Managers often make decisions with limited information, limited time, and imperfect ability to predict what will happen. This lesson explores four related barriers that can make sound decisions difficult.
Bounded rationality is the idea that people cannot be completely rational when making complex decisions because they cannot fully identify every possible alternative or understand every consequence. Human brains can process only a limited amount of information. Managers may also have to decide before they have time to gather all relevant data.
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Bounded rationality
Limits on fully rational decision-making caused by constraints on information, time, and people's capacity to process alternatives and consequences.
Escalation of commitment
Continuing to invest in a poor decision despite evidence that it is producing increasingly negative outcomes.
Familiarity and similarity bias
Favoring people, ideas, or options that feel familiar or similar, even when familiarity is not evidence of quality.
Process conflict and relationship conflict
Process conflict is disagreement about how work should be done; relationship conflict is personal disagreement or hostility.
Reducing decision bias
Use diverse perspectives, consistent criteria, verified evidence, and active searches for information that could challenge an initial belief.
Quiz questions
Why can nonprogrammed decisions be especially challenging for managers?Answer: They involve unfamiliar situations, so managers may not know what information to gather or how to predict outcomes.
What does uncertainty mean when a manager is choosing among alternatives?Answer: The manager cannot know each alternative's outcome before choosing.
How can familiarity influence a manager's evaluation of a job applicant?Answer: The manager may favor an applicant who feels familiar, even without evidence of stronger qualifications.
Which practice can help a manager counter confirmation bias?Answer: Look actively for evidence that could challenge an initial belief and evaluate it fairly.
What is a central feature of a learning-oriented organizational culture?Answer: It values curiosity, listening, continual learning, and collaboration.
Based on Principles of Management by David S. Bright, Anastasia H. Cortes, Eva Hartmann, K. Praveen Parboteeah, Jon L. Pierce, Monique Reece, Amit Shah, Siri Terjesen, Joseph Weiss, Margaret A. White, Donald G. Gardner, Jason Lambert et al. (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.