SMG 604-

DECISION MAKING

CHAPTER 5
VALUE AND ETHICS
 ETHICS

• The set of moral principles or values that

defines right and wrong for a person or group

• Deciding what is right (or what is more right)

in a particular situation.
• Deciding what is consistent with one’s
personal or organizational value system.
 How do Ethics influence
Decision Making?

Ethical Issues and Decision Making

 Ethical Dilemma.
 A situation in which a person must decide whether or not
to do something that, although personally or
organizationally beneficial, may be considered unethical
and perhaps illegal.

 Ethical dilemmas are often associated with:

 Risk and Uncertainty.

 Non routine Problem Situations.

 The Five P”s of Ethical Power

 Purpose: objective, goal or intention

 Pride: The sense of satisfaction that receive

from the accomplishments
 Patience: Trust the process!

 Persistence: Maintaining your commitment

and making your actions consistent with your
guiding principles
 Perspective: The capacity to see what is
REALLY important in any situation.
Influences on Ethical Decision Making

Ethical Intensity of Decision

Ethical
Answers
Depend on…
Moral Development of Manager

Ethical Principles Used

Ethical Intensity Depends on…

Magnitude of consequences

Social consensus

Probability of effect

Temporal immediacy

Proximity of effect

Concentration of effect
 Ethical Intensity In Decision Making

 Magnitude of consequences is the total harm

or benefit derived from an ethical decision.

 Social consensus is agreement on whether

behavior is bad or good.

 Probability of effect is the chance that

something will happen and then result in harm to
others.
 cont.

 Temporal immediacy is the time between an act

and the consequences the act produces.

 Proximity of effect is the social, psychological,

cultural, or physical distance of a decision maker
to those affected by his or her decisions.

 Concentration of effect is how much an act

affects the average person.
 VALUES

 Values are the principles & priorities which

help us make decisions on a daily basis.

Values are constantly changing & developing

throughout our lives. In childhood, our values
are usually the ones held by parents and
other adults around us.

Example:
• If you truly value honesty, you will choose to be
honest in interactions.
Common Decision-Making Errors and Biases
Overconfidence

Hindsight Immediate Gratification

Self-serving Anchoring Effect

Sunk Costs Selective Perception

Decision-Making
Errors and Biases

Randomness Confirmation

Representation Framing

Availability
 Decision-Making Biases and Errors
 Heuristics
 Using “rules of thumb” to simplify decision making

 Overconfidence Bias
 Holding unrealistically positive views of one’s self and one’s
performance
 Immediate Gratification Bias
 Choosing alternatives that offer immediate rewards and
avoid immediate costs
 Anchoring Effect
 Fixating on initial information and ignoring later
information
 Selective Perception
 Selecting, organizing, and interpreting events based on the
decision maker’s biased perceptions
 Confirmation Bias
 Seeking out information that reaffirms past choices and
discounting contradictory information
 Framing Bias
 Selecting and highlighting certain aspects of a situation
while ignoring other aspects
 Availability Bias
 Losing decision-making objectivity by focusing on the
most recent events
 Representation Bias
 Drawing analogies and seeing identical situations when
none exist
 Randomness Bias
 Creating unfounded meaning out of random events
 Sunk Costs Errors
 Forgetting that current actions cannot influence past
events and relate only to future consequences
 Self-serving Bias
 Taking quick credit for successes and blaming outside
factors for failures
 Hindsight Bias
 Mistakenly believing that an event could have been
predicted once the actual outcome is known (after-the-
fact)