Mgt 422 Scenarios

People all over the world grow up with different experiences due to culture and circumstance, as a result, these experiences play a role in their overall decision-making ability and biases. Sometimes these experiences can have a positive effect on the choices made, other times however, the decision-maker’s decisions are ones based on biases and other such traps which negatively affect their resolutions. These can hinder the decisions made because the decision-maker isn’t making a rational or balanced decision. There are many different biases which are ingrained throughout the business world that prevent decision-makers from making smart, sensible decisions for the good of the company. Recognizing these pitfalls are vital in becoming a successful decision-maker in today’s business world.

Scenario one

In the first scenario a Chief Financial Officer of a corporation believes that marketing is not a good use of the company’s money. Based on this strong belief, the CFO seeks out statistical data to back up her claim. Due to her misguided outlook on the situation the results further solidify her stance. Because the results are interrupted by her, rather than an impartial party, she believes the data back up her original inclination that money spent on marketing is wasted. This is known as the confirming-evidence trap or confirmation bias. The decision-maker saw data/evidence that spending on marketing had no positive correlation to increased sales. However, this CFO already had strong beliefs against spending money on marketing and allowed one piece of information to solidify her stance, rather than trying to disprove her theory or seek alternative solutions. The result was her decision to cut funding toward marketing and a subsequent drop in sales as a result. The CFO wanted to find information that proved her original belief rather than seeking out alternative correlations between marketing and sales.

Scenario two

The next scenario show a CEO who wants to expand his company by purchasing a major rival. This type of decision happens fairly often in business to a mixed degree of results. In this particular situation, several of the CEO’s top managers warn him of the potentially devastating effecting this merger could have on the company and the difficulties faced as a result. However, the CEO’s arrogance over-shadows the potential problems, causing him to not view the problem objectively. Overconfidence is a problem faced by many managers because they believe nothing can get in their way, when in reality, they are the ones usually causing the problem. Confidence can be a good thing when assuming the role as a leader, however, being overconfident can lead to mistrust and ignorance to outside views which show flaws in a person’s skewed thought process. This can be avoided by being aware of one’s own capabilities and of those around them. They must also be open to other alternatives which may be better suited for the situation on a whole.

Scenario three

The third scenario depicts a CEO who is provided information on two different factories. However, because the information is provided in different manners the CEO ends up choosing the less favorable company. This is a common bias for people when they don’t fully understand the facts as they pertain to the current situation or who put too much emphases on “bigger is better”, this is also known as the framing bias.