Chp4 real tesk bank mgmt 201 PDF

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Fundamentals of Management, 7e (Robbins/DeCenzo/Coulter) Chapter 4 Foundations of Decision Making 1) In decision making, a problem can be defined as a discrepancy between what exists and what the problem solver desires to exist. Answer: TRUE Explanation: A problem is a difference between a desired state and an existing state. For example, suppose a person is hungry—the existing state of not having food. The desired state is to obtain food. So the problem is defined as the difference between the no-food state and the food state. Diff: 2 Page Ref: 58 Objective: 3.1 2) The second step in the decision-making process is identifying a problem. Answer: FALSE Explanation: The identification of a problem is the first step in the decision-making process. Once you have identified a problem, you can decide how to solve it. Diff: 1 Page Ref: 59 Objective: 3.1 3) A decision criterion defines factors that are relevant in a decision. Answer: TRUE Explanation: Decision criteria are comprised of factors that will affect a decision. If the decision is between driving or riding a bike to work, criteria might include cost, weather, convenience, ecological considerations, time, clothing, and so on. Diff: 2 Page Ref: 59 Objective: 3.1 4) Managers identify a problem by comparing the current state of affairs to some standard. Answer: TRUE Explanation: The standard for comparison might be a goal that has been set, or comparison with some historical standard or standard set by a competitor. For example, a manager might detect a discrepancy between a goal of 100 units sold and the existing state of only 50 units sold. This discrepancy constitutes a problem that must be solved. Diff: 3 Page Ref: 59 Objective: 3.1 5) All criteria are equally important in the decision-making process. Answer: FALSE Explanation: Criteria have differing values, depending on their importance. The importance of an individual criterion is indicated by how it is weighted. The greater the weight assigned to the criterion, the greater its importance. Diff: 2 Page Ref: 59 AACSB: Analytic Skills Objective: 3.1

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6) Identifying the wrong problem is just as much a failure for a manager as identifying the right problem and failing to solve it. Answer: TRUE Explanation: Problem identification is a critical part of problem solving and decision making. Solving the wrong problem does nothing to further a manager's goals so it is no value. Diff: 2 Page Ref: 59 AACSB: Analytic Skills Objective: 3.1 7) The final step of the decision-making process is to implement the alternative that has been selected. Answer: FALSE Explanation: Implementation of the best alternative is the second-to-last step in the process. The final step of the process is to appraise the result of the decision to see if it solved the problem. Diff: 1 Page Ref: 61 Objective: 3.1 8) A heuristic can simplify the decision-making process. Answer: TRUE Explanation: A heuristic is a rule of thumb that is used to simplify the decision-making process by allowing the decision maker to focus on just a few variables, rather than all variables. When used wisely, heuristics make decision making easier and simpler. Diff: 1 Page Ref: 62 Objective: 3.1 9) Because heuristics simplify the decision-making process, they are unlikely to lead to errors. Answer: FALSE Explanation: By virtue of their simplicity, heuristics can lead to many different kinds of biases and errors. Using heuristics lures decision makers into ignoring critical elements of the situation and oversimplifying the problem. Diff: 1 Page Ref: 62 AACSB: Analytic Skills Objective: 3.1 10) Decision makers who "cherry-pick" information that matches what they already know are guilty of confirmation bias. Answer: TRUE Explanation: Confirmation bias means that the decision maker has already made up his or her mind and is seeking only the information that will confirm that position. Cherry-picking is a way of preferentially selecting information that supports your position and ignoring all other information. Diff: 1 Page Ref: 62 AACSB: Analytic Skills Objective: 3.1

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11) A basketball coach who takes a very good shooter out of a game because she missed her last two shots has availability bias. Answer: TRUE Explanation: Availability bias is the tendency to over-accentuate recent history and discount long-term patterns. This basketball coach is ignoring long-term patterns—the player is a good shooter—in favor of very recent history—two missed shots—so he is displaying availability bias. Diff: 1 Page Ref: 63 AACSB: Analytic Skills Objective: 3.1 12) A rational decision will never fail to provide the best and most successful solution to a problem. Answer: FALSE Explanation: A rational decision is logical, objective and will maximize the likelihood of solving a problem or achieving a goal. That said, a decision can be arrived at through a rational process and still be wrong due to the decision maker lacking complete information about the situation. Diff: 3 Page Ref: 64 AACSB: Analytic Skills Objective: 3.2 13) Maximizing value means a decision will have the best possible outcome for the parties involved. Answer: TRUE Explanation: Maximizing value is a matter of making a decision that results in the ideal, or best possible solution. A baseball manager, for example, wants to make a decision that will not only score runs, a favorable outcome, but win the game, the ideal or maximal outcome. Diff: 2 Page Ref: 65 AACSB: Analytic Skills Objective: 3.2 14) One assumption of bounded rationality is that managers can analyze all relevant information about all alternatives for a situation. Answer: FALSE Explanation: The idea of bounded rationality says that decision makers can never analyze all information for the alternatives involved. So decision makers need to put limits on how much information they will analyze. Diff: 2 Page Ref: 65 AACSB: Analytic Skills Objective: 3.2

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15) A synonym for the word satisfice is maximize. Answer: FALSE Explanation: The words satisfice and maximize are opposites rather than synonyms. When a manager does not have enough information to maximize, or find the best possible solution to a problem, he or she must compromise, or satisfice. When you satisfice you accept not the best solution, but a solution that is "good enough." Diff: 2 Page Ref: 65 AACSB: Analytic Skills Objective: 3.2 16) One assumption of bounded rationality is that managers usually make rational decisions. Answer: TRUE Explanation: Bounded rationality assumes that managers are logical, objective, and fairly rational when they make decisions. However, since managers often don't have access to all of the relevant information for a given situation, they must bound their rationality within the limits of the information they actually have. Diff: 2 Page Ref: 66 AACSB: Analytic Skills Objective: 3.2 17) Intuitive decision making is systematic, logical, and orderly. Answer: FALSE Explanation: Intuitive decisions may be perfectly sound, but they are not arrived at through a systematic analysis of alternatives. Instead, intuitive decisions are quickly made and rely on experience, unconscious reasoning, feelings, and hunches. Diff: 2 Page Ref: 66 AACSB: Analytic Skills Objective: 3.2 18) Intuitive decision making cannot be a part of the rational decision-making process. Answer: FALSE Explanation: Intuitive decisions are not arrived at in a deliberative, systematic manner, but they can be objective and logical, so they are considered rational. Diff: 2 Page Ref: 66 AACSB: Analytic Skills Objective: 3.2 19) The expression "throwing good money after bad" is an example of an escalation of commitment. Answer: TRUE Explanation: Throwing good money after bad typically denotes a situation in which money has already been wasted on an unsuccessful venture—"bad money." Throwing more "good money" into the situation simply because of the "bad money" already committed is a clear example of escalation of commitment. Diff: 2 Page Ref: 66 AACSB: Analytic Skills Objective: 3.2

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20) Emotions should always be strictly ignored in a decision-making process. Answer: FALSE Explanation: Decisions that were accompanied by strong feelings were found to be more reliable than those that did not have an emotional component, according to one study, especially in cases in which decision makers acknowledged their feelings. So emotions should not be ignored during the decision-making process. Diff: 2 Page Ref: 67 AACSB: Analytic Skills Objective: 3.2 21) Programmed decisions tend to be routine. Answer: TRUE Explanation: A programmed decision is a routine decision that works well in solving structured problems that present no ambiguity or unknown elements. Programmed decisions can usually be solved using a systematic procedure, rule, or policy. Diff: 1 Page Ref: 68 AACSB: Analytic Skills Objective: 3.3 22) A rule is simpler than a policy or a procedure to implement. Answer: TRUE Explanation: A rule is a simple statement that can be applied directly to a situation. For example, a broker can easily follow a rule to sell a specific stock when it reaches a specific price point. A procedure or policy may have an identical outcome, but a more complicated series of steps must be taken to arrive at that outcome. Diff: 2 Page Ref: 68-69 AACSB: Analytic Skills Objective: 3.3 23) Implementing a procedure requires more judgment and interpretation than implementing a policy. Answer: FALSE Explanation: A procedure is a series of steps that must be followed to arrive at a decision, each of the steps being clear and straightforward. A policy provides guidelines rather than steps for the decision maker to follow. Each guideline must be interpreted and evaluated for the situation at hand. Therefore a policy requires much more judgment and interpretation than a procedure. Diff: 2 Page Ref: 69 AACSB: Analytic Skills Objective: 3.3 24) A highway speed limit is an example of a policy. Answer: FALSE Explanation: A highway speed limit is an example of a rule, not a policy. Policies require the decision maker to exercise judgment and interpretation. Following a speed limit, on the other hand, involves no interpretation. The driver simply must not exceed the posted speed. Diff: 2 Page Ref: 69 Objective: 3.3

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25) Managerial decisions are likely to become more programmed as managers rise in an organizational hierarchy. Answer: FALSE Explanation: Problems that managers face become more unique, ambiguous, and difficult as the status of a manager rises, not more programmed. Top managers are paid more than lower-level managers specifically because they are expected to make difficult decisions. More routine decisions are made by lower-level managers. Diff: 2 Page Ref: 70 Objective: 3.3 26) Most managerial decisions include an element of risk. Answer: TRUE Explanation: Few situations involve certainty, in which a manager knows all outcomes in a situation and can choose between them. Instead, situations usually involve risk, in which the manager must estimate the probability of different outcomes. Diff: 1 Page Ref: 70 Objective: 3.3 27) Uncertainty involves a situation in which the probability of a certain outcome is known to be small. Answer: FALSE Explanation: In an uncertain situation, the probabilities of specific outcomes are not known and cannot be reasonably estimated. Therefore, the probability that any outcome is high or low cannot be determined. Diff: 3 Page Ref: 70 AACSB: Analytic Skills Objective: 3.3 28) A manager is more confident of his assessment of a situation if it involves risk rather than uncertainty. Answer: TRUE Explanation: With risk, a manager is able to estimate the likelihood of specific outcomes. With uncertainty, not enough is known even to make estimates. So a manager would be more confident of a position involving risk. Diff: 3 Page Ref: 70 AACSB: Analytic Skills Objective: 3.3 29) Group decisions tend to provide more complete information than individual decisions. Answer: TRUE Explanation: Because "two heads are better than one" groups tend to identify more alternatives and consider more information before coming to a decision. Diff: 1 Page Ref: 71 Objective: 3.4

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30) An advantage of group decisions is that they increase the perception of the legitimacy of the solution. Answer: TRUE Explanation: When decisions that affect many people are made without their consent, they tend to be less well accepted than group decisions in which all parties are consulted. A group decision is perceived to be more legitimate because it was made in a more democratic manner. Diff: 1 Page Ref: 71 AACSB: Communication Objective: 3.4 31) A drawback of group decision making is groupthink. Answer: FALSE Explanation: When a group experiences groupthink, members do not freely express their opinions for fear of standing out and having to assume responsibility for their actions. Groupthink often results in bland, unimaginative decisions that fail because they are too timid. Diff: 1 Page Ref: 72 AACSB: Communication Objective: 3.4 32) Groups tend to be more efficient and less effective than individual decision making. Answer: TRUE Explanation: The reverse is usually true. Because achieving consensus within a group takes time, group decision making often takes longer than individual decision making it less efficient. However, groups are typically more thorough than individuals, so group decisions are often more effective at achieving goals than decisions made by individuals. Diff: 2 Page Ref: 73 Objective: 3.4 33) Two major advantages of electronic meetings are anonymity and honesty. Answer: TRUE Explanation: Electronic meetings allow participants to type in comments without needing to identify themselves. This creates an atmosphere in which people feel more free to express their true feelings. Diff: 2 Page Ref: 74 AACSB: Technology Objective: 3.4 34) A country with high uncertainty avoidance and high power distance is more likely to engage in groupthink than a country with low uncertainty avoidance and low power distance. Answer: TRUE Explanation: High uncertainty avoidance makes managers avoid difficult decisions and be overly agreeable and accommodating. High power distance allows high-status individuals to dominate groups. Both of these attributes would contribute to groupthink, the tendency of groups to avoid controversy and conform to conventional positions. Diff: 2 Page Ref: 75 AACSB: Analytic Skills Objective: 3.5

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35) Creative solutions to problems are valued because they are new and different from traditional solutions. Answer: FALSE Explanation: Creative solutions are valued only if they solve problems in ways that are superior to conventional solutions. Often, solving a problem in a creative way can give a company a competitive edge on its competitors. Diff: 1 Page Ref: 71 Objective: 3.5 36) Decision making begins with ________. A) selecting alternatives B) identifying decision criteria C) identifying a problem D) eliminating false alternatives Answer: C Explanation: C) The process of decision making begins with the identification of a problem. Once the problem has been identified the decision maker goes through a series of steps to solve the problem. Selecting alternatives is part of the decision-making process but it is a step that comes much later, after criteria have been identified, weighed against one another, developed into alternatives, and analyzed as alternatives. Eliminating false alternatives, is something that a decision maker might do, but it is not a recognized part of the process. Diff: 2 Page Ref: 58 Objective: 3.1 37) Which of the following defines a problem in the decision-making process? A) a discrepancy between what exists and what the decision maker desires to exist B) a discrepancy between the ideal and the practical C) something that causes irritation D) something that calls for attention Answer: A Explanation: A) Though problems certainly can irritate, and merit attention, these characteristics are not universal enough by themselves to define what a problem is in the decision-making process. In this process, a problem is defined as a discrepancy, or difference between how things are and how the decision maker wants things to be. A problem is not a difference between the ideal and the practical, but rather just a situation in which things are less than satisfactory, and the decision maker intends to take action to make them satisfactory. Diff: 1 Page Ref: 58 Objective: 3.1

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38) The decision-making process consists of a series of eight steps that identify a problem and work toward ultimately ________. A) determining if there is a solution to the problem B) solving the problem C) making a plan to solve the problem D) breaking down the problem into a series of steps Answer: B Explanation: B) The goal of the decision-making process is to solve the problem that has been identified. The process assumes that there is a solution to the problem, so determining if there is a solution to the problem is not correct. The process includes making a plan to solve the problem and breaking the problem down into steps. However, ultimately the decision maker wants to implement the best alternative to solve the problem, then evaluate this alternative to see if it actually resulted in a successful solution. Diff: 1 Page Ref: 58 AACSB: Analytic Skills Objective: 3.1 39) To identify a problem, a manager ________. A) compares one set of standards or goals to a second set of standards or goals B) looks for unhappy customers C) uses intuition to see that things don't look right D) compares the current state of affairs with some standard or goal Answer: D Explanation: D) A manager compares what she has now to some standard or goal to identify a problem. The standard or goal may represent some level of performance from the past, or it could be an as yet unreached level that the manager thinks can be attained. Looking for unhappy customers or using intuition to see when things don't look right may be ways to identify problems but they are not general problem identification methods. Finally, comparing one set of standards or goals to a second set is incorrect because a problem is always identified by comparing an actual state to a standard or goal, not one set of standards or goals to another. Diff: 1 Page Ref: 58 Objective: 3.1 40) A manager can faithfully execute the decision-making process, but still end up with nothing of value if ________. A) he fails to identify the correct problem B) he fails to assign number values to different criteria C) he solves the problem inefficiently D) he fails to correctly identify the steps of the process Answer: A Explanation: A) Assigning number values to decision criteria may often be helpful in the decision-making process, but they are not required for a successful outcome. Solving the problem inefficiently may not be ideal, but it is not without value. Identifying the steps of the process have little to do with the success of the process. That leaves failing to identify the correct problem—it does no good to solve a problem if it is the wrong problem. Solving the wrong problem has no benefit for the organization or its goals. Diff: 2 Page Ref: 59 AACSB: Analytic Skills Objective: 3.1 9 Copyright © 2011 Pearson Education, Inc

41) A manager is considering purchasing new computers for her department. The manager spends time assessing the computers her department now has. Which stage of the decisionmaking process is she going through? A) identification of a problem B) identification of decision criteria C) development of alternatives D) implementation of an alternative Answer: A Explanation: A) The first thing the manager needs to do is identify the problem. More specifically, she needs to determine whether she actually has a problem or not. If the computers her department now has are performing satisfactorily, she may decide that she doesn't have a problem ...