Organization behavior decision making


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Organization Behavior - Decision Making.
If Two heads are better than one, are four even better?

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Organization behavior decision making

  1. 1. Organisation Behaviour Case 8 : “ If two heads are better than one, are four even better ?” Team member : Mohd Jaladi Muda (CGS00544501) Ooi Tse Zher (CGS00531001) Veni Priya (CGS00531501) Seow Swee Miee ( CGS00528301)
  2. 2. How do you decide? Go with your intuition … Trust your parents’ judgment … Do as what your friends are doing … Or just toss a coin?
  3. 3. Decision making is the process of choosing the best alternative for reaching objectives (Certo, 2009)
  4. 4. or = Maggie Becker, 24 Marketing Manager $100,000 A moderate-risk mutual fund A very low-risk AAA municipal bond fund Financial advisor Get great opinion from … Family own a nice nest egg
  5. 5. <ul><li>Discuss whether Maggie made </li></ul><ul><li>a good decision about the way she is going to make decision. </li></ul>
  6. 6. Rational Decision Making Model The models proposed the following 6 steps : (Robbins 2003) <ul><li>describes how individuals should behave in order to maximize the outcome. </li></ul>
  7. 7. Monitor and Evaluate Results Rational Decision Making Model Defining the problem 1. Identify the decision criteria 2. Prioritize & weigh the criteria 3. Generate possible alternatives 4. Critically evaluate each alternatives 5. Compute the optimal decision 6.
  8. 8. How Maggie make her decision? <ul><li>She received USD100, 000 </li></ul><ul><li>Decided to invest the money rather than spend for her routine expenses . </li></ul><ul><li>Is the investment the best option or there are other options ? </li></ul><ul><li>To generate as much alternatives ? </li></ul>
  9. 9. <ul><li>make good steps to ask financial advisor </li></ul><ul><li>was not properly evaluated whether the </li></ul><ul><li>financial advisor is competent in the field </li></ul><ul><li>ask 10 questions to Financial advisor. (Yap 2009) </li></ul>. How Maggie make her decision? Financial Advisor 1. Are they licensed to be a financial planner by regulators ? 2. Do they charge for financial advice? 3. What type of financial advice do they provide? 4. How many year have they been in business? 5. What kind of people do they work with most often? 6. What is the ratio of support staff to the financial adviser ? 7. What is the financial adviser reputation in the field? 8. When setting your appointment, ask if you can meet the financial adviser's office instead meeting him at somewhere else? 9. Are they tied to one financial product provider? 10. Ask about financial adviser's investment philosophy and approach
  10. 10. <ul><li>limit herself with 2 options. </li></ul><ul><li>should not ask financial advisor to choose the option </li></ul><ul><li>bounded rationality - shorten the decision making process. </li></ul><ul><li>when people face a complex problem , most people respond by reducing the problem to a level which it can be readily understood. (Robbins, 2003). </li></ul><ul><li>search more alternatives & do comparison (guidance from expert and family) </li></ul>How Maggie make her decision?
  11. 11. <ul><li>Has good perception on family, must be supported by fact and figure . </li></ul><ul><li>Individual and group decision making varies due to behavior. </li></ul><ul><li>Giving to others to decide without giving the responsibility or implication of the decision made is not a good idea. </li></ul>How Maggie make her decision?
  12. 12. Monitor and Evaluate Results Rational Decision Making Model What Maggie has done and missed in the Rational Decision Making Model! $100,000 Yes No Index Yes Partially No Matter of time Compute the optimal decision 6. Identify the decision criteria 2. Defining the problem 1. Prioritize & weigh the criteria 3. Generate possible alternatives 4. Critically evaluate each alternatives 5.
  13. 13. 2. Explain which investment would you choose and justify your answer.
  14. 14. Contributors towards decision making Heredity Environment Situation (Robbins 2003)
  15. 15. (Barclays Wealth 2008) Decision maker being … influenced by emotions anxiety regret fear hope
  16. 16. = Low returns ? = High returns ? High risks Low risks Investment risk Return on Investment (ROI).
  17. 17. Based on Warren Buffet , SWOT is an intellectual framework for making decisions. SWOT Analysis T hreats O pportunities W eaknesses S trengths
  18. 18. Common shortfalls in most financial strategies as below:- Too much money - one category Desire vs. Priorities Over-monitoring Inflations (Yap 2009) (Barclays Wealth 2008)
  19. 19. Five Key Suggestion by Investment Experts 1. Analyze the situation. 2) Be aware of biases 4) Do not assume that specific decision style is appropriate for every scenario. 5) Try to enhance creativity. 3) Combine rational analysis with intuition.
  20. 20. Three Money Buckets Concept <ul><li>Putting money in the right buckets </li></ul>(Yap 2009) First Money Bucket Low risks investment Second Money Bucket Moderate risks investment Third Money Bucket High risks investment 1 2 3
  21. 21. Three Money Buckets Concept <ul><li>How can Maggie put her money in the right bucket? </li></ul>$100,000 + long term wealth enhancement Second Money Bucket Returns : approximately USD20,000. Or lose USD10,000 50% of USD100,000 (USD50,000) First Money Bucket 50% of USD100,000 (USD50,000) liquidity Emergency & safe guard Returns : ( USD3,500 in 5 years ) Estimated returns at USD23,500 Third Money Bucket opportunity for high returns USD23,500 3
  22. 22. Financial Needs & Objectives of Maggie preserving wealth -> last for the entire retirement years. investment return will allow her to buy a proper house  home mortgage + other financial commitments saving + investing -> approaching retirement . stable income, if investment continues -> low risk + capital growth 1 2 3 $100,000
  23. 23. Financial Needs & Objectives of Maggie avoid wrong investments & diversify the money Not spending too much money in early years Control living expenses  inflation + medical expenses Stop assets investment too early + caught up by long term inflation can all be avoided 1 2 3 $100,000
  24. 24. 3. Based on groupshift, discuss which investment do you think Maggie’s family will choose ?
  25. 25. Group is Two or more individuals interacting & interdependent achieve particular objectives Formal Group Informal Group
  26. 26. <ul><li>complete knowledge and information </li></ul>Group Decision Making Strengths: <ul><li>diversity of views </li></ul><ul><li>acceptance of a solution </li></ul><ul><li>quality decisions </li></ul>More High
  27. 27. Group Decision Making Weaknesses : <ul><li>Time consuming </li></ul><ul><li>Dominated </li></ul><ul><li>Ambiguous responsibility </li></ul><ul><li>Conformity pressures </li></ul>
  28. 28. Groupthink is Type of thought Cohesive in group Minimize conflict Reach consensus Without critically testing, analyzing & evaluating the idea
  29. 29. Groupshift happened … <ul><li>during the group’s discussion </li></ul><ul><li>dominant decision-making norm </li></ul><ul><li>exaggerate the initial positions </li></ul><ul><li>caution dominates </li></ul><ul><li>-> conservative shift </li></ul>
  30. 30. More often Groups tend toward a … risky shift. 1. Responsibility is dissolved 2. Emotional bond between members, decrease the anxiety , actual risk seems less.
  31. 31. A way to overcome risky shift Brainstorming
  32. 32. Method of brainstorming 1. Group meeting before any discussion - individual write down ideas + problems 2. Individual Idea presentation to group - no discussion - ideas recorded 3. Group Discussion - clarify & evaluate ideas 4. Group member rank-order the ideas - highest aggregate = final decision
  33. 33. <ul><li>Individual </li></ul><ul><li>More efficient </li></ul><ul><li>Speed </li></ul><ul><li>No meetings </li></ul><ul><li>No discussions </li></ul><ul><li>Clear accountability </li></ul><ul><li>Consistent values </li></ul><ul><li>Group </li></ul><ul><li>More effective </li></ul><ul><li>More information and knowledge </li></ul><ul><li>Diversity of views </li></ul><ul><li>Higher-quality decisions </li></ul><ul><li>Increased acceptance </li></ul>Individual vs. Group Decision Making
  34. 34. Based on group shift principle , Maggie’s family will choose a moderate risk fund . $100,000
  35. 35. Summary
  36. 36. 3. Decision Making Process Decision Making 4. Decision Making Tools 1.Make Effective Decision 2.Better Management Decision Making – improve organization profits & goals
  37. 37. Thank you.