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    Section 5+6

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    theboyvip2006

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    Section 5+6

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    theboyvip2006
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    section 5+6

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    1 views8 pages

    Section 5+6

    Uploaded by

    theboyvip2006

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    © All Rights Reserved
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    of 8

    5/WHY DO MANAGERS MAKE BAD DECISIONS

    1. Being influenced by initial impressions


    2. Justifying past decisions
    3. Seeing what you want to see
    4. Perpetuating the status quo
    5. Being influenced by emotions
    6. Overconfidence

    1.Being influenced by initial impressions (Bị ảnh hưởng bởi ấn tượng


    ban đầu)
    -The mind often gives disproportionate weight for the first information it
    receives when we’re about to make decisions.
    -Those first information act as an anchor for future judgments, so do past
    event and trends.
    -Paying too much attention for the past can lead to poor forecasts and
    misguided decisions
     The first information we get influences our thoughts too much, even if
    better information comes later.

    Example: A manager is interviewing candidates for a sales position. During the first
    interview, the first candidate, A, makes a great impression—she is confident, well-
    dressed, and gives smooth answers. The manager feels she would be perfect for the
    job.

    However, the second candidate, B, is a bit nervous at the beginning of his interview but
    has better qualifications and more relevant experience. As the interview progresses,
    B relaxes and demonstrates strong problem-solving skills, but the manager already has
    A’s positive first impression stuck in their mind.

    When it’s time to make a decision, the manager still picks A, even though B is
    objectively the better fit for the role. The initial impression of A being confident
    clouded the manager’s judgment, making them ignore B superior qualifications.
    2. Justifying past decisions (Biện minh cho các quyết định trước đó)
    - As usual, when people make mistakes, the continually support a flawed
    decision in an effort to justify or correct their previous mistakes.
    They stick to bad decisions because they don’t want to admit they were
    wrong.

    Example: A company decides to launch a new product, SmartWatch X, and invests


    heavily in its development and marketing. After six months on the market, sales are far
    below expectations, and customer feedback is poor—people find the watch too
    complicated to use.The marketing team suggests cutting losses and discontinuing the
    product, but the project manager insists on continuing. The reason? "We’ve already
    spent so much time and money on this; we can’t give up now!" Instead of admitting the
    product was a mistake, they decide to pour even more resources into updates and new
    marketing campaigns.Six months later, the product still fails to attract buyers, causing
    greater financial loss.

    3. Seeing what you want to see (Chỉ muốn tiếp nhận những ý kiến ủng
    hộ cho ý kiến của mình)
    -People tend to seek information that supports their beliefs and avoid
    contracdict information
    -This can affect where they look for information as well as how they
    interpret the information they find.
    They look for things that confirm their beliefs and ignore anything that
    doesn’t fit.
    4. Perpetuating the status quo (Duy trì hiện trạng)
    -Managers, especially old-style managers, may usually make decisions on
    what has worked in the past. This may be effective in a short-term.
    -However, as the market demands more and more, they cannot adapt
    because they’re fail to explore new options, dig for additional information,
    or investigate new technologies.
    They rely on familiar methods and avoid trying new ideas.

    Example: A company has been using the same accounting software for 10 years.
    The software is outdated, slow, and lacks modern features like automated reports and
    cloud storage. Several employees suggest switching to a newer system, which would
    save time and reduce errors. However, the manager decides to stick with the old
    software because he believes it still works fine. Even though switching systems would
    improve efficiency.

    5. Being influenced by emotions (Bị ảnh hưởng bởi cảm xúc)


    -Managers usually make bad decisions when they’re thinking negatively,
    upset or too confident with their previous success.
    -So managers definitely make better decision when they take emotions out
    of the decision-making process.
    Decisions get worse when feelings, like fear or pride, affect thinking.
    Example: (Can give personal example(presenter) from work,study,life,love,
    …)
    6. Overconfidence (Quá tự tin)
    -Most people overrate their ability to predict uncertain outcomes.
    -They have unrealistic expectations of their ability to understand the risk
    and make the right choice.
    They believe they know more than they really do, leading to risky
    decisions.

    Example: Before the 2008 financial crisis, many banks and financial institutions
    were overly confident in the stability of the housing market and their ability to manage
    risk. They believed housing prices would continue rising indefinitely and that
    complex financial products, like mortgage-backed securities, were safe investments.

    Despite some warnings from analysts and economists, many decision-makers ignored
    the risks, thinking they understood the market better than others. Banks continued
    issuing risky subprime loans to people who couldn't afford them, assuming that even if
    defaults occurred, rising property values would cover the losses.

    When the housing bubble burst, it led to massive defaults and the collapse of major
    financial institutions, such as Lehman Brothers. The overconfidence in their ability to
    predict market outcomes and manage risk was a key factor in triggering the financial
    crisis.

    6/Innovative Decision Making


    Mechanisms to help reduce bias-related

    decision errors:

    1/Start with brainstorming

    2/Use hard evidence

    3/Engage in rigorous debate

    4/Avoid groupthink

    5/Know when to bail

    6/Do a postmortem

    1A/Brainstorming

    Brainstorming is a group technique to generate a wide range of ideas for


    decision-making. Key elements include:

     Free flow of ideas: All suggestions are welcome, no matter how


    unusual.
     No criticism: Ideas are shared without judgment to encourage
    creativity.
     Building on others' ideas: Participants can expand or improve ideas
    suggested by others.

    Video: https://www.youtube.com/watch?v=GLpZ6RZHyoM

    1B/Electronic brainstorming

    Electronic brainstorming (also known as brainwriting) uses computer


    networks to gather ideas from participants in real-time. It often generates
    40% more ideas than traditional brainstorming and can improve
    participation by reducing social pressure. Participants contribute equally,
    fostering more creativity and diversity in ideas.

    https://www.youtube.com/watch?v=D6opObwD6os (vid này nội dung y chang textbook,


    có thể cho coi vid và tóm tắt lại)
    2/Use Hard Evidence

    -Using hard evidence in decision-making helps reduce emotional bias and


    prevents reliance on faulty assumptions or intuition.

    -This approach emphasizes gathering the best available facts and data
    to make well-informed, objective decisions. Managers must carefully
    evaluate evidence, challenge biases, and avoid relying solely on past
    experiences

    Example: A retail company wants to decide whether to open a new store in


    a different city. Instead of relying on intuition or gut feelings, the
    management collects hard evidence:

     Customer data: Analyzing purchasing trends in the target city.


     Market research: Studying competitors and local demand.
     Financial reports: Reviewing the profitability of similar stores.
     Surveys: Gathering feedback from potential customers.

    Based on this data, the management makes an informed decision,


    ensuring that the new store location has a high chance of success.

    3/Engage in Rigorous Debate (Seriously Debate)

    -Encouraging rigorous debate helps managers make better decisions under


    uncertainty. Constructive conflict from differing viewpoints sharpens
    problem focus, clarifies ideas, and stimulates creative thinking. It also
    broadens understanding of issues and alternatives, leading to higher-
    quality decisions.

    -To stimulate rigorous debate, several strategies can be employed:

    1. Diversity in Groups: Ensuring a mix of age, gender, expertise, hierarchy,


    and business experience can enrich discussions.
    2. Devil's Advocate: Assigning someone to challenge assumptions and
    assertions encourages critical thinking.
    3. Generating Alternatives: Encouraging group members to quickly develop
    numerous alternatives fosters creativity and exploration.
    4. Point-Counterpoint Technique: Dividing members into subgroups with
    opposing viewpoints allows for the exchange of proposals and thorough
    discussion, leading to a common understanding and recommendations.
    4/Avoid Groupthink

    -Groupthink is the phenomenon where individuals in a group suppress


    opposing opinions in favor of harmony. This desire for unity often leads to
    neglecting the quality of decisions. Group members prioritize cohesion over
    critically addressing problems and exploring alternatives, suggesting that
    some disagreement and conflict can be beneficial compared to uncritical
    agreement.

    Example: Imagine a marketing team at a company tasked with launching a


    new product. During a brainstorming session, one team member suggests
    a bold advertising campaign that involves unconventional strategies.
    However, several other team members hesitate to express their concerns
    about the idea, fearing it might disrupt the harmony of the group or lead to
    conflict.

    Instead of voicing their doubts, they all agree with the suggestion,
    emphasizing the importance of team unity. As a result, they overlook
    significant potential flaws in the campaign, such as misalignment with the
    target audience or the risk of negative public perception.

    When the campaign launches, it fails to resonate with customers, leading to


    poor sales and wasted resources.

    5/Know When to Bail

    -In a fast-paced environment, good manager encourages risk taking and


    learning from mistakes, it also teaches a person to know when to pull the
    plug on something that isn’t working.

    -However, escalating commitment(Commitment bias, also known as the


    escalation of commitment, describes our tendency to remain committed to
    our past behaviors, particularly those exhibited publicly, even if they do not
    have desirable outcomes.) can lead organizations to continue in investing
    time and money into solutions that are clearly ineffective. Managers may
    block or distort negative information to avoid responsibility for poor
    decisions or may refuse to acknowledge that their choices were incorrect.
    6/Do a Postmortem

    -Conducting a postmortem, or after-action review, is a technique adopted


    by many companies from the U.S. Army to promote evidence examination
    and continuous learning. This disciplined process involves managers
    regularly reviewing the outcomes of decisions to identify successes and
    failures. After implementing a decision, managers meet to evaluate what
    worked, what didn’t, and how to improve future actions, recognizing that
    many problems are resolved through trial and error.

    Example: https://www.youtube.com/watch?v=oSktXK9OHy8

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