BUSMGT711 Chap.6 Decision-Making and Ethical Choices
Decision-Making and Ethical Choices
Week 6 starts from an uncomfortable finding: managers decide constantly yet humans are poor decision makers, as three simple puzzles demonstrate. The chapter covers Kahneman's fast and slow thinking, the layers of ignorance, and the non-rational influences of bounded rationality, heuristics, incrementalism, escalation of commitment, emotion, illusion and politics.
It then compares approaches from intuition and simple heuristics through dictionary and threshold rules to weighted criteria and value analysis, before turning to four views of ethical behaviour, cultural relativism and a seven-step checklist. This topic is included in the mid-term test.
What this chapter covers
- 01
Why people are poor decision makers: the three-puzzle evidence
- 02
Fast and slow thinking and the layers of ignorance
- 03
Non-rational influences and remote-work biases
- 04
The pyramid of decision approaches: intuition, rules, methodologies
- 05
Dictionary, threshold and industry-specific rules
- 06
Weighted criteria, decision matrices and value analysis
- 07
Four ethical views, relativism versus universalism, seven-step checklist
Worked example · free
Weighing three coffee suppliers on price, reliability and sustainability
- +1The weights add to 100% (40 + 35 + 25), so each total is a score out of 100.
- +1Supplier A earns 32 from price, 21 from reliability and 12.5 from sustainability, giving 65.5.
- +1Supplier B earns 24, 31.5 and 17.5 for 73; Supplier C earns 36, 17.5 and 22.5 for 76.
- +1C ranks first, but only 3 points ahead of B; moving 5 points of weight from price to reliability gives B 74.5 against C's 74, so the ranking depends on the weights.
Key terms
- Bounded rationality
- Decision making limited by incomplete information, time and mental capacity, so people settle for a satisfactory option.
- Escalation of commitment
- Continuing to invest in a failing course of action because of what has already been spent.
- Threshold rule
- A generic decision rule that accepts an option only if every one of several conditions is met.
- Weighted criteria method
- A decision approach that weights each criterion, rates every option against it and sums the weighted scores.
- Value analysis
- A structured assessment of a product or process, its functions, their importance and cost, used for important and complex decisions.
- Cultural relativism
- The position that no single right way to behave exists because ethical behaviour depends on cultural context.
Decision-Making and Ethical Choices FAQ
Why does the course say people are bad at making decisions?
Three short puzzles with tempting wrong answers were set, untimed, for 3,235 Ivy League students; only 17% solved all three and 32% got all three wrong. Kahneman's explanation is that people rely almost always on fast, biased thinking rather than slow, logical reasoning, which makes structured methods worth learning.
When should a manager trust intuition instead of data?
Intuition can be brilliant when it is really automated expertise, and the course cites research on 122 creative-industry companies where simple heuristics combined with experience worked best. Under extreme uncertainty, such as innovation projects or a pandemic, data may be unreliable and slow. Elsewhere intuition is inconsistent and exposed to biases like confirmation and halo effects.
What are the four views of ethical behaviour?
The utilitarian view looks for the greatest good for the greatest number, individualism for long-term self-interest pursued honestly, the moral rights view for respect of fundamental rights, and the justice view for fair and impartial treatment. In class they are applied to whether cancer research organisations should accept tobacco company donations.
Assessment move
Start by learning the non-rational influences as pairs: each bias with a team symptom and a counter-move, because test questions reward a factor that is named, grounded and illustrated. Work the three puzzles again slowly and write one sentence on why the fast answer feels right; that sentence becomes evidence for Kahneman in an answer.
Practise the weighted criteria method with your own numbers until checking the weight total, multiplying, summing and reporting the margin takes under three minutes, and always add a line on which weight would flip the result.
Sort decision approaches onto the pyramid from memory and attach one danger to each: inconsistency for intuition, wrong ranking for the dictionary rule, near misses for the threshold rule, ignored local conditions for industry rules. For ethics, rehearse a short debate on a contested donation or supplier choice, arguing it through each of the four views, then run your preferred option through the seven-step checklist.
Finally, review your simulation decisions for incrementalism or escalation of commitment and note one rollover as a ready example. Keep a compact version of the four views and the checklist on your A4 note page, since a scenario question on ethics rewards a visible structure.
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