Law and ethics chapter 7 review answers

CHAPTER 7 Individual & Group Decision Making How Managers Make Things Happen ©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Major Questions You Should Be Able to Answer 7.1 How do people know when they’re being logical or illogical? 7.2 What guidelines can I follow to be sure that decisions I make are not just lawful but ethical? 7.3 How can I improve my decision making using evidence-based management and business analytics? 7.4 How do I decide to decide? 7.5 Trying to be rational isn’t always easy. What are the barriers? 7.6 How do I work with others to make things happen? ©McGraw-Hill Education. Two Kinds of Decision Making: Rational and Nonrational • Decision – Choice made from among available alternatives • Decision making – Process of identifying and choosing alternative courses of action – Can be made rationally, but often it is nonrational • System 1: intuitive and largely unconscious • System 2: analytical and conscious ©McGraw-Hill Education. Rational Decision Making (1 of 2) • Rational model of decision making – Explains how managers should make decisions – Assumes managers will make logical decisions that will be optimum in furthering the organization’s best interests – Also called the classical model ©McGraw-Hill Education. Rational Decision Making (2 of 2) Figure 7.1: The Four Steps in Rational Decision Making Jump to Appendix 1 for description ©McGraw-Hill Education. Example: Who’s Better at Financial Decisions? • Warren Buffett and female investors have something in common • A study found that women trade less often than men, do a lot more research, and tend to base their investment decisions on more than just numbers • Men tend to trade more, and the more you trade, typically the more you lose ©McGraw-Hill Education. What’s Wrong with the Rational Model? Table 7.1: Assumptions of the Rational Model Complete You should obtain complete, error-free information information, no about all alternative courses of action and the uncertainty consequences that would follow from each choice. Logical, unemotional analysis Having no prejudices or emotional blind spots, you are able to logically evaluate the alternatives, ranking them from best to worst according to your personal preferences. Best decision for the organization Confident of the best future course of action, you coolly choose the alternative that you believe will most benefit the organization. ©McGraw-Hill Education. Some Hindrances to Perfectly Rational Decision Making • Complexity • Time and money constraints • Different cognitive capacity, values, skills, habits,