Management Decision Making: Effect of Emotion, Time Pressure on Judgment and Decision Making - Assignment Example

Name: University: Course: Tutor: Date: Management Decision Making Limited capacity processing and the distinction between System 1 and System 2 thinking? Limited capacity processing is the inability in decision making that affects the objective to be derived at while making decisions, the most limiting factors here are the speed and amount in processing information available so as to derive at a decision which is not rational and the outcome of it can bear which ever consequence that amount in the objective results. The speed of understanding of tasks or information matters very much because decision making sometimes relies on quick thinking, amount in processing information suitable for good decision making is very essential this can be verified by the use of system two or reducing goal to be achieved and therefore use system one (Baron, 2001). This is mainly affected by the theories we use in decision making and different mythology involved in decision making, people tend to have a limited capacity of thinking in most mental work research and this affect their decision making this has been statistically approved. The key to success with information that will be crucial in the decision making is rehearsing because information decays literally if not constantly revised, with this in mind the person making decision will be well equipped with the knowledge that is essential to address any situation that may arise with the same idea they had addressed the earlier one without limitation in the process. Although this method has its implication the pursuant should have in mind the objective and the outcome when addressing limited capacity process. The distinction in system one and system two thinking is; in system one this is simplistic thinking where pursuant to this mode of decision making are prone to error and bias to a certain extent than elaboration, in this system the objective of the result are not included in the thinking and in most cases like in examinations where errors are penalized this system of decision making is a flop, people choose this method of simplifying the strategy and they don’t consider the objective outcome this is rational thinking, this mode can only be used in making small decision that have no big implication afterwards. System two is a mode of thinking that reduces most error portrayed by system one mode of thinking, the objective and result to be derived at here are covered when making decisions it also known as analytical decision making mechanism. According to Hardman, (2009) these system cover and engages these angles so as to conclusively derive at positive results; systematic, analytical, conscious and rule based thought, with this in mind the result derived at here are very accurate for all angel are covered and rational thinking is ill advised this help to overcome limitation and keep the thinking quality high for not only students but in our daily life spheres and help in quality decision making, in most business and also in our day to day living setup this kind of thinking is well advised because the outcomes derived at here hold water and are not questionable at all. Mental Accounting Mental accounting is modules set up by households and individuals for use in cognitive operations of coding, evaluating and categorizing financial activities. This is drawn from the prospect theory which accounts for the odds in behavioral patterns in finances; found mostly in business and individuals, contrary to these predictions are the classical economical model. (Thaler, 1999). This mode is very efficient and well advised for the good of the firm, in business set up it helps the pursuant to well manage transaction by evaluating and framing them in decision making that are helpful in making credible financial decisions that derive at strategic results that have benefits individually and institutionally. The main concern of mental accounting is how we evaluate and frame situations concerning financial gains and losses, how to evaluate these loses and gains which has occurred mainly in decision making by use of prospect theory which counter attack intuitive predictions and also does explain anomalies involved in these preferences. Mental accounting in individual occurs when one budgets for their saving or in students the allowances they are given how to wisely govern and minimize expenditure and save the little they can afford to put away for the rainy days. Without proper mental accounting the pursuant of this method will be always at loss of funds because the finances tend to diminish prior to the date they were supposed to last for students these is a great setback and many tend to loan from their friends and are heavily indebted this also occurs in domestic setup where the family tend to go loans funds to support the monthly budget which if they could have properly budget they would have avoided this short comings (Wilkinson 2008). In business these mental accounting is seen in promotional sales where the owners of the stores gives out incentive to entice clients to shop in their premises. In most of this sales the shop attendant tend to play with the mind set of the shoppers by issuing incentive that are tricky, like in the case where the shopper issues a discount of $200 from the original price of $210 on a certain item, but for one to access this item on this price they had to be accompanied by another item of less value let say $50, due to competition another attendant issues the same discount but on the opposite the less commodity now costs $40 and the other one $210. The aggregate here been $10 but the percentage discount by the shop attendant two is much larger than the first so for one to formulate and know how to evaluate the difference in prices and know how put it to practice when accounting in purchasing goods this is what tallies as mental accounting. This decrease of prices tends to pull consumers closer and the purchase power increases but it decreases in shop where there are no decreases or discount in prices or incentives. In commercial business mental accounting is mostly adhered to by production managers in cutting down cost in productions so as to also lower the prices of a product in the market. This strategy is aim at when making tactical and strategic decisions which are not proposed to the board but are necessary and the urgency of the case is the limiting factor to this, the manager in this situation has to react fast and get to a solution that will help to increase sales and also combat competition at the same time leaving the stake holders and consumers satisfied. Motivational Biases Motivational biases is a term derived at from the term bias which means preconception or faulty thinking this term is basically associated with cognitive error or in simpler terms faulty thinking or misconception of notions, so it right to say motivational biases is the drive that influence faulty thinking and this results to misconceptions of notions, the objectives derived at here are delusional and are based on own self conception which greatly affect the outcome of goals and plans. A best example of motivational biases is experienced in a case where a hiker decides to take the most un-used route in climbing a mountain thinking that the route they have taken is the shortest the hardship that this hiker will encounter in the way are the consequences associated with motivational biases. According to Bazerman, (2006) this is now faulty thinking and misconception of own liking and the goals of climbing the mountain to the top will be halted by the fact that the condition of the side they have chosen are unbearable and so they will definitely have to end their pursuit of climbing that particular mountain or have the alternative to start all over again the right way using the most popular and used route of going up hill and in this they will have wasted time, energy and in many cases resources that are beneficial and could have been used inn other important activity. There are several determinant factors of motivational biases that fuel our driving force to this error the most important to this is the multi-selves, this is the conflict of short term thinking (system 1) and long term thinking (system 2) and is mainly influenced by the tension between what we want and what we ought to do. In layman term we can classify this as the immediate and the future. Multi-selves conflict result to motivational biases when we conflict the thinking of the terms involved, when we used system two to address immediate response than using system one and the vice versa. This is mostly influenced by factors associated with our daily lives like sex drives, hunger and greed because this factors falls under wants they predominates our thinking and bias the importance of the ought to do values and this results to motivational biases of the highest grade, by deterring and overriding planned actions from our longer terms interest either because we loose focus and our desire are not strong enough in making our goals and plans and this results to loss of vision and focus. Will power is another factor though in this case it is used negatively and the results are bias because, this term differs from person to person and many use it through positive illusions. They are over confidence in their own and this will definitely affect the outcome of the objective set to be derived at because of the unrealistic optimism they have in mind, when addressing issues this is what result when one uses the not so most used route to climb a mountain because they are governed by unrealistic positive view in the own will power of accomplishment and don’t involve the ideas of other by down sizing other competence and competitive stances. This egoism is brought about by overconfidence which result if the person advocating for this has illusion over control issues, in this stance the party in this area tend to control things that cannot be controlled automatically it like trying to change fate, like in a game of dice the player can not predict the outcome of the dices but has to rely on shear luck but due to motivational biases the player feel in control of the throw of the dice which in real life is fictional and cannot be added up or cannot tally as controlling of the dices outcome. In corporate set up this kind of motivational biases reflect to when managers cohesively use the powers (Dunning, Heath and Suls, 2004). They have in manning project and strategy their own way without consulting the stake holders involved in this kind of mechanism this kind of egoism bring about fatality in businesses and in common life setup and should be despised for they only attribute to regrets and bad experiences in life. Positivity in life should be the most important aspect as one should do so as to respect life most precious gift life. The effect‘s of emotion, stress and time pressure, on judgment and decision making? Stress is the extreme change in emotional state of affairs and mind, this is mostly linked with our day to day thinking and how we address situations either at home, school or in our working places. In the finance sector the kind of work load and the staff generally affect the way the emotion of one will be affected, if the person in this sphere has a high position in the office the more likely stressed they are bound to be in deal with, for they are in-charge of matters that constantly need assessing and approval for the well of the firm, this is aimed at good production and high gains from the production. Although stress in managerial area is viewed good in terms of time processing for in most of this positions time is the limiting factor and is mostly associated in making quick unexpected strategic decision that affect the outcome of the company at stake due to high demand and competition nature of the markets. The decision derived at here has to be fast and accurate in this circumstance many kinds of emotions are involved anxiety, fatigue, fear, depression and anger, however if this kind of emotions are not well addressed they results to fatality that are sometimes permanent and can results to madness, the most dangerous kind is anxiety it good and very helpful in decision making but if not addressed and monitored graduates to depression and this now gives birth to anger, resentment, incompetence, loss of confidence and indiscipline and in most cases the person under this condition is either diagnosed to counseling or fired from office (Schwartz, 2000). Positive thinking although is very essential in managerial position however it is very crucial for many don’t know how to handle the real from illusion and they end up being overconfidence and under estimating strategic trends and competitiveness of the market although if addressed properly the person in-control addresses high risk strategy and takes risk probability of winning high and less likely to when the probability is low, but due to the stresses of daily life positive thinking clash with fatigues and emotions associated with the working conditions of companies. Negative moods affects decision making by blocking goals to be achieved and this derives at different emotions like anger and fear; anger is derived at when some one else is responsible for provoking the other party or responsible for the derailment of the strategic decision and which led to disappointing result from the objectives and goals targeted, fear is low certainty and low perceived control of any plan that may have been devised to combat a certain epidemic (Keltner, D & Lerner, 2000). This two factors provides perspective for judgment and choice, this is seen by when fearful people make pessimistic judgment than angry ones due to lower perceived controllability that is associated with emotions in decision making. Negative moods promotes more analytical processing, extensive and compensatory strategies, most decision makers are unaware of the effect of stress, emotions and time pressure or the way they are likely to affect them in making decisions. This helps them to derive at the right goals and objective they had set even when under pressure although this are the main advantages for most institutions when interviewing candidates for the positions that are inclusive of drastic decision making they assess if the candidate can work under pressure. There are also negative impact associated with kind of vices in making decision, for they make the situation un-bearable for the participant, they narrow the span of attention, in most cases the applicant uses system one rather than system two and this results to conflict of interest, that participants opts for shortcuts which derives at half baked result and premature closure, they reduce the amount of information to be processed. The most important aspect indecision making of these vices is they help in varying preferences, judgment of risk and certainty in all strategic decision making that are essential for the well running of the firm. References Baron, J, 2001, Thinking and Deciding. Cambridge, Cambridge University Press Bazerman, M, 2006, Judgment in Managerial Decision Making. New York, John Wiley & Sons Inc Dunning, Heath and Suls, 2004, Flawed Self-Assessment: Implications for Health, Education, and the Workplace. Psychological Science in the Public Interest, Vol. 5, No. 7, pp. 69-106 Hardman, D, 2009, Judgment and Decision Making. New York. BPS Blackwell. Keltner, D & Lerner, J, 2000, Beyond valence: Towards a model of emotion specific influences on judgment and choice. Cognition & Emotion, Vol. 14, No. 4, pp.473- 493 Schwartz, N, 2000, Emotion, Cognition and Decision Making. Cognition & Emotion, Vol. 14, No. 4, pp. 433- 440 Thaler, R, 1999, Mental Accounting Matters. Journal of Behavioral Decision Making, Vol. 12, No. 4, pp. 183-206. Wilkinson, N, 2008. An introduction to Behavioral Economics. Yancey, Palgrave Macmillan Read More