The document discusses why smart people make bad decisions and provides strategies to overcome judgment biases when problem solving. It outlines common problem solving myths and cognitive biases like availability bias, confirmation bias, and overconfidence bias that can negatively impact decision making. The document also presents frameworks for ethical and effective problem solving, including defining the problem, assessing stakeholders, using tools like affinity diagrams, and considering alternatives while avoiding rationalizations.

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2. Chapter 3
Problem Solving and Ethics
Barbara M Fowler
bfowler@chiefoutsiders.com
McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

3. The Challenge of Problem Solving
Problem Solving Myths
– Taking action is better than standing by
– Trust your gut
– I know when I’m making a poor decision
– Dividing an elephant in half makes two small
elephants
– Ethics is not my problem
– Ethical abuses are due to unethical people
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4. Why Smart People Make Bad
Decisions
• Intuition
– represents a collection of what we’ve learned
about the world, without knowing that we
actually learned it
• Common for intuition to be influenced by
unconscious biases
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5. Why Smart People Make Bad
Decisions
• Inference
– conclusion drawn about what we don’t know
based on things we do know
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6. Ladder of Inference
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7. Why Smart People Make Bad
Decisions
• Fundamental attribution error
– people tend to over attribute behavior to internal
rather than external causes
• Self-serving bias
– people attribute personal success to internal
causes and personal failures to external causes
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8. Ways People Exercise Poor Judgment
Without Knowing It
• Availability
• Representativeness
• Anchoring and Adjustment
• Confirmation
• Overconfidence
• Escalation of Commitment
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9. Ways People Exercise Poor Judgment
Without Knowing It
• Availability bias
– things that are more readily available to us are
likely to be interpreted as more frequent or
important
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10. Ways People Exercise Poor Judgment
Without Knowing It
• Hasty generalization fallacy
– people often draw inappropriate general
conclusions from specific cases because they do
not realize that their specific example is not
necessarily so in most cases
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11. Question?
What is the tendency is to collect evidence that
supports rather than negates our intuition
before deciding?
A. Anchoring
B. Adjusting
C. Confirmation bias
D. Overconfidence bias
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12. Ways People Exercise Poor Judgment
Without Knowing It
• Anchoring and adjusting
– Different starting points lead to different end
results
• Confirmation bias
– tendency is to collect evidence that supports
rather than negates our intuition before deciding
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13. Ways People Exercise Poor Judgment
Without Knowing It
• Overconfidence bias
– we posses some unique trait or ability that allows
us to defy odds, whereas others simply don’t have
such a trait
• Escalation of commitment
– people are likely to continue to invest additional
resources in failing courses of action even though
no foreseeable payoff is evident
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14. Overcoming Judgment Biases
1. Confidence estimates
2. Trial and error
3. Healthy skepticism
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15. Best Defenses for Decision Biases
1. Do not jump to conclusions
2. Do not assume a relationship is a cause
3. Do not base your conclusion only on your
own experience
4. Do not just look to support your case
5. Do not fall prey to overconfidence
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16. Question?
What type of decision is made when the most
acceptable solution to a problem is chosen
rather than the optimal one?
A. Bounded rationality
B. Satisfying
C. Satisficing
D. PADIL
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17. Solving Problems Ethically and
Effectively
• Bounded rationality
– thinking and reasoning ability is constrained by
the limitations of our minds
– It is impossible to consider simultaneously all
information relevant to any decision or problem
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18. Solving Problems Ethically and
Effectively
• Satisficing
– determining the most acceptable solution to a
problem rather than an optimal one
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19. A Problem Solving Framework
PADIL
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20. A Problem Solving Framework
• Define and Structure the Problem
– Be sure you are working on the right problem
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21. A Problem Solving Framework
How people solve the wrong problem precisely
1. Picking the wrong stakeholders
2. Framing the problem too narrowly
3. Failure to think systematically
4. Failure to find the facts
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22. A Problem Solving Framework
• Assess key stakeholders
– Stakeholders – anyone who has a “stake” in the
problem or solution
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23. Vroom’s Problem Solving Approaches
• Decide
• Consult individually
• Consult group
• Facilitate group
• Delegate group
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24. Vroom Decision Factors
• Decision significance
• Importance of commitment
• Leader’s expertise
• Likelihood of commitment
• Employee support
• Employee expertise
• Employee competence
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25. Discussion Question?
Which is the most important decision factor?
A. Decision significance
B. Importance of commitment
C. Leader’s expertise
D. Likelihood of commitment
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26. A Problem Solving Framework
Framing the problem correctly
– Black or white fallacy
• assumes that our choices are clear and limited to two
when in reality there may be many other choices
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27. A Problem Solving Framework
Thinking systematically
– System
• perceived whole whose elements “hang together”
because they continually affect each other over time
and operate toward a common purpose
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28. Systems Approach
• Events
• Patterns of behavior or trends
• Systemic structure
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29. Systems Approach
• Mental models
– prevailing assumptions, beliefs and values that
sustain the current systems
• Inquiry skills
– understanding how to ask the right questions
about a problem
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30. Tools for Understanding the Problem
Scope
• Affinity diagram
• Is-Is not
• Graphic displays
• Generate creative alternatives
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31. Tools for Understanding the Problem
Scope
Affinity Diagram
1. Write the problem statement
2. Allow each person to write as many potential
causes as possible
3. Look for similarities in the ideas
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32. Tools for Understanding the Problem
Scope
Graphic Displays
– Histogram bar chart
• allows for the display of data categories tracked against
some important standard
– Behavior over time chart (BOT)
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33. Generate Creative Alternatives
• Brainstorming
• Brainwriting
• Diversify participants
• Use metaphors and analogies
• Performance standards and feedback
• Assume a “Perfect World”
• Benchmarking
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34. Generate Creative Alternatives
• Benchmarking
– organizational representatives trying to solve a
problem go to visit other organizations that are
thought to have solved the problem successfully
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35. Characteristics of Good Alternatives
• Postponed evaluation
• Stakeholder involvement
• Organizational focus
• Time implications
• Effective
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36. Paralyzed by Choices
• Equifinality
– condition in which different initial conditions lead
to similar effects
• Devil’s advocate
– method for increasing debate and exploring a
problem from all the angles
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37. Implementing the Solution
• Implementing a solution involves others
• Does not have to happen all at once
• Often the scope of the problem is
underestimated or the problem is defined
incorrectly
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38. Ethics: Making the Tough Choices
• Ethical commitment
– level of desire to do what is right even in the face of
potential personal implications
• Ethical consciousness
– developing an ability to understand the ramifications of
choosing less ethical courses of action
• Ethical competency
– involves a thoughtful consideration of ethics in each stage
of the problem solving process
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39. Right vs. Right Scenarios
• Truth vs. loyalty
• Individual vs. community
• Short-term vs. long-term
• Justice vs. mercy
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40. Fairness in Decision-Making
• Economics
• Equality
• Justice
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41. Justice
• Distributive justice
– perceived when people view fairness of a
particular outcome
• Procedural justice
– perceived when the process used to make
decisions is fair
• Interactional justice
– perceived when people treat others respectfully
and explain decisions adequately
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42. Intensity of Ethical Issues
• Magnitude of consequences
• Social consensus of good/evil
• Probability of harm/benefit
• Temporal immediacy
• Proximity
• Concentration of effect
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43. Making the Tough Choices
Moral imagination is the ability to:
1. Step out of one’s situation and see the
possible ethical problems present
2. Imagine other possibilities and alternatives
3. Evaluate from an ethical new possibility one
has envisioned
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44. Rationalizations and Ethical Traps
• If it’s legal, it’s ethical
• I was only trying to help
• Everyone else
does it
• It’s owed to me
• As long as I don’t
gain
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45. Quick Tests of Your Actions
1. Is my action legal?
2. Am I behaving fairly?
3. Is my decision in line with my own values?
4. Will others be negatively impacted?
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46. Test Your Ethics
• Use the self assessment at monster.com
to test your business ethics
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