OWP liVe REPORT

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Make better decisions by understanding distinct layers

M A N A G E M E N T

Managerial decisions call for awareness and understanding of many levels and layers, says Professor of Strategy and International Management Phil Rosenzweig. A decision may present itself as a simple choice: Approve a new product, or okay a new venture. But look more closely, and much more is involved. In his OWP liVe session - Making better decisions: Layers, levels and lessons, Rosenzweig took participants through a structured approach to understanding the complexity of decision-making and what to consider when making managerial decisions.

by making an accurate evaluation under uncertainty and then select the best choice from the range of available options. For example, consider what appears to be a simple decision about approving a new product. There is judgment about the estimated sales and revenues, and about costs. Based on these judgments, there is a choice to approve or not approve. “This is the sort of decision we encounter in economics and marketing classes, but it’s very simplistic,” Rosenzweig said. “Any manager understands that more is involved.” If we unpack that seemingly simple decision about a product approval, we see at least four other levels. First, at a group level, the manager is receiving information from subordinates and very likely making the decision in a group setting. Second, the manager is an individual who approaches judgments and choices with certain cognitive biases. Third, deciding about a given product

has to take into account other products that have been, or could be, launched by your division. Fourth, your division may be influenced by large forces at the level of the corporation . Wise managers will be aware of these different levels and keep them in mind.

Group 1

PHIL ROSENZWEIG Professor of Strategy and International Management

Individual 2

The breadth of implications in decision- making

Product 3

Decision-making is a topic of interest to many disciplines, from economics and computer science to political science and psychology. At a simple level, decisions have two core components: Judgment and choice. You need to exercise judgment

Corporation 4