions. Lower-level managers mostly rely on programmed decisions because they confront
familiar and repetitive problems. As managers move up the organizational hierarchy, the
problems they confront become more unstructured. However, few managerial decisions in the
real world are either fully programmed or nonprogrammed. Most fall somewhere in between.

Answer: Despite the unrealistic assumptions of perfect rationality, managers are expected to be
rational when making decisions. It is understood that "good" decision makers are supposed to do
certain things and exhibit good decision-making behaviors as they identify problems, consider
alternatives, gather information, and act decisively but prudently. When they do so, they show
others that they are competent and that their decisions are the result of intelligent deliberation.
However, a more realistic approach to describing how managers make decisions is the concept of
"bounded rationality." According to this concept, managers make decisions rationally, but are
limited by their ability to process information.
Because they cannot possibly analyze all information on all alternatives, managers "satisfice,"
rather than maximize. That is, they accept solutions that are "good enough." Thus, they become
rational within the limits of their ability to process information.

Newcastle United, a soccer club, was relegated from the top flight two seasons ago. Following
relegation, the club's board sacked the manager and hired a new manager to replace him. The
club won back promotion to the league and enjoyed a good season. Andy Carroll, the star player
for Newcastle, was the top scorer in the league for that season. However, the club, needing to
strengthen the team by buying new players, sold Andy Carroll to Liverpool soccer club to buy
three average players. The club is presently experiencing a dip in form and is in danger of being
relegated again.
90) Which of the following statements, if true, would indicate the presence of self-serving bias
on the part of the manager?
A) The manager assumes moral responsibility for the club's disappointing performance and
offers to resign from his position.
B) The manager buys Andy Carroll back from Liverpool at a much higher price to revive the
team's fortunes.
C) The manager blames the board for selling the top scorer and replacing him with below-par
players.
D) The manager threatens to quit if the board refuses to buy back Andy Carroll from Liverpool
immediately.
91) Which of the following statements, if true, best reflects sunk cost error on the part of the
board?
A) The board buys, a now out-of-form, Andy Carroll back from Liverpool at a much higher price
in the hopes of reversing the team's form.
B) The board admits that it underestimated Andy Carroll's real market value while selling him to
Liverpool.
C) The board blames the manager for buying three under-par players instead of one good
replacement for Andy Carroll.
D) The board backs the manager-who is confident that the team will be back in form-to improve
the team's performance with its current players.

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