Managerial Decision Making and Biases

Running head: MANAGERIAL DECISION MAKING AND BIASES
MANAGERIAL DECISION MAKING AND BIASES
Name of the student
Name of the university
Author Note

1MANAGERIAL DECISION MAKING AND BIASES
Introduction
According to Herbert Simon, human behavior while making an administrative decision is
not entirely rational instead it is "intendedly rational" (Simon 1991). In administrative decision
making process, the strategic decision is always taken by few individuals or a group. However,
this decision making process is inherently a complicated situation. Since the idea of rationality is
the central theme of Simon's decision making process, and it is important to elaborate on the
issue of rationality in decision making. It is to be considered that the choice of the rational
decision within the administrative set up is effected by the biases occurring which are internal
and external to the decision making process (Simon 1991). However, this seems to have a
substantial impact on the decision making the process of human beings (Tamir et al., 2015). This
paper will analyse three such issues of bonded awareness a, framing and emotions that might
cause bias in effective decision making process.
Bounded awareness
It is often argued that some people and mostly at the organizational setup, managers fail
to identify and perceive the issues, piece of information and process this inducement that are
readily available to them (Bazerman et al., 2016). This is what is known as “bounded
awareness”. It is further elaborated that such situation occurs when the people at the decision
making position make mistakes by overlooking the facts and piece of information (Carp et al.,
2016). It is argued that such behavior occurs when there is over-focus on one particular issue
than the rest. This leads to significant biases in the decision since the decision maker tends to
ignore the prime issue and takes a decision on other issues (Chen et al., 2018). This concept is
primarily applied to organizational decision taking where people are guided by the bounded
awareness, and this tends to happen more for the decision maker (Carp et al., 2016). According
to the psychologists, sharing some kind of information that is already known to the other
members tends to create a positive impact in the manner that everyone agrees to it (Haselton et
al., 2015). It is basically a psychological process where there are multiple reactions that this
entire lea to some kind of error in the decision making process. It is the complex process of
failure to understand the easily shared piece of information which could be quickly sought and

2MANAGERIAL DECISION MAKING AND BIASES
used in the decision making process within the organizational structure of decision making
(Haselton et al., 2015).Referring to Simon, the capacity of the human in solving problems of
objective reality where the problems are more significant than the solvable ability of the person,
it could be said that this is primarily because decisions are marked by error and biases like
bounded awareness (Van Knippenberg et al. 2018). These biases are prevalent in decision
making since it is argued that by the process of limited focus, awareness and concern form the
vital information is distracted outside the focus. This situation is the reason behind many
business scandals where the decisions of the managers proved to have failed. Hence, it is entirely
justified to claim Simon’s viewpoint that the decision making ability sometimes remains outside
the required complexity of the objective reality. To take an example of the bounded awareness,
itnis to be argued that when one particular medicine was withdrawn from the market in U. S back
in 2004, many medical practitioners prescribed it without the knowledge of the ban and it led to
serious result. This happened due to the lack of awareness to seek, sought and use this
information in the right manner. This has been developed in the later section of the paper.
Framing in decision making
The second vital aspects of decision making with chances of bases are the situation of
framing. According to the scholar, framing is the situation where the decision maker tends to opt
one of the similar situations depending on the way the situation is framed before them. This
occurs in a situation where there are higher chances of identical options. According to the
groundbreaking theory of Tversky and Kahneman , people tend to choose between options on the
basis of their framed representation. This has been further elaborated in the case study (Jain et
al., 2015). According to the Prospect theory, framing will always come in some form of gain or
loss (Jain et al., 2015). This is particularly important to consider since the decision making
ability of the individual within a given situation will impact the future prospects for the
organization. Under this framing, there are chances that within a hierarchy of options and
choices, the decision maker will choose to take up the issue with higher gain and avoid the
probable loss attached to the second option (Zhang et al. 2015). This could be said that Simon
has rightly emphasized that the fact that decisions are motivated by the way the objective reality
is framed. This objective reality tends to affect the decision because it is shaping the decision by
presenting the objective reality in one or the other way. This is what creates distortions in the

3MANAGERIAL DECISION MAKING AND BIASES
decision since the way the reality is framed is or presented before us (Jain et al., 2015). It is
important to note that framing is the process where the reality before us is presented. An
economist for long believed that framing the situation one or the other does not matter while
making the decision. However, in this field have found that decision making gets biased with
framing representation of the objective reality and this leads to the situation of confusion. (Jain et
al., 2015) For example, there might be a situation where the decision maker chooses to react in a
certain way for financial decision depending on the investment deals are presented before them.
This issue is deep rooted in the human mind where there is a tendency to avoid cases that include
higher risk factors. If there are two options presented before the individual decision maker, there
are higher chances that the decision maker would be taking the decision based on the positive
representation of the issues (Marusich et al., 2016). For example, an individual would invest in
the financial bonds in the market depending on the way it is represented on how much risk each
one of the bonds carries. This framing effect involves the risk of being tricked to the certain
decision by adopting the option which looks more favorable than other (Marusich et al., 2016). It
can also be pointed out that in the dental care advertisements, companies tend to use catchy lines
like “a health smile makes a person beautiful”, this helps to generate positivity in the consumer’s
mind and this way framing could be used for gaining certain things. Hence, it can be argued that
Simon’s opinion about the inability of the human mind to take a particular decision because the
objective reality tends to be more complicated than the capacity of the individual decision
making faculty proves to be true. It is to be mentioned that to avoid the inability of making a
decision about the objective reality which seems to be complicated, and the decision has to be
made by considering the awareness of the presence (Marusich et al., 2016).
Emotions in decision making
The third and the most important bias in the decision making is the issue of emotions.
Emotions are guided by the sudden expression of the individual mind, and this includes sadness,
anxiety, embarrassment, excitement or anger (Davis et al., 2018). These emotions can persuade
an individual to get carried away and prompt them to make decisions that may not be appropriate
in the given situation. For example, excitement has the chance of overestimation of success. If a
station of complex reality is presented before the individual decision maker, it is imperative that
the decision maker keeps a balance between the logic and emotions (Davis et al., 2018). Any