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Walter Schroeder Library, Milwaukee School of Engineering
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Orgovan, Andrew Joseph.
Subjects
Decision-making
Cognition
Management
MSEM Thesis.
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Orgovan, Andrew Joseph.
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The role of cognitiv...
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The role of cognitive biases in strategic decision making and ways to avoid them / by Andrew Joseph Orgovan.
by
Orgovan, Andrew Joseph.
Subjects
Decision-making
Cognition
Management
MSEM Thesis.
Description:
iv, 100 leaves : ill. ; 29 cm.
Contents:
Advisor: Dr.William Gleason.
Committee members: Stanley Kosmatka, Kimbel Nap.
Introduction -- The strategic planning process -- Strategic decision models -- Individual decision making -- Group decision making -- Common cognitive biases in strategic decision making -- Avoiding biases -- Concluding remarks and suggestions for further research.
The strategic decision records of many corporations are very often stories of failure. Although there are many reasons offered in the management literature for this poor performance, little mention is made about the cognitive limitations of the executives who must make complex decisions. The overall goal of this essay is to increase the awareness of the role of individual cognitive biases in producing poor strategic decisions. These biases are identified and some approaches are suggested to try to avoid them.
Chapters 2 and 3 deal specifically with strategic decision making itself. In Chapter 2 each stage of the strategic decision making process is reviewed. These stages include: environmental scanning, strategy formulation, strategy implementation, and evaluation and control. By understanding the strategic decision process, as it is commonly followed today, it then becomes possible to explore how cognitive biases may influence that process. In Chapter 3, the three different models of strategic decision making are presented which show the various perspectives that strategic decision making can be viewed from. In this chapter it is shown that in addition to cognitive limitations of the individual decision-maker, there are political and organizational factors that can also impact the quality of strategic decisions.
The seven main steps in the individual decision making process are then examined in Chapter 4. The focus of this chapter is to review how individuals make decisions; from establishing goals and objectives to evaluating how well decisions have been implemented. It is at the level of individual decision making that cognitive biases form the basis for influencing organizational, or strategic, decisions. The manner in which individual managers prefer to gather and process information are influenced by their biases.
One such approach to information gathering and processing is decision making in groups. In Chapter 5 of this essay three main techniques of making decisions in groups are examined. The strengths and weaknesses of each technique are discussed as well as the value each has in developing sound decisions.
With the foundation laid by the previous review of strategic, individual, and group decision making, 10 cognitive biases are identified in Chapter 6 which can affect the strategic decision making process. These biases not only influence the way decision-makers gather and process information, but also how they establish selection criteria for choosing an alternative strategy. The way decision groups can exhibit certain biases are also examined. These group biases, also called choice shift effects, are linked to the cognitive biases of the group members.
In an attempt to improve the quality of strategic decision making 3 approaches to avoiding cognitive biases are presented in Chapter 7. Top management must be committed to understanding why cognitive biases exist and how they can affect decision making before there can be true progress in avoiding biases.
Finally, it is recognized that a great deal of further research is required to fully shed light on the role of cognitive biases, and limitations, of corporate executives on strategic decisions. In Chapter 8 two areas in particular are suggested for further investigation. These two areas are: the role of decision groups in avoiding cognitive biases in strategic decision making; and the connection between Jungian personality types and cognitive biases. Understanding the nature of this “linkage” may help in avoiding biases at the various stages of the decision process.
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Walter Schroeder Library
Master's Theses
AC805 .O74 1992
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