Judgment in Managerial Decision Making

Judgment in Managerial Decision Making: Availability, representativeness, and affect heuristics The availability heuristic can best be summed up 'if it is not worth being remembered, it is not important.' In short, if a problem is available (i.e., preoccupying the manager) it is assumed to be more important than one which is not. Sometimes dealing with immediate problems are necessary, such as when managing a crisis or during an organization's busy season.

However, it can also lead to a 'seat of the pants' managerial style in which the manager is always putting out fires rather than anticipating problems before they occur. On one hand, emphasizing recent information can be valuable and prevent a manager from remaining stymied in old behavior patterns. On the other hand, it can mean a lack of historical context for the data of which one is using to make a judgment.

A manager of an ice cream store might assume that just because a new flavor is popular that it is essential to market a similar product, based upon the immediate information at hand, not based upon long-term analysis (Availability heuristic, 2014, Changing Minds). Another common heuristic is the representativeness heuristic, in which a mental analogy is made between a current event and past event. In other words, it is assumed that if it occurred in the past, it is likely to manifest similar features in the present.

To some extent, this is inevitable, given that we cannot proceed through life treating each event as new and unexpected (for example, we assume that if one drugstore sells toothbrushes in one city, another drugstore will also sell toothbrushes even if we move; a manager assumes that a trusted supplier will consistently be reliable as it has been in the past). However, the representativeness heuristic can give rise to many flawed judgments based upon stereotypes.

A good example of the representativeness heuristic is the so-called gambler's fallacy which presumes that if one is having a run of 'good luck' it will continue and every bet will be equally as successful as the last (Representativeness heuristic, 2014, Changing Minds). In business, the faulty use of this heuristic might be seen in assuming that because a particular product was successful amongst female consumers last year, it will continue to be successful this year or using the same type of sales pitch to promote a product year after year.

The affect heuristic refers to the phenomenon of when a word or a phrase summons up an extremely strong emotion with little provocation. "Researchers have found that if we have pleasant feelings about something, we see the benefits as high and the risks as low, and vice versa" (Giesler 2013). For example, when selling food it is very common for advertisers to emphasize its decadent qualities, showing pictures of overstuffed burgers and creamy ice cream.

But when selling diet products, the emphasis is often on its low calories and how good the dieter will look after using the product for several weeks.