Dm Final Exam
Managerial Decision Making - Final Exam
I pledge my honor that I have not violated the Honor Code during this examination.
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You are concerned that your organization does not take enough risk. Using the principles covered in class, come up with a strategy for inducing more risk-taking. The strategy should not be something like: “increase the incentives for risk taking.” Instead, it should be inspired by psychology, reflecting some of the reasons why individuals in organizations might not naturally take as much risk as they should. Of course, you should be mindful of the costs (organizational, economic, or psychological) of introducing a new process.
In most organizations, performance is measured in outcome. If it is not so good, then it is seen as a mistake vs. an investment in learning. As we know from the prospect theory, the pain from loss is greater than the happiness from gain. This compounded by anticipated regret makes people more cautious and emotionally coerces them to stick to the status quo. A strategy to motivate more risk taking, needs to consider the emotional aspect of risk while balancing it with the growth of the organization. This can be achieved by
This new method starts by recalibrating performance reviews to include process employed prior to implementation. Questions such as “What and how was data collect? What assumptions were used to come to conclusion? What uncertainty were ignored?” will be part of this evaluation. Involving both Manager and employee in these discussion ensures that risks were considered and losses, if any, anticipated.
Secondly, there needs to be a method of systematically breaking the project into smaller components, each with its own goals. Goals change how people take risks. Loss aversion from not meeting the goal leads to better performance. People experience more satisfaction the closer they are to the goals and
I pledge my honor that I have not violated the Honor Code during this examination.
________________________________________________________________________________________
You are concerned that your organization does not take enough risk. Using the principles covered in class, come up with a strategy for inducing more risk-taking. The strategy should not be something like: “increase the incentives for risk taking.” Instead, it should be inspired by psychology, reflecting some of the reasons why individuals in organizations might not naturally take as much risk as they should. Of course, you should be mindful of the costs (organizational, economic, or psychological) of introducing a new process.
In most organizations, performance is measured in outcome. If it is not so good, then it is seen as a mistake vs. an investment in learning. As we know from the prospect theory, the pain from loss is greater than the happiness from gain. This compounded by anticipated regret makes people more cautious and emotionally coerces them to stick to the status quo. A strategy to motivate more risk taking, needs to consider the emotional aspect of risk while balancing it with the growth of the organization. This can be achieved by
This new method starts by recalibrating performance reviews to include process employed prior to implementation. Questions such as “What and how was data collect? What assumptions were used to come to conclusion? What uncertainty were ignored?” will be part of this evaluation. Involving both Manager and employee in these discussion ensures that risks were considered and losses, if any, anticipated.
Secondly, there needs to be a method of systematically breaking the project into smaller components, each with its own goals. Goals change how people take risks. Loss aversion from not meeting the goal leads to better performance. People experience more satisfaction the closer they are to the goals and