Tb08

CHAPTER 8: FUNDAMENTALS OF DECISION MAKING
Test Correlation Table Question Types/Level of Difficulty

LEARNING OBJECTIVES Easy Moderate Difficult

1. State the conditions under which TF 1, 3, 7, 10, 11 2, 5, 6 4, 8, 9, 12
individuals make decisions.

MC 4, 6, 8, 9, 10, 1, 3, 12, 17, 23 2, 5, 7, 11, 13,
14, 15, 16, 19, 18, 20, 21
22

ES — 1, 3 2

2. Describe the characteristics of TF 14, 16, 19 15, 17, 20 13, 18
routine, adaptive, and innovative
decisions.
MC 24, 27, 33, 36, 25, 26, 28, 29, 35, 37, 39, 43
41, 45 30, 31, 32, 34,
38, 40, 42, 44

ES — — 4, 5, 6

3. Explain the three basic models of TF 22, 27, 29 21, 23, 24, 25, —
decision making. 26, 28, 30

MC 47, 52, 57, 64, 48, 49, 50, 53, 46, 51, 58, 65,
66, 68, 79, 81, 54, 55, 56, 59, 71, 73, 74, 76,
82, 84, 85, 86, 60, 61, 62, 63, 77, 89, 93, 104
87, 91, 92, 95 67, 69, 70, 72,
75, 78, 80, 83,
88, 90, 94, 96,
97, 98, 99,
100, 101, 102,
103

ES — 7, 8 9, 10

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True/False Questions
Learning Objective 1

1. Decision making includes defining problems, gathering information, generating
alternatives, and choosing a course of action.

ANSWER: T, Knowledge, Easy, p. 208

2. Intel’s CEO illustrates the planning and administration competency in the comment:
“Occasionally it is more important to get the decision made than it is to collect more
data.”

ANSWER: F, Knowledge, Moderate, p. 209

3. Decision making underlies most managerial competencies.


4. The conditions under which individuals in an organization make decisions are influenced
by developments and events that they can’t control but that may in the future influence
the results of their decisions.

ANSWER: T, Knowledge, Difficult, p. 209

5. Mark Meadows, an employee of Texas Instruments, is making decisions under a
condition of being fully informed, as well as having alternative solutions the results of
which are totally predictable. He is operating under the condition of certainty.

ANSWER: T, Application, Moderate, p. 210

6. Decision making under the condition of certainty is the norm for most managers.


7. Risk is the condition under which individuals can define a problem, specify the
probability of certain events, identify alternative solutions, and state the probability of
each solution leading to the desired results.


8. Risk generally means that the problem and the alternative solutions fall somewhere
between the extremes of being unknown and ambiguous.

ANSWER: F, Knowledge, Difficult, p. 210

9. Susie Contreras is determining the type, amount, and reliability of information that
influences the level of risk. She should look at whether she can use objective or
subjective probability in estimating the outcome.

ANSWER: T, Application, Difficult, pp. 210–211

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10. Uncertainty is the condition under which an individual doesn’t have the necessary
information to assign probabilities to the outcomes of alternative solutions.


11. Dealing with uncertainty is an important facet of the jobs of many managers and other
professionals, including research and development engineers.


12. Managers, teams, and other professionals often need to absorb uncertainty by using
their intuition, creativity, and all available information to make a judgment regarding the
course of action to take.



13. The considerations of certainty, risk, and uncertainty provide an underpinning to the
basic types of decision—routine, adaptive, and innovative.


14. Decisions may be classified as routine, innovative, and comprehensive.

ANSWER: F, Knowledge, Easy, p. 213

15. The bank teller with an out-of-balance cash drawer at the end of the day faces an
ambiguous situation.

ANSWER: F, Application, Moderate, p. 213

16. Alternative solutions range from the known and well defined to the untried and
ambiguous.


17. Adaptive decisions are choices made in response to fairly common and routine
problems.


18. Continuous improvement requires commitment toward occasional improvements year
after year.

ANSWER: F, Knowledge, Difficult, p. 217

19. Innovative decisions are based on the discovery, identification, and diagnosis of
unusual and ambiguous problems and/or the development of unique or creative
alternative solutions.


20. Because innovative decisions usually represent a sharp break with the past, they
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normally happen in a logical, orderly sequence.



21. The bounded rationality model prescribes a set of phases that individuals or teams
should follow to increase likelihood that their decisions will be logical and optimal.


22. There are seven phases in the rational decision making model.


23. Ryan Keeley, a plant manager, has agreed to select an acceptable goal or alternative
solution rather than searching for the best available goal or alternative solution. This
concept is known as satisficing.

ANSWER: T, Application, Moderate, p. 228

24. The law of large numbers bias refers to the tendency to view a few incidents or cases as
representative of a larger population even when they aren’t.


25. The political model describes the decision-making process in terms of the self-interests
and goals of powerful external and internal shareholders.

ANSWER: T, Knowledge, Moderate, p. 228

26. Organizational politics is the ability to influence or control individual, team, departmental,
or organizational decisions and goals.


27. Scapegoating is the casting of blame for problems or shortcomings on an innocent or
only partially responsible individual, team, or department.


28. Miguel Del Toro recognizes that he must balance the conflicting goals among his
various stakeholder groups as he seeks to make an important decision. Miguel will likely
use the political model of decision making.

ANSWER: T, Application, Moderate, pp. 228–229

29. Stakeholders within an organization often use power as a major source of information.

ANSWER: F, Knowledge, Easy, p. 230

30. Co-optation refers to bringing new stakeholder representatives into the strategic
decision-making process as a way to avert threats to an organization’s stability or
existence.
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ANSWER: T, Knowledge, Moderate, p. 230

Multiple Choice Questions

Preview
1. In the Preview Case, Craig Barrett of Intel considers three big steps in his decision-
making process which include all of the following except __________.
a. free discussion among participants
b. determination of risks
c. clear decision from the discussion
d. everyone must “buy in”

ANSWER: B, Knowledge, Moderate, p. 208

2. Before Craig Barrett, CEO of Intel finalizes a decision, he finds it important to
__________.
a. understand all of the data
b. collect any missing data
c. make sure there are no major blind spots
d. All of the above are steps in Barrett’s decision-making process.

ANSWER: C, Knowledge, Difficult, p. 208


3. Every day, managers typically make decisions using a process that includes all of the
following basic elements except __________.
a. implement strategies
b. generate alternatives
c. define the problem
d. choose a course of action

ANSWER: A, Knowledge, Moderate, p. 208

4. _________ underlies most managerial competencies.
a. Common Sense
b. Decision making
c. Managerial input
d. Forward thinking

ANSWER: B, Knowledge, Easy, p. 208

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5. The conditions under which decision are made can be broadly classified as
__________.
a. certainty and risk
b. certainty, risk, and uncertainty
c. uncertainty and risk
d. certainty and uncertainty

ANSWER: B, Knowledge, Difficult, p. 209

6. As information dwindles and becomes ambiguous, the condition of __________ enters
into decision making.
a. certainty
b. satisficing
c. loss
d. risk

ANSWER: D, Knowledge, Easy, pp. 209–210

7. The condition of certainty means that the __________ and __________ are known.
a. problem; decision
b. problem; alternative solutions
c. opportunities; threats
d. strengths; weaknesses


8. Dewann Everett is president of Halray Industries. His decision is to choose a marketing
plan. He knows all about the problem, alternative plans are obvious, and the results of
each plan are clear. Everett will make his decision under a condition of __________.
a. risk
b. guarantee
c. loss
d. certainty

ANSWER: D, Application, Easy, p. 210

9. Jim Iverson has been asked to schedule 10 of his employees for overtime. Jim can
determine the cost of the overtime in an environment of __________.
a. certainty
b. guarantee
c. loss
d. risk

ANSWER: A, Application, Easy, p. 210

10. When Kirsten Colbert has full knowledge of a problem, its alternative solutions, and the
results of those solutions, she makes decisions under a condition of __________.
a. risk aversion
b. complexity
c. uncertainty
d. certainty

ANSWER: D, Application, Easy, p. 210
200


11. When Robert Gibbs has to make decisions concerning problems that are both
ambiguous and exceptional, he makes decisions under a condition of __________.
a. risk
b. uncertainty
c. subjective probability
d. objective probability

ANSWER: B, Application, Difficult, p. 211

12. __________ is the percentage of time that a specific outcome would occur if an
individual were to make a particular decision a large number of times.
a. Satisficing
b. Optimizing
c. Probability
d. Risk

ANSWER: C, Knowledge, Moderate, p. 210

13. Risk generally means that the problem and alternative solutions fall somewhere
between the extremes of being __________ and __________.
a. common; usual
b. certain; ambiguous
c. routine; non-routine
d. certain; uncertain


14. The National Highway Safety Administration concluded that the probability of a seat-
belted driver’s death in an accident is reduced by 50 percent in a car equipped with a
driver’s side airbag. This statistic is an example of __________.
a. satisficing
b. a routine decision
c. a probability
d. an adaptive decision

ANSWER: C, Application, Easy, p. 210

15. The likelihood that a specific outcome will occur, based on hard facts and numbers, is
known as __________ probability.
a. rational
b. subjective
c. predicted
d. objective

ANSWER: D, Knowledge, Easy, p. 210

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16. The likelihood that a specific outcome will occur, based on personal judgment and
beliefs, is known as __________ probability.
a. objective
b. subjective
c. strategic
d. rational


17. Life insurance underwriters cannot determine which of their clients will die this year.
However, their business success depends upon their ability to predict how many of
those clients will die, based on population death rates in categories of age, gender, etc.
Life insurance companies are using __________ to make their decisions about whom to
insure and the premiums to charge.
a. uncertainty
b. alternative risk
c. objective probabilities
d. subjective probabilities

ANSWER: C, Application, Moderate, p. 210

18. Nancy Barnes decided to become a flight attendant when she graduates from college in
two years. She liked the regular hours and substantial benefits. Recently, the news has
reported that benefits will no longer be offered to flight attendants, and that they will
have to work standby hours. Barnes decides to become a teacher. Barnes has
changed her decision in part because __________.
a. the conditions under which she made her initial decision changed
b. she is certain that the employment conditions will not improve
c. she did not have information about the job when she made her initial decision
d. she did not know how to make decisions

ANSWER: A, Application, Difficult, p. 209

19. When an individual does not have the necessary information to assign probabilities to
the outcomes of alternative solutions, a decision is made under the condition of
__________.
a. risk
b. subjectiveness
c. probability
d. uncertainty


20. Uncertainty suggests that the problem and the alternative solutions are both
__________ and __________.
a. ambiguous; highly unusual
b. risky; opportunities
c. problems; opportunities
d. strengths; weaknesses

ANSWER: A, Knowledge, Difficult, p. 211

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21. All of the following are listed in the text as types of crises that may be sources of
uncertainty and risk except __________.
a. criminal crises
b. economic crises
c. management crises
d. reputation crises


22. Hyundai experienced a business crisis in 1998 as a result of its __________.
a. import restrictions
b. product quality
c. harassment scandals
d. unattractive styling

ANSWER: B, Knowledge, Easy, pp. 212–213

23. In responding to Hyundai’s business crisis, CEO Finbarr O’Neill identified __________
as the company’s biggest problem.
a. worried customers
b. lack of profits
c. dealers shutting down
d. none of the above



Basic Types of Decisions
24. The considerations of __________ provide an underpinning to the basic types of
decisions that managers make.
a. certainty
b. risk
c. uncertainty
d. all of the above


25. In general, the decision maker should begin by defining the problem and then
________.
a. compare it to existing problems
b. move on to generating and evaluating alternative solutions
c. collect all available information
d. immediately choose a satisfactory solution


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26. Decisions may be classified as __________.
a. routine, adaptive, or innovative
b. routine or non-routine
c. known or unknown
d. risky or certain


27. Pamela Kay is a bank teller. At the end of her shift, her cash drawer is short by $100.
Pam faces a(n) __________ problem.
a. accounting
b. bookkeeping
c. common
d. uncommon

ANSWER: C, Application, Easy, p. 213

28. Faisal Karim, a management professor, attempts to decide why women and minorities
are not moving faster into management positions. Karim is faced with a(n) __________
problem.
a. common
b. discrimination
c. racial
d. ambiguous

ANSWER: D, Application, Moderate, pp. 213–214

29. The types of __________ that managers and other employees deal with range from the
relatively common and well defined to the unusual and ambiguous.
a. risks
b. uncertainties
c. decisions
d. problems

ANSWER: D, Knowledge, Moderate, p. 213

30. The types of __________ available to managers in trying to solve problems range from
the known and well defined to the untried and ambiguous.
a. information
b. solutions
c. routines
d. human resources

ANSWERS: B, Knowledge, Moderate, p. 214

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31. __________ is the rigid devotion to the status quo by attempting to do more of the same
thing, only better.
a. Active inertia
b. Inactive Response Mode (IRM)
c. Passive management
d. Idle Management Syndrome (IMS)


32. A manager of a restaurant located in a shopping center that is losing popularity says,
“Let’s spend more on advertising because sales jumped in the last half of 2002 when we
did that.” This manager __________.
a. may be making a routine decision when a problem calls for an adaptive or innovative
decision
b. is using known facts to make an adaptive decision
c. should use a routine decision
d. should receive a raise for seeing the connection between advertising and sales

ANSWER: A, Application, Moderate, pp. 214–215

33. A(n) __________ decision is a standard choice made in response to relatively well-
defined and common problems and alternative solutions.
a. strategic
b. adaptive
c. expert
d. routine


34. Dexter Humphreys has a problem. He wants to travel to London and pay the lowest
possible price. His travel agent uses the computerized airline reservation system to find
a flight for $1,000 and a flight for $700. Dexter’s choice of which flight to take is a(n)
__________ decision.
a. financial slack
b. routine
c. imitable
d. adaptive

ANSWER: B, Application, Moderate, p. 215–216

35. Choices made in response to a combination of moderately unusual problems and
alternative solutions are called __________ decisions.
a. strategic
b. flexible
c. adaptive
d. non-routine


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36. __________ improvement involves streams of adaptive decisions made over time that
result in a large number of small, incremental enhancements year after year.
a. Functional
b. Corporate-level
c. Continuous
d. Market leader

ANSWER: C, Knowledge, Easy, p. 217

37. Continuous improvement is driven by all of the following goals except __________.
a. providing better quality
b. improving efficiency
c. being responsive to customers
d. simplifying decision making

ANSWER: D, Knowledge, Difficult, p. 227

38. Adaptive decisions often reflect the concept of __________. This is a business shift in
which two connections with the customer that were previously viewed as competing
(e.g., bricks-and mortar stores and Internet stores) come to be seen as complementary.
a. union
b. convergence
c. concurrence
d. concentration

ANSWER: B, Knowledge, Moderate, p. 216–217

39. VisaNet engages in a continuous effort to __________.
a. reduce system down time
b. increase reliability to 100%
c. meet new demands and threats
d. create satisfied customers


40. Visa’s processing system requires enough capacity to handle __________ merchant
and bank transactions per day.
a. 2 million
b. 20 million
c. 50 million
d. 100 million


206


41. Choices based on the discovery, identification, and diagnosis of unusual and
ambiguous problems and/or the development of unique or creative alternative solutions
are called __________ decisions.
a. primary
b. operational
c. innovative
d. adaptive


42. Otis Hawkins is an engineer in the R&D department of KennelCare Foods. During the
ten years he has worked for the company, he has made a series of small, interrelated
decisions as part of the development of novel new pet stores. Hawkins’ decision
making at KennelCare illustrates __________.
a. market segmentation
b. innovative decisions
c. economies of scale
d. efficiency

ANSWER: B, Application, Moderate, p. 218

43. Christina Culbert is a judge. Her decision on the Hanover case represents a sharp break
with past decisions and she has been very careful to define the problem in the case and
review prior court decisions. In this example, Culbert makes a(n) __________ decision.
a. risky
b. innovative
c. judgmental
d. adaptive

ANSWER: B, Application, Difficult, p. 218

44. __________ involves individuals or organizations who change the bases for industry
competition or change the economic efficiency of an industry.
a. Convergence strategy
b. Adaptive decision making
c. Radical innovation
d. Transformational leadership


45. __________ is an example of radical innovation.
a. Akami Technologies
b. AmeriScan
c. Phillips Consumer Electronics
d. Xerox Corporation


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Models of Decision Making
46. Which of the following is not one of the decision-making models discussed in the
decision making chapter?
a. rational
b. bounded rationality
c. political
d. value chain


47. The __________ decision-making model prescribes a set of phases that individuals or
teams should follow to increase the likelihood that decisions will be logical and optimal.
a. rational
c. political
d. goal setting

ANSWER: A, Knowledge, Easy, p. 219

48. Marco Hernandez is a city manager. Morale at the new water treatment plant is at an all
time low due to a succession of incompetent facility managers. As Marco is called into
the hiring process, it is essential that a successful job search take place this time. He is
making a __________ decision.
a. rational
b. bounded rational
c. political
d. goal setting

ANSWER: A, Application, Moderate, p. 219

49. When making __________ decisions under near certain conditions, individuals don’t
need to follow all of the phases in the rational decision making model.
a. continuous
b. routine
c. core
d. adaptive


50. When making adaptive or innovative decisions, individuals __________ follow the
seven phases of rational decision making sequentially.
a. pretend to
b. never
c. frequently
d. rarely


208


51. Problem definition and diagnosis involves the skills of noticing, interpreting and
incorporating, which are part of the manager’s __________ competency.
a. communication
b. teamwork
c. planning and administrative
d. strategic action


52. The first phase in the rational decision-making model is __________.
a. strategy formulation
b. stating the vision
resource definition
define and diagnose the problem


53. Phase 1 in the rational decision-making model includes the skill of __________, which
involves identifying and monitoring numerous external and internal environmental
factors and deciding which ones are contributing to the problem.
a. interpreting
b. noticing
c. communication
d. teamwork


involves assessing the environmental factors noticed and determining which are
causes, not merely symptoms, of the real problem.
a. noticing
b. interpreting
c. communication
d. teamwork


involves relating those interpretations to the current or desired goals of the department
or organization.
a. interpreting
b. noticing
c. communication
d. incorporating


209


56. In the rational decision-making model, the phase that immediately follows “define and
diagnose the problem” calls for the manager to ___________.
a. interpret the problem
b. notice solutions
c. communicate the problem
d. set goals


57. ___________ are results to be attained and thus indicate the direction that decisions
and actions should be aimed.
a. Goals
b. Objectives
c. Aims
d. Outcomes


58. Goals may be stated in either __________ or __________ terms.
a. attainable; unattainable
b. objective; subjective
c. qualitative; quantitative
d. abstract; concrete


59. __________ goals are stated in qualitative terms while __________ goals are stated in
quantitative terms.
a. Subjective; objective
b. Long-term; short-term
c. Team; individual
d. General; operational


60. Microsoft has the goal of becoming the world’s leading developer of computer software
applications. This is an example of a(n) __________ goal.
a. operational
b. general
c. tactical
d. long-term


61. Microsoft has the goal of increasing sales of its Windows 2000 software packages by
40% over the next three years. This is an example of a(n) _________ goal.
a. operational
b. general
c. strategic
d. long-term


210


62. After individuals or teams have defined a problem, they __________.
a. are stuck unless they have complete information
b. can move directly to a solution
c. have completed the rational decision-making model
d. can set goals that are intended to lead its elimination


63. Sally Powers wants to get a job as an international currency trader. Powers begins to
think creatively about the ways in which she could obtain this job. She is at the
__________ step of the rational decision-making model.
a. setting goals
b. search for alternative solutions
c. comparing alternative solutions
d. choosing alternatives


64. In the rational decision-making model, the phase that immediately follows goal setting is
__________.
a. search for alternative solutions
b. develop strategies
c. engage in teamwork
d. analyze the internal environment


65. In the rational decision-making model, during the “search for alternative solutions”
phase, individuals or teams might engage in all of the following except _____________.
a. seek additional information
b. think creatively
c. consult experts
d. analyze the environment


66. In the rational decision-making model, the phase that immediately follows the search for
alternative solutions is __________.
a. implement the chosen solution
b. develop imitability
c. compare and evaluate alternative solutions
d. identify customers


211


67. Managers often complain that recent college graduates present and discuss only one
solution when they receive project assignments. The college graduates are doing a
poor job of __________.
a. strategy implementation
b. defining the problem
c. strategy formulation
d. comparing and evaluating alternative solutions

ANSWER: D, Application, Moderate, p. 223

68. After individuals or teams have searched for alternative solutions, they must then
__________.
a. compare and evaluate alternative solutions
b. choose among alternative solutions
c. implement the solution selected
d. follow-up and control


69. Choosing among alternative solutions may prove to be difficult when the problem is
__________.
a. complex
b. ambiguous
c. involves a high level of risk
d. all of the above


70. In the rational decision-making model, the phase that immediately follows “choosing
among alternative solutions” is __________.
a. implementing the solutions selected
b. evaluating the selection
c. analyzing the environment
d. follow-up and control


71. In phase 7 of the rational decision-making model, individuals and teams must
__________ implementation activities and __________ by evaluating results.
a. manage; act
b. follow up; control
c. control; follow up
d. explore; change


212


72. John Mayberry, CEO of Dofasco, says he has placed decision-making accountability
right where it belongs: at the __________ level.
a. individual
b. executive
c. manager
d. team


73. Dofasco’s decision making process has resulted in a team decision to install new steel
furnaces that do all of the following except __________.
a. consume less energy
b. reduce air pollution
c. produce higher volumes
d. produce higher quality


74. Which of the following is not an individual tendency in the bounded rationality model of
decision making?
a. engage in an extended search for alternative solutions
b. select less than the best goal
c. select less than the best alternative solution
d. have inadequate information and control over environmental forces

ANSWER: A, Knowledge, Difficult, p. 227

75. Talia and Eliza Sinkinson are on vacation in New York City. They would like to go to a
good Chinese restaurant for lunch. There are at least 200 Chinese restaurants in
Chinatown. Talia and Eliza will probably use the __________ model of decision making
to select a restaurant.
a. bounded rationality
b. decision tree
c. rational
d. probability

ANSWER: A, Application, Moderate, pp. 226–228

76. The bounded rationality model of decision making is particularly useful because it
emphasizes the __________, thus providing a better picture of the day-to-day decision-
making processes used by most people.
a. rational steps in decision making
b. uncertainty of decision making
c. limitations of rationality in decision making
d. goal setting nature of decision making


213


77. The level of satisficing can be raised by all of the following except __________.
a. using computer-based decision-making techniques
b. setting lower organizational expectations
c. setting higher individual standards
d. personal determination


78. In the bounded rationality model, individuals stop searching for alternatives as soon as
they __________.
a. find an acceptable one
b. find the best one
c. get tired of searching
d. have explored the maximum alternatives


79. A person who easily recalls specific instances of an event may overestimate how
frequently the event occurs. This is an example of __________ bias.
a. law of small numbers
b. availability
c. gambler’s fallacy
d. memorization


80. Jerry Taylor was in a serious car accident last year. The National Safety Transportation
Board says that 1 percent of all drivers will be in car accidents each year. However,
Taylor thinks that the actual frequency is 5 percent. He has most likely fallen prey to the
__________ bias.
a. belief
b. concrete information
c. critical thinking
d. availability


81. The idea that what people expect to see often is what they do see is an example of the
__________ bias.
a. availability
b. limitation
c. certainty
d. selective perception

ANSWER: D, Knowledge, Easy, pp. 226–227

214


82. __________ bias means that vivid, direct experience usually prevail over abstract
information.
a. Availability
b. Personal experience
c. Concrete information
d. Law of experiences


83. Amy Ingram works for a large toy manufacturing company. Her first supervisor, Alice
Fredrich, was unfair, unsupportive, and often used Amy’s ideas without giving her credit.
Amy’s current supervisor, Libby Valentine, is supportive and friendly, but Amy is
unwilling to trust Valentine. Amy appears to be applying the __________ bias.
a. concrete information
b. abstract information
c. intrasender role
d. law of experience


84. When a few incidents or cases are viewed as representative of a larger population, even
when they aren’t, the law of _________ bias exists.
a. population concentration
b. large numbers
c. incidents
d. small numbers


85. The __________ bias occurs when an unexpected number of similar events leads to
the conviction that an event not seen will occur.
a. probability
b. law of association
c. law of expected outcomes
d. gambler’s fallacy


86. Bubba Barnett has seen his favorite college football team unexpectedly lose six games
in a row but he is convinced that his team will win this coming weekend. Barnett is guilty
of the __________ bias.
a. probability
b. gambler’s fallacy
c. law of expected outcomes
d. law of association

ANSWER: B, Application, Easy, p. 227

215


87. Satisficing is __________.
a. the practice of selecting an acceptable goal or alternative solution
b. the inability to select an acceptable goal or alternative solution
c. the unwillingness to select an acceptable goal or alternative solution
d. applying decision making to routine decisions


88. Which of the following is not one of the factors that influence a satisficing decision?
a. limited search
b. inadequate information
c. information processing bias
d. a certain environment


89. In the text, Herbert Simon identifies assumptions that lead to satisficing which include all
of the following except __________.
a. limited set of alternatives
b. difficulty in locating alternatives
c. tendency to select lowest cost
d. difficulty in evaluating alternatives


90. Cherry Cheatwood is graduating from Indiana State University in May. She wants to
find a job as an elementary school teacher. It would be extremely time consuming and
costly for her to evaluate every teaching job available. Most likely, Cherry will
__________.
a. use a routine decision making framework
b. use the constrained decision-making model
c. use the rational decision-making model
d. use bounded rationality in making a choice


91. The __________ decision-making model is described in terms of the self-interests and
goals of powerful internal and external stakeholders.
a. co-optation
b. governance
c. political
d. gambler’s fallacy


92. If an individual is able to influence or control individual, departmental, team or
organizational decisions and goals, the individual has __________.
a. power
b. vision
c. entrepreneurial skill
d. the backing of the CEO

216


93. An individual has power if she or he can influence or control all of the following except
__________ during decision making.
a. the definition of the problem
b. goal preferences of other decision makers
c. the choice of the goal
d. selection of the alternative to be implemented


94. A(n) __________ decision-making process is most likely to occur when decisions
involve powerful stakeholders, disagreement over goals, and the lack of search for
alternative solutions.
a. rational
b. political
c. irrational
d. adaptive

ANSWER: B, Knowledge, Moderate, pp. 228–229

95. In the political model, external and internal stakeholders try to __________.
a. define problems to their own advantage
b. define problems to the advantage of everyone
c. make the decision makers process more rational
d. make the decision makers process more irrational


96. __________ refers to the process of casting blame for problems or shortcomings on an
innocent or only partially responsible individual, team, or department.
a. Politics
b. Scapegoating
c. Blamesharing
d. Satisficing


97. Brandi Putnam often blames problems on other individuals to preserve a positive image
for himself. Thus, Putnam tends to use __________.
a. argumentation
b. person–role augmentation
c. scapegoating
d. power shifting

ANSWER: C, Application, Moderate, p. 229

217


98. The push and pull of stakeholders who have both power and conflicting goals occurs in
the __________ decision-making model.
a. niche
c. political
d. relational


99. When goals and the means to achieve them are perceived by stakeholders as a win–
lose situation, the ability to make adaptive and innovative decisions is __________.
a. not affected
b. greatly increased
c. severely limited
d. related constrained


100. __________ involves bringing new stakeholder representatives into the strategic
decision-making process as a way of averting threats to an organization’s stability or
existence.
a. Conglomeration
b. Co-optation
c. Competitor intelligence
d. Bureaucratic control


101. The __________ model of decision making may be especially useful for resolving
conflicts among stakeholders with divergent goals and/or divergent preferences for
actions to be taken.
a. co-optation
b. rational
c. bounded rationality
d. political


102. Russell Finkstein's company needs to borrow money. He decides to put the president
of a local bank on his board of directors. Finkstein is using the political strategy of
__________.
a. conglomeration
b. co-optation
c. competitor intelligence
d. bounded rationality


218


103. Don Carty, CEO of American Airlines, lost his job as an outcome of miscommunications
related to all of the following problem areas except __________.
a. full public disclosure of the seriousness of the company’s financial condition
b. full disclosure to unions about lucrative executive bonuses and protections
c. offering to resign if the unions would take pay cuts
d. threatening bankruptcy if unions would not take pay cuts


104. __________ was taking place in the failed political process at American Airlines?
a. Satisficing
b. Co-optation
c. Scapegoating
d. Bounded rationality

ANSWER: C, Application, Difficult, pp. 229–231

Essay Questions

1. What is decision making?

In the most basic sense, decision making includes:
(1) defining problems
(2) gathering information
(3) generating alternatives
(4) choosing a course of action

Moderate, p. 208

2. Compare and contrast certainty, uncertainty, and risk.

a. Certainty is the condition under which individuals are fully informed about a problem,
alternative solutions are obvious, and the likely results of each solution are clear.
The condition of certainty at least allows anticipation (if not control) of events and
their outcomes. This condition means that both the problem and alternative
solutions are known and well defined.
b. Uncertainty is the condition under which an individual doesn’t have the necessary
information to assign probabilities to the outcomes of alternative solutions. The
individual may not be able to define the problem, much less identify alternative
solutions and possible outcomes. Uncertainty often suggests that the problem and
the alternative solutions are both ambiguous and highly unusual.
c. Risk is the condition under which individuals can define a problem, specify the
probability of certain events, identify alternative solutions, and state the probability of
each solution leading to the desired results. Risk generally means that the problem
and the alternative solutions fall somewhere between the extremes of being
relatively common and well-defined and being unusual and ambiguous.

Difficult, pp. 210–212

3. What is probability, and what are the different types of probability?

219


a. Probability is the percentage of times that a specific outcome would occur if an
individual were to make a particular decision a large number of times.
b. Objective probability is the likelihood that a specific outcome will occur based on
hard facts and numbers such as past records.
c. Subjective probability is the likelihood that a specific outcome will occur based on
personal judgments and beliefs, such as intuition, previous experience, and
expertise.

Moderate, pp. 210–211


4. What type of decision would be made when: (1) the problem is common and well
defined, (2) the problem and alternative solutions are only moderately unusual, and (3)
the problems are unusual and ambiguous? Give an example of each.

a. When problems are common and well-defined, routine decisions are made.
Managing guest relations at Four Seasons Hotels is an example of a routine
decision process.
b. When problems and alternative solutions are moderately unusual and only fairly
common, adaptive decisions are made. Continuous improvement at VisaNet is an
example of adaptive decision making.
c. When problems and alternative solutions are unusual, ambiguous, and untried,
innovative decisions are made. Michael Dell, Charles Schwab, and Jeff Bezos of
Amazon.com are examples of innovators.


5. How does continuous improvement relate to decision making? What goals drive the
process of continuous improvement?

a. Continuous improvement involves streams of adaptive decisions made over time in
an organization that result in a large number of small, incremental improvements
year after year.
b. The goals of continuous improvement include:
(1) providing better quality
(2) improving efficiency
(3) being responsive to customers

Difficult, p. 217

220


6. Describe how Richard Knight uses continuous improvement in his planning and
administration competency to constantly meet new demands and threats at VisaNet.

Although VisaNet can maintain 100 percent reliability in their transaction processing
systems, they constantly refine their software in order to protect multiple layers of
redundancy and backups. They are able to process as many as 100 million
transactions per day. They periodically design testing procedures to verify the quality
and control taking place within the systems. VisaNet completed a three-year overhaul
of their assembler-language-based clearing application and they typically modify 2
million lines of code annually. The firm upgrades system security on an ongoing basis,
as well as customer service applications. Richard Knight has assigned four risk level
ratings, and reviews the system constantly according to his demanding criterion.



7. Name four of the seven phases in the rational decision-making model.

a. Define and diagnose the problem
b. Set goals
c. Search for alternative solutions
d. Compare and evaluate alternative solutions
e. Choose among alternative solutions
f. Implement the solution selected
g. Follow up and control the results


8. Describe the parts of the bounded rationality model.

a. The individual’s tendencies to select less than the best goal or alternative solution
(satisficing).
b. The individual’s tendencies to engage in a limited search for alternative solutions.
c. The individual’s tendencies to have inadequate information and control over external
and internal environmental forces influencing the outcomes of decisions.


221


9. Define and give examples of two of the five kinds of information processing biases
common to bounded rationality decision making.

a. The availability bias means that a person easily recalls specific instances of an
event and overestimates how frequently the event occurs. Example: Someone who
has been in a serious automobile accident will overestimate the frequency of such
accidents.
b. The selective perception bias means that people see what they expect to see,
tending to seek information consistent with their own views. They downplay
conflicting information. Example: Some people are willing to bungee jump but are
unwilling to live next to a superfund cleanup site.
c. The concrete information bias means that vivid, direct experience usually prevails
over abstract information. Example: If one manager is difficult, all managers are
difficult.
d. The law of small numbers bias means that a few incidents or cases may be viewed
as representative of a larger population even when they aren’t. Example: After a
few well-publicized events of the use of excessive force by police officers, some
people may believe that all police use excessive force.
e. The gambler’s fallacy bias means that seeing an unexpected number of similar
events can lead to the conviction that an event not seen will occur. Example: After 9
successive reds on a roulette wheel, a player believes the odds of a black on the
next spin are greater than 50/50.


10. When does a stakeholder have power in the political model of decision making?

A stakeholder has power when he or she can control or influence the:
a. definition of the problem,
b. choice of the goal,
c. consideration of alternative solutions,
d. selection of the alternative to be implemented, or
e. ultimate actions and success of the organization.

Difficult, p. 228

222

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