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Rational decision making model and heuristics

Rational decision making model and Heuristics

Varuni Wadhwa (1712139)

University Canada West

Professor: Dr. Min Kay

MGMT 660 Leadership and Decision making

January 20th, 2019

Abstract

Individuals make decisions on a daily basis that too throughout the day. Human brain works as such that there are two systems, that is system 1 and system 2 that help in decision making process. System 1 is the effortless, fast and automatic, while on the other hand system 2 is effortful, slow and logical. System 1 is something that is always working but to make rational decisions system 2 is to do work. A tool that can be used to make rational decisions with the help of system 2 is the decision matrix, which is used t take big decisions like buying a property or selecting the best job. In decision matrix ranks are given to the criteria jolt down which are significant for the individual and alternatives are ranked based on the chosen criteria. However, people not always make choices rationally as many decisions are to be made in a day and thinking rationally consumes a significant amount of time. So, at those times individuals use heuristics that are the shortcuts the human brain uses to make decisions. Heuristics have been discussed below in the paper based on how each heuristic can be used to choose an ideal job.

Keywords: Effortless, Automatic, Effortful, Logical, Rational, Criteria, Heuristics.

Rational decision making model

Any individual makes hundreds of decisions in a single day from, ‘what to have for breakfast’ to ‘what time to wake up tomorrow’. For decisions like these which are not to be evaluated or examined, so the system 1 in the human brain makes such decisions. However, there are some decisions which are to be assessed or thought about carefully, like buying a car. In situations like these Decision matrix is something that helps individuals decide rationally, considering relevant information and details (Bazerman & Moore, 2012). Decision matrix is a tool that gives weights to criteria and then ranks them, and the most weighted criteria is the one that is to be decided (Hassan, Saman, Sharif, & Omar 2016).

Starting a job is something which is crucial for any individual. As finishing my MBA and getting a good job in the industry that I desire is something I would have always wanted. The 5 job offers that I have are- Marketing manager, Market research analyst, Production manager, Wealth manager, Operations manager. Deciding if working in marketing sector with jobs like Marketing manager, Market research analyst, production manager, or banking sector as a Wealth manager, or operations being operations manager is something which is to be decided upon.

Being the operations manager in Amazon is something that is amazing, that too in Vancouver, BC. On average operations manager in Canada gets $68″,000 annually. The satisfaction will be high being the operations managers as this is something that I would prefer to do if other criteria were the same (“General / Operations Manager Salary (Canada) | PayScale”, 2019).

Market research analyst job in Altus Groups, Toronto, ON, which is the leading company in providing technology services. Market research analyst get $65000 annually (“What We Do – Altus Group”, 2019) (“Market Research Analyst salary – Average salary”, 2019).

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Working in the USA, in Infosys as marketing manager will be exciting, but my personal life will get affected by moving to USA. Earning USD100″,053 annually on an average is the highest I will be paid from the other job offers that I have (“Salary for Marketing Manager | Salary.com”, 2019).

Toronto Dominion (TD) Bank offers $115″,000 on an average to its wealth managers annually (“Wealth Management Salaries in Canada”, 2019).

Working as a Production manager in Ikea and earning on an average $80″,000 annually (“Production manager salary – Average salary”, 2019).

Choosing which job to take from the above-mentioned job offers, I will make a decision matrix. Keeping in mind the five criteria which are vital to me that is Satisfaction, job security, financial security, Peach of mind, and balance between personal and professional life. Ranking them from 1 to 3 and keeping the five job offers as the five different alternatives, I have listed them. Some are subjective so have done with my extinct and some like salary they provide I have done some research.

After completing the decision matrix, it is clear that the job offer of the Market research analyst is the best option out of the five job offers that I have. As the total of the five job offers is 28, 23, 23, 21 and 20, ranging from highest to lowest.

Heuristics

Heuristics are the mental shortcuts that a person’s brain take while making decisions. These are basically when system 1 of the brain is making decisions, and system 2 is not working at that time. System 1 is the one which is fast, automatic and effortless, on the other hand, system 2 is slow and effortful. So whenever an individual does not use their system 2 to make rational decisions and decide with system 1 are called heuristics. There are 4 heuristics: – confirmation heuristic, availability heuristic, representativeness heuristic and affect heuristic.

Availability heuristics

This heuristic is the one which is related with vividness and recency. In this heuristic people generally choose the alternatives that are more recent in their memory or are more critical as compared to the other alternatives. For example, when you frequently hear about people losing their jobs, you too start to worry about the same because this is very recent in your memory. Individuals not always have the time and resources or even the complete information to decide rationally, so the best alternative at that time is the availability heuristic. Which acts as one of the potential advantages of this heuristic. While on the other hand, this heuristic has some problems as well such as, system 1 always keeps or chooses the information that is more vivid or recent like when you hear about many thefts in the news and become worried, but they are not even in your area.

When choosing the best job offer availability heuristic can help as in my MBA, I have recently studied the course Operations management, so that memory is very recent in my mind and I might think that I have more knowledge about that from the course I have recently completed. So based on that recency effect I might choose Operations manager offer.

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Representativeness Heuristic

Like different heuristics, in Representativeness Heuristic making decisions dependent on representativeness is expected to fill in as a sort of alternate mental way, enabling us to settle on choices rapidly. Be that as it may, it can likewise prompt mistakes. Representativeness Heuristic proves that we gauge the probability of an occasion by contrasting it with a current model that as of now exists in our brains. Our model is the thing that we believe is the most significant or ordinary case of a specific occasion or item.

For example- Dean and Alvin are two persons, and someone has to identify who plays Basketball out of them. The stereotype suggests the taller person out of Dean and Alvin is likely to be a basketball player. This can be true, but there is a possibility of choosing the wrong person based on the stereotypical physical appearance of a basketball player. Another example can be drawn from a personal experience. Me and my friend were walking by a road and suddenly we encountered a person who identified me as an Indian based on the stereotype that all Indians have a wheatish complexion. My friend, who is an Indian as well, was identified as a native of Iran by that same stranger, again based upon his skin tone as my friend has a fair complexion. This is a perfect example of how Representativeness Heuristic can lead to errors as well. In some cases, it can likewise prompt blunders.

If I were suing representativeness heuristics while choosing the job offer from the ones that I have received, I would go for the marketing manager. As people have this stereotype in their mind that marketing job is not something that is a 9 to 5 job basically and people make connections, as marketing managers connect with may people. However, this might work wrongly, as marketing is something that would require more time investment by the manager, even more than the regular eight hours, and you might not end up making good connections.

Confirmation Heuristics

Confirmation Heuristic is a sort of subjective inclination that includes favoring data that affirms your already existing convictions or predispositions. Confirmation Heuristic affects how we accumulate data, yet it additionally impacts how we translate and review data. The people with Confirmation Heuristic put more prominent sign on the “proof” that underpins what they as of now accept. These people may even look for “evidence” that further backs up this conviction while limiting models that don’t bolster the thought. For instance, individuals who bolster or contradict a specific issue won’t just look for data to help it, and they will likewise decipher news stories in a way that maintains their current thoughts. They will also recollect subtleties in a way that strengthens these frames of mind.

For Instance, a person planning to buy a car (Ford Mustang), visits two different car dealers named A and B. He would be interested in searching out positive feedback and conclusion pieces that reaffirm the decision made by the buyer. Car dealer A expounds all the key-features of the car and substantiates his choice to be a legitimate choice. He elucidates them in such a way that bolsters his present perspective. Whereas Car dealer B strives to prove that Chevrolet Camaro is a better option as compared to Ford Mustang. Ryan would choose to deal with Car dealer A as the proof which he was looking for to validate his decision was provided to him by the Car dealer A.

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If I will use Confirmation heuristics while choosing a job from the job offers I have got, I would select Operations manager as already mentioned above in section 1 that I have interest in operations field as compared to the other jobs. I would look for reasons that would act as confirmation to my belief because humans always want to hear that they are right; so when any information will serve as confirmation for choosing operations manager as the best offer, I will be more inclined towards that information being provided.

Affect Heuristic

When an individuals mood affect the decision the person is making is known as affect heuristic. For instance, if the manager has a bad mood due to his fight with his wife in the morning, and he has to evaluate employees work. He will be very harsh towards the employees. On the other hand, if he has a good mood due to any reason like his wife made his favorite item for breakfast so he will be very lenient with his employees. This heuristic might save time, but at the end of the day, we are letting our emotions control our actions, which might lead to regrets in the future.

While choosing jobs, an individual might use affect heuristic as at the time of offering job if I like the proposal of the employer, I might accept that job just because I am happy. For instance, if any company out of the above-mentioned ones give me a sign up bonus, I will choose that as it will make me happy at that moment. However, the job might not be the best option for me, but that will be realized later.

Conclusion

As shown in appendix 1, an ideal job for me while considering the rational decision making process is Market research analyst. As that ranks the highest among the others. But when it comes to thinking with system 1, I might choose different job offers depending upon the heuristics, as mentioned above.

References

Bazerman, M., & Moore, D. (2012). Judgment in Managerial Decision Making (8th ed.).

General / Operations Manager Salary (Canada) | PayScale. (2019). Retrieved from https://www.payscale.com/research/CA/Job=General_%2F_Operations_Manager/Salary

Hassan, M., Saman, M., Sharif, S., & Omar, B. (2016). Sustainability evaluation of alternative part configurations in product design: weighted decision matrix and artificial neural network approach. Clean Technologies & Environmental Policy, 18(1), 63–79. https://doi-org.ezproxy.myucwest.ca/10.1007/s10098-015-0990-1

Kay, M. (2019). University Canada West. Leadership & Decision Making

Market Research Analyst salary – Average salary. (2019). Retrieved from https://neuvoo.ca/salary/?job=Market%20Research%20Analyst

Production manager salary – Average salary. (2019). Retrieved from http://neuvoo.ca/salary/?job=production+manager

Salary for Marketing Manager | Salary.com. (2019). Retrieved from https://www1.salary.com/Marketing-Manager-Salary.html

Wealth Management Salaries in Canada. (2019). Retrieved from https://www.glassdoor.ca/Salaries/canada-wealth-management-salary-SRCH_IL.0″,6_IN3_KO7″,24.htm?countryRedirect=true

What We Do – Altus Group. (2019). Retrieved from https://www.altusgroup.com/what-we-do

Appendix

Criteria

Rank

Market research analyst

Production manager

Marketing manager

Operations manager

Wealth manager

satisfaction

3

2

6

2

6

2

6

3

9

1

3

Financial security

2

1

2

2

4

3

6

1

2

2

4

Balance between personal and professional life

1

3

3

2

2

1

1

2

2

3

3

Peace of mind

2

3

6

1

2

2

4

2

4

2

2

Job security

3

3

9

3

9

2

6

1

3

3

9

Total

26

23

23

20

21

Appendix 1- Decision Matrix

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