The Anatomy of Decision

Ana Veras
1/30/2013
BUS 3302
Professor Ed Jaye
Chapter 1 Summary

The Anatomy of Decisions

• In the real world managers are paid to make decisions on a daily basis, on how your firm’s resources are controlled to meet goals that have been set by higher managers or by yourself. • There are some essential characteristics that manager’s share when making a decision; they are usually made with someone else’s money and need to be justified, they build on one another, the outcome is important to other people, and they are also forgettable. • Decisions with other people’s money: As a manager and not being a self-financed entrepreneur, your job is to make decisions with the money of others, therefore a justification has to be provided to the financers. I believe this puts a pressure on the managers to make sure they make the right decision, since they are not using their own money. That is the reason why managers tend to make their decisions based on instinctive judgment. Previous experiences can save managers from telling their shareholders that they lost money based on the rational and analytically defendable decision. • Decisions that build on each other: Previous experience can be very influential at the time of making the right decision. Managers are asked to “do their homework” before making an important decision, therefore they look back into previous decisions that have led them to the actual one and analyze what would benefit the firm the most according to previous decisions. Each decision is taken as more information becomes available. • Decisions that matter: Every decision made weather is a good one or a bad one is valid and it matters. Bad decisions are the ones that push managers and the world to become better and keep working to make the right decision on future opportunities, in other words bad decisions are ways to keep progressing. • Decisions that will be forgotten: The way memory works is very beneficial to managers when a good decision has been made. “Hindsight bias is a tendency to believe that we predicted what actually occurred, when in fact we forecasted the opposite”. After a decision was made and the outcome is positive, managers tend to forget what would have happened if the wrong decision were made. When a bad decision is made and a project fails, partners and other managers who supported the failure decision will claim that they always knew the plan was going to fail. They will believe that they were right all along the way, but never actually tried to convince the other manager to over look at different options before making a decision. In conclusion to this chapter managers are told by different texts and books diverse ways to be great decision-making managers. However, the best decisions yet made, have been made not taking in consideration the characteristics taught to managers through texts. “The challenge as a manager is not to denying our instincts and following rational theories that cannot work in the real world, but by understanding the strengths and weaknesses of how we do make decisions and by learning to handle uncertainty”. Great managers focus on success and forget failures.