??Chapter 10Chapter 10

Decision Making by Decision Making by Individuals & GroupsIndividuals & Groups

Nelson & QuickNelson & Quick

The Decision-Making Process

Programmed Decision - a simple, routine matter for which a manager has an established decision rule

Nonprogrammed Decision - a new, complex decision that requires a creative solution

The Decision-Making Process

Recognize the problem andthe need for a decision

Identify the objective ofthe decision

Gather and evaluate dataand diagnose the situation

List and evaluatealternatives

The Decision-Making Process

Select the bestcourse of action

Implementthe decision

Gatherfeedback

Follow up

Models of Decision-Making

Effective decisionEffective decision

a timely decision that meets a desired objective and is acceptable to those individuals affected by it

Garbage Can Model

Bounded Rationality Model

Rational Model

1. The outcome will be completely rational

2. The decision maker uses a consistent system of preferences to choose the best alternative

3. The decision maker is aware of all alternatives

4. The decision maker can calculate the probability of success for each alternative

Rational ModelRationality - a logical,step-by-step approachto decision making, with athorough analysis ofalternatives and theirconsequences

1. Managers suggest the first satisfactory alternative

2. Managers recognize that their conception of the world is simple

3. Managers are comforable making decisions without determining all the alternatives

4. Managers make decisions by rules of thumb or heuristics

Bounded Rationality Model

Bounded Rationality - a theory that suggests that there are limits upon how rational a decision maker can actually be

Garbage Can Model -

a theory that contends

that decisions in

organizations are

random and unsystematic

Garbage Can Model

Problems

Solutions

Choiceopportunities

Participants

From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative Science Quarterly 17 (March 1972) 1.25. Reprinted by permission of the Administrative Science Quarterly

Risk and the Manager

Risk aversion - the tendency to choose options that entail fewer risks and less uncertainty

Risk takers– accept greater potential for loss

– tolerate greater uncertainty

– more likely to make risky decisions

Evidence: Successful Managers Take Risks

Escalation of Commitment

• Why it occurs– humans dislike inconsistency– optimism– control

• How to deal with it– split responsibility for decisions– provide individuals with a graceful exit– have groups make the initial decision

The tendency to continue tocommit resources to a losingcourse of action

Cognitive Style

Cognitive Style - an individual’s preference for gathering

information and evaluating alternatives

Jungian theory offers a way of understanding andappreciating differences among individuals.

Jung’s Cognitive Style

Style

Sensing/thinking

Sensing/feeling

Intuiting/thinking

Intuiting/feeling

Ideal Organization

Facts/ Impersonal Control

Facts & Org. relationships

Broad issues/ Impersonal & ideal

Serve humankind/General values

ST

SF

NT

NF

Z Problem-Solving Model

Look at the facts

and details

Can it beanalyzed

objectively?

What alternativesdo the facts

suggest?

What impactwill it have on

those involved?

Sensing Intuition

Thinking Feeling

Figure from Type Talk at Work by Otto Kroeger and Janet M. Thuesen. Copyright © 1992 by Otto Kroegerand Janet M. Thuesen. Used by permission of Dell Publishing, a division of Random House. Inc.

Influences on Decision-Making

Intuition - fast, positive force in decision making utilized at a level below consciousness, involves learned patterns of information

Creativity - a process influenced by individual and organizational factors that results in the production of novel and useful ideas, products, or both

Four Stages of Creative Process

• Preparation - experience/ opportunity to build knowledge base

• Incubation - reflective, often unconscious thought

• Illumination - insight into problem

• Verification - thinking, sharing, testing the decision

Influences on Creativity

• Individual examples– Cognitive Processes

• Divergent Thinking• Associational Abilities

– Personality Factors• breadth of interests• high energy• self confidence

• Organizational ex.– Flexible organization

structure– Participative

decision-making– Quality, supportive

relationships with supervisors

Organizations Can Facilitate Creative Decision-Making

• Reward creativity

• Allow employees to fail

• Make work more fun

• Provide creativity training

• Vary work groups (internal/external)

• Encourage creative stimuli (music, art, etc.)

Participative Decision Making

• Organizational Foundations– Participative, supportive organizational culture– Team-oriented work design

• Individual Prerequisites – Capability to become psychologically involved in

participative activities– Motivation to act autonomously– Capacity to see the relevance of participation for

one’s own well-being

Individuals who are affectedby decisions influence themaking of those decisions

Two Brains, Two Cognitive Styles

Left Hemisphere Right Hemisphere

VerbalSequential, temporal,

digitalLogical, analytic

RationalWestern thought

Nonverbal, visuospatialSimultaneous, spatial,

analogicalGestalt, synthetic

IntuitiveEastern thought

Ideal = “brain-lateralized” making use ofeither or both sides, depending on situation

From Left Brain, Right Brain by Springer and Deutsch © 1989, 1985, 1981 by Sally Springer and Georg Deutsch. Used with permission by W.H. Freeman and Company

Group Decision-Making

• Role of synergy - a positive force in groups that occurs when group members stimulate new solutions to problems through the process of mutual influence and encouragement in the group

• Role of social decision schemes - simple rules used to determine

final group decisions

(prediction 80% correct)

Majority Wins

Truth Wins

Two-thirds Majority Wins

First-shift rule

Group Decision-Making

1) more knowledgethrough pooling of group resources2) increasedacceptance & commitment dueto voice in decisions3) greater under-standing due toinvolvement indecision stages

1) pressure ingroups to conform2) domination byone forceful memberor dominant clique3) amount of timerequired, becausegroup is slowerthan individualto make a decision

Advantages

Disadvantages

Group Phenomenon

Groupthink - a deterioration of mental efficiency, reality testing, and moral judgment resulting from in-group pressures

Group polarization - the tendency for group discussion to produce shifts toward more extreme attitudes among members

GroupDecision

Techniques

Self-Managed Teams

Dialectical Inquiry

Brainstorming

Devil’s Advocacy

Delphi Technique

Nominal Group Technique

Quality Circles & Quality Teams

Technological Aids to Decision-Making

Expert Systems - a programmed decision tool set up using decision rules

Decision Support Systems - computer and communication systems that process incoming data and synthesize pertinent information for managers to use

Group Decision Support Systems - systems that use computer software and communication facilities to support group decision-making processes

Ethics Check

• Is it legal?– Does it violate law– Does it violate

company policy

• Is it balanced?– Is it fair to all– Does it promote win-win

• How will it make me feel about myself