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Requirement
Write a report on Management Decision Making Cognitive Biases.
Solution
Executive Summary
The decision-making and the decision bias theory is seen not to focus on the choice process but instead it focusses on the possible persistent and systematic errors in the decision-making process. The decision biases are considered to be the cognitions which might prejudice the quality of our decisions. Therefore a DSS development model is uses for incorporating such decision biases instead of the development focus task. The study focuses on two of the biases and explains them thoroughly along with a general framework being provided by Dr. Arnott.
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Introduction
In the era of distributed computing, the decision support system is introduced. The support system is started in 1965 and the record formalization of system, people, ideas and technology involved in the applied information technology. The technology provides integrated support to the managers who are working in a sole proprietorship and it helps to take rational decisions for the management of organizational hierarchies. The history includes the ideas and records of the past activities which help to guide the future activities. The different reports are prepared because of different vantage points, reactions and incidents. The problems can be sorted out through past history solutions but collection of data is very necessary. The information is collected from the information technology companies, college and universities, and the companies which are using decision support system. The decision support system is defined as the area of information system which is prepared to support and improve the decision making system. The major modifications in the information technology enable the new decision support movement. In the year 1980, the spreadsheet and financial modeling software had created a boom in the personal decision support system. The DSS and its functionality has evolved with the various development cycles where the clients and the system analysts are the active contributors to the shape, logic and nature the system. Due to ill-structured management decisions, the DSS developers should try to adopt an evolutionary approach. The DSS and its environment are seen to be subjected to change and therefore all the system requirements are likely to change even when specified with accuracy when the project begins. The major modifications in the information technology enable the new decision support movement. In the year 1980, the spreadsheet and financial modeling software had created a boom in the personal decision support system. (Arnott, D., & Pervan, G., 2005).
The aim of the paper is contribution to the DSS development theory along with its practices by presented various researches based on the errors in the decision-making process and judgment being the prime base for the development of the systems.In this present paper we will discuss the general framework and the research to improve the decision support system. The paper aims to discuss the various cycles involved in the DSS evolution. The organization of the paper is as follows: initially a general framework by D Arnott (1978) is discussed along with various biases. A general framework in this approach has been described and is then used for structuring the discussion on the two selected biases two biases of Arnotts’s list of theory seven biases is explained with an example. The biases used in the project paper involve the memory and the confidence biases. Present approach along with the DSS evolution framework has been reported and finally the debiasing strategies for the two selected biases have been identified.
General framework by D Arnott (1978)
The general framework involves the sections from the period of 1965 to mid-1990. The threads of decision support system is linked with the model-oriented decision support system, multidimensional analysis, expert system, reporting and query tools, business intelligence, OLAP, executive information system, and group decision support system. All the information is converged and diverged over the years. In the 1960s, the new information system comes into usage which is a management decision system. The concept of decision support system comes from the theoretical studies of organizational decision making which took place at the Carnegie institute of technology at the late 1950s. The technical work took place at Massachusetts institute of technology in the 1960s. The MIT project’s historical information is on interactive computer system took place at mutlicians.org. In the 1970s, the journal on Management decision system starts publishing. Such as the various article on decision support system is publishes by Scott Morton and Colleagues in 1968. The journal on management decision making is publishes by Ferguson and Jones in 1969. The breaking book on Management decision making is published by Michael S. Scott Morton’s in the year 1971. The study on the help of computers and analytical models is conducted by Scott Morton which helps the managers to take crucial decision of an organization. The Management decision system is used by the production and marketing managers which help in the planning of production for laundry equipment’s. The dissertation research is prepared by the Scott, who includes the definition, implementation and research on the model driven decision support system.
The fundamental process of design is the system development. The problems came at the time of decision support system analysis is articulated in the design theory which includes the problem of insufficient knowledge base for the purpose of designing. The strategic nature of decision support system acts as a guide for the companies which helps the analysts to overcome with the trial and error problem to create an effective system. The decision support system helps to reach at the final stage because the requirement can’t be predicted in advance. The system should be altered so that the changes can be tracked in the problems, environment and user because these three factors are inherently volatile in nature. The series of development cycle is included in the functionality of decision support system. The system analyst and consumers are main contributors in shaping the decision support system. The evolutionary development for the decision support system is universally applicable. The decision support system project has the objective to improve the decision making process for the managers who are decision makers of an organization. There should be clear understanding about the nature of the target decision task and the strategy should be clear which supports the decision making process by the system analysts. The main problem faced by the analysts is the conceptualization of the decision task which requires the improvement during the repetition of evolutionary development process. The strategies improvement is supported by the development methods of decision support system. The decision support system is mainly about the improvement of decision making process. The analyst should have the considerable knowledge about the decision support system and the measures to improve the decision making (Arnott, D., 1998). The guidance is a very important aspect according to the behavioral decision theory which is a theory of cognitive bias. The general framework includes the method used for the research and designing which includes the design science research method and frameworks. The theoretical aspect is included in the next section. Then, taxonomy of cognitive bias is discussed.
The design science approach is used for the research which is the compliment to the natural science approach. In the design science, the development and evaluation of Information Technology related facts are discussed which intends to solve the organizational problems. The controversies are addressed in the development of system and unit of analysis which is evaluated in an organizational context. The main design process includes various steps such as: problem awareness, development, suggestions, evaluation and draw a conclusion.
Evolutionary theory & DSS
The nature of decision support system can be retrieved from the evolutionary theory. The evaluation in decision support system is ontogeny but the cross generation change is also common. The change in generation is a higher version in the language of information system. The variance between major and minor version is the problem of system analyst and the perception of users. The decision support system is made from the design process and the evaluation of decision support system is done through artificial selection. In the process of artificial selection the goal of every individual designer is same. The features are selected very deliberately which helps to promote the goal among the generations. The goal of many decision support systems is to support the decision making of managers. The bets mechanism of evolution is adaption. The adaption decision support system occurs in the life of system version. Another evolutionary agent is speciation which is the creation of one or two species from the common stock. The decision support system is classified at the genera level which is a type of information system at the family level (Sage, A.P., 1981). The decision support system taxon consists of different species of decision support system. The Alter’s classification of decision support system includes file drawer system, data analysis system, analysis information system, accounting models, representational models, suggestion models and optimization models.
Present Approach
The decision support system is evolving by an iterative process of system design. Since the inception of the filed the use has been central to the theory of decision support system. The evolutive approach is not implemented in a parallel or linear fashion. The completion of each evolutive cycle gets near to the final state. The evolution cycle should be continues because the decision support system exist in continues change. The adaptive design framework includes analysts, system and user. The cycle of adaptive cycle framework flow the information. The system provides user learning to the user through personalized use and analyst evaluates the system function and receives the pressure for evaluation. The analysts provide middle out design to the user and receive the enabling of implementation. The model helps to understand the dynamics of decision support system. The approach is called as adaptive design. The decision support system evaluation is seen as a learning process. (Silver, M.S.,1991)
DSS evolution framework
The Decision support system evolution framework includes aetiology, tempo and lineage. Aetiology is defined as the evolution causes. The lineage defines the position of evolution which is between the applications or within the application. The tempo defines the evolution pattern over the time. The lineage can be conceptualized at the application level of the decision task. The occurrence of lineage can be thought either at the branching lineage or within an application. Another perspective of decision support system evolution considers aetiology which triggers the adaptive process and it directly leads to evolution. The factors can be exogenous or endogenous with the decision making. The aetiology of decision support system includes cognitive and environmental triggers. The cognitive triggers comprises of system use, peer interaction, analyst interaction, training courses, consultant interaction and idle thoughts. The environmental triggers include technology change, personnel change, mergers, industry change and co-evolution. According to the review of decision support system research, it is shown that the evolution is necessary to compete with the constant change in the environment. (Courbon, J-C., Grajew, J. & Tolovi, J, 1978).
Another Framework of DSS evolution
The framework is developed by combining the different lineages and aetiology yields. The framework includes four main classes, namely, with cognitive trigger within the application, with an environment trigger within an application, within a cognitive trigger between applications, with an environment trigger between applications. The various patterns are followed during decision support system evolution (Courbon, J-C, 1996).
Initiation cycles
The initiation cycle is developing when the need of new decision support system is realized or major changes are required in an existing application. The need is realized when the decision support system require some improvements. If the debiasing strategy is used by the decision support system then it is an ethical responsibility to tell the nature of strategy to the client.
Analyzing cycle
The framework of debiasing can be used in the decision diagnosis activity. It is the part of unfreezing stage of Lewin-Schein model. The work of the analysis is based on the nature of project. In this process the managers become accustomed and they are ready to consider the cognitive biases. The step involves in the combined approach includes: prediction of existence and the nature of potential bias. Then identify the impact and magnitude of bias. Then, considers the alternative for reducing the bias and finally assure the user about the existence of bias.
Delivery cycle
It includes the parallel application and iteration of designs, user and system construction. The cycle covers the stage of refreezing in the Lewin-Schein model. The decision support system model can be used as the feedback and the training purpose.
Research design
The system development process is the unit of analysis. The case study considers the details of than a survey in the prediction of nature and important characteristics of the system development process. The delta consulting is a service provider business firm which comprises of strategic consulting, training, project management and IT development. The performance is reviewed by the board of directors and external consultants. The recommendation includes the core activities of strategic consulting and project management at the existing level. The recommendation includes the requirement of training by showing the wound up in the training area and the investigation of strategic alliance with the training specialist provider. The escalation approach is used to analyze the effect of confirmation bias.
Reflection & Discussion
The first issue is related to the success of delta’s decision support system. It is difficult to identify the problem in design research studies because after the research intervention it is not possible. The identification of alternative intervention is conducted to know other intervention which could be more successful. The success of the project is the main argument of the managing director. The success is equated with the repetition of usage and satisfaction of the user. The managing director has offered a bonus to the development team which is regarding the success of the project. The case study is conducted to evaluate the use of design related facts at the center of the design science project which uses the decision support system development methodology which uses the cognitive bias theory as a construct of focusing. The development process is effective and feasible.
Arnotts’s Biases
Cognitive Biases
The cognitive biases are defined as the mental behavior which prejudices the quality of a decision in the significant number of decisions. It is also known as decision biases. The cognitive biases can be seen as predictable deviations from rationality. The rational choice is based on the current assets of decision and based on the choice of decision makers. There are various cognitive biases which are researched by the researchers of decision theory. There are total thirty seven biases which are arranged by the taxonomy into the category of adjustment, statistical, confident, presentation, memory and situational biases (Arnott, D., 2006). Memory biases include the recall and storage of information. Statistical biases include the normal tendency of humans to process the information which is contrary with the theory of probability. Cognitive bias includes the increment of confidence in their area of specialization as a decision maker. The decision maker has to find the new information related to the decision task. The presentation bias explains that the bias should not be based on the display of information. It acts as the perceiving of information which a significant bias for the decision is making process. The situation bias includes how the respondent reacts on the particular situation and its decision which shows the major bias from the perspective of decision makers. It is not important that every cognitive bias create a discrete as the classification implies (Anderson, N.H.,1986). The two cognitive bias are explained below with an example:
Memory biases:
The memory biases are related to the recall as well as storage of any information. These biases due to their functionality are usually seen to be the deepest level or the lowest level of the cognitive biases. The memory biases include the following biases:
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1. Hindsight: "In retrospect the degree to which an event would have been predicted is usually overestimated." For example, when the commentator hears a weird and unfamiliar result of the election he says, “I had an inclination that he would win”, while turning of cards in a rummy game with our friends, we usually claim, “I thought so”, when the information system stops due to ongoing issues in it, the system analysts are seen to say “I already predicted this.” All the situations mentioned above are the examples of Hindsight bias. Therefore this type of bias helps in increasing the confidence of the people in their own decision making process and abilities. However, they hinder him in reducing their ability to learn from the past experiences. In some of the cases, we can say that this memory bias is related to the other memory biases and Testimony when the occurrence of an event effects the recollection. The general heuristics given by Tversky & Kahneman and its action might be responsible for causing Hindsight along with the new information being highly vivid which results in overcrowding of the previous knowledge and information or insufficient adjustment from the knowledge being received recently and there are evidences which are consistent with the outcomes due to being highly accessible in our memory.
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2. Imaginability: "An event will be judged more probable if it can be easily imagined."
When the human constructs an abstract model from the piece of their memory it results in imaginability, For example, if an expedition is formed in order to investigate an unexplored area then it gets difficult to imagine it and therefore the explore becomes very curious and serious and it is likely for the explorer to underestimate the accidents or mishaps that can that place. Therefore, we can say that imaginability is some function of memory, experience and the intellect of the person. -
3. Recall: "An event or class will appear more numerous or frequent if its instances are more easily recalled than other equally probable events."
The familiarity, vividness and the salience of an event to be recalled basically depends on the ease of recall from the memory. When a person is asked about his primary school memories the person automatically recalls the situation like being bullied by a senior in the schoolyard etc. This incidence was although easy to recall but it cannot be regarded as a representative of the school experiences. Various evolutionary reasons have been provided for the Recall bias however the decision makes might be able to overweigh all the easily reminisced data and information to towards detriment of new information or relevant and pertinent memories. -
4. Search: "An event may seem more frequent due to the effectiveness of the search strategy."
When a person attempts towards recalling an event or incidence or any other information, the search is conducted in our mind which can bias the processing of recall. For an instance, when asked are there higher number of words starting from ‘m’ as compared to the words where ‘m’ is in the third letter? People might reply that words starting from m but that is not a correct answer. Throughout their school experiences people experience every word in an alphabetical manner, for example, a dictionary is listed sequentially for ease of search for the users. Therefore, people find is easier to recall the words starting from “m”. However, according to the correct linguistic rule the consonants are present at the third position rather than being the first position in the English word. -
5. Similarity: The likelihood of an event occurring may be judged by the degree of similarity with the 21 class it is perceived to belong to."
Anton is a singer. What is Anton like? Is he likely to be highly well-fashioned? Will he be extrovert and confident? The answers to queries like this are usually subjected to the similarity bias where a person is stereotypes and same is considered for him. Although in case of Anton, his class (singer) is given but in a complex decision situation the perception towards the class of the entity is also subjected to being biased. -
6. Testimony: "The inability to recall details of an event may lead to seemingly logical reconstructions which may be inaccurate."
This bias results from the cues on the basis of the factual information. The recall and testimony is usually affected by how the question is being structured. When the automobile accidents are related to the different speed estimates like (Hogarth, 1987): what was the speed of the car when they got hit, how fast the cars were moving in the situation of collision, hat was the speed of the car when they smashed into each other etc. -
In case of misleading or complex questions being asked, the Testimony bias becomes the strongest. Along with the Redundancy bias, the Testimony results in increased frequency of the questioning or the retelling of the evidence.
TO BE CONTINUED..............
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