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Michael A. Hitt

C. Chet Miller

Adrienne Colella

Chapter 10 Decision Decision

Making by Making by IndividualsIndividualsand Groupsand Groups

Slides by Ralph R. Braithwaite

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Dawn Ostroff’s Decision Making Dawn Ostroff’s Decision Making at the CW Television Networkat the CW Television Network

Dawn Ostroff

• What are your thoughts about Ostroff’s decision-making process regarding programming at the “new” network?

• Given the nature of the decisions needed, did she used the knowledge and wisdom of her advisors wisely?

• What are your thoughts about the “creative and somewhat risky tactics” that were adopted?

• Do you think the network will survive and be successful in the future?

Exploring Behavior in Action

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Knowledge ObjectivesKnowledge Objectives1. Describe the fundamentals of decision making,

including the basic steps and the need to balance ideal and satisfactory decisions.

2. Discuss four important decision-making styles, emphasizing the effectiveness of each one.

3. Explain the role of risk-taking propensity and reference points.

4. Define cognitive bias and explain the effects of common types of cognitive bias on decision making.

5. Discuss common pitfalls of group decision making.6. Describe key group decision-making techniques.7. Explain the factors managers should consider in

determining the level of associate involvement in managerial decisions.

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Fundamentals of Decision Fundamentals of Decision MakingMaking

Decisions are choices of actions from among multiple feasible alternatives.

Making decisions is one of the primary activities of senior managers.

Decisions are also made by managers at all levels and by associates in high-involvement organizations.

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Decision-Making ProcessDecision-Making Process

Adapted from Exhibit 10-1: The Decision-Making Process

Define the Problem

Identify Criteria

Gather and Evaluate Data

List and Evaluate Alternatives

Select Best Alternative

Implement and Follow Up

Feedback

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Optimal versus Satisfactory Optimal versus Satisfactory DecisionsDecisions

Optimal decision Satisficing decision

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Decision-Making StylesDecision-Making Styles

Carl Jung

Individuals’ predispositions can affect decision process at two critical stages

Gathering Gathering (Perceiving) (Perceiving)

of Informationof Information

Sensing styleSensing styleIntuition styleIntuition style

Evaluating Evaluating (Judging) of (Judging) of AlternativesAlternatives

Thinking styleThinking styleFeeling styleFeeling style

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Decision-Making Decision-Making StylesStyles

Adapted from Exhibit 10-2: Influence of Decision Styles

Implement and Follow Up

Pe

rce

ptu

al

Infl

ue

nce

s IntuitionSensing

Ju

dg

men

tal

Infl

ue

nce

s

Fe

edb

ack

Identify Criteria

Gather and Evaluate

Information

List and Evaluate Alternatives

Select Best Alternative

Define the Problem

Using abstractions and describing the

“big picture”

Using the five senses to identify

factual details

FeelingThinking

Subjective values with emotional and

personal factors

Objective analysis, rational

procedures

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Gathering InformationGathering Information

SensingSensingA decision style

focused on gathering concrete information directly through the

senses, with an emphasis on practical

and realistic ideas.

IntuitionIntuitionA decision style

focused on developing abstractions and

figurative examples for use in decision making,

with an emphasis on imagination and

possibilities.

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Intuition StyleIntuition StyleValuable when:

• A high level of ambiguity exists

• Few or no precedents exist

• Facts are limited

• Facts don’t clearly indicate which way to go

• Time is limited and there is pressure to make the right decision

• Several plausible alternative solutions exist with good arguments for each

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Evaluating AlternativesEvaluating Alternatives

ThinkingThinkingA decision style

focused on objective evaluation and

systematic analysis.

FeelingFeelingA decision style

focused on subjective evaluation and the

emotional reactions of others.

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ManagerialAdvice

Nurturing Alternative Nurturing Alternative Decision StylesDecision Styles

What are your thoughts about the comment that many accountants believe that more data is better and they hide behind “a mass of data”?

What are your thoughts that some marketers have “blind spots” when it comes to having to do data analysis?

What are you thoughts about the Six Thinking Hats concept of Edward de Bono?

Edward de Bono

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Degree of Acceptable RiskDegree of Acceptable Risk• Risk exists when the outcome of a chosen

course of action is not certain

• Risk-taking propensity (Willingness to take chances)

Reference Point

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Cognitive BiasesCognitive Biases

Confirmation biasSeeking information that confirms early beliefs and ideas

Ease of recall biasRelying too much on information that is easy to recall from memory

Anchoring biasEmphasizing too much the first piece of information encountered

Sunk-cost biasNot treating past investments (time, effort, money) as sunk-costs when deciding to continue an investment

Cognitive Biases

Mental shortcuts involving simplified ways of thinking

10-15ExperiencingStrategic OB

Mount Everest ExpeditionsMount Everest Expeditions

George Mallory (R) and Andrew Irvine

• What role do “sunk costs” play in many decisions?

• Why would someone like Rob Hall ignore his pre-determined turnaround time?

• Have you experienced the “perils of sunk cost” in your work or personal lives? Give examples.

Rob Hall

Sir Edmund Hillary (L) and Tenzing Norgay

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Group Decision MakingGroup Decision Making• Some members may arrive with their own

expectations, problem definitions, and pre-determined solutions

• Some members may have given more thought to the decision situation and what is to be accomplished

• Focus of the team leader may be in developing a collaborative team rather than developing individual decision making skills

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Decision-Making ProcessDecision-Making Process

Adapted from Exhibit 10-3: Group Decision-Making Phenomena – Pitfalls and Techniques

Risky Shift

Devil’s Advocacy

Brainstorming

Group Decision Making

Dialectical Inquiry

Delphi Technique

Nominal Group

Technique

Diversity-based

InfightingGroupthink

Common Information

Bias

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Group Decision-Making Group Decision-Making PitfallsPitfalls

GroupthinkCommon

Information Bias

Diversity-Based

Infighting

RiskyShift

Brain- storming

NominalGroup

Technique

DelphiTechnique

DialecticalInquiry

Devil’sAdvocacy

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Vroom-Yetton MethodVroom-Yetton Method

Victor Vroom Philip Yetton

Requires managers to diagnose the problem situation and then determine the extent to which associates will be involved in the decision-making process. The involvement depends on the probable effect participation will have on:

• the expected quality of the decision

• the acceptance or commitment needed from associates to implement the solution

• the amount of time available (and needed) to make the decision.

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Who Should Decide? Who Should Decide?

Adapted from Exhibit 10-4: Managerial Approaches to Associate Involvement in Decision Making

Low High

Level of Associate Involvement in Decision

AI Manager solves problem or makes decision aloneAII Manager requests information but not alternativesCI Manager explains problem individually but makes

decision aloneCII Manager explains problem to group, gets suggestions,

makes decision aloneGII Manager explains problem to group, facilitates problem

solving, implements decision supported by the group

AI AII CI CII GII

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Vroom-Yetton MethodVroom-Yetton Method

A. Is there a quality requirement such that one solution is likely to be more rational than another solution, or will any number of solutions work reasonably well?

B. Do I have sufficient information to make a high-quality decision?

C. Is the problem structured (do I know the question to ask and where to look for relevant information)?

D. Is acceptance of the decision by associates critical to effective implementation?

E. If I were to make the decision by myself, is it reasonably certain that it would be accepted by my associates?

F. Do the associates share the organizational goals to be attained in solving this problem?

G. Is conflict among associates likely in preferred solutions?

Questions asked to determine level of associate involvement in decision making

Adapted from Exhibit 10-5: Decision Tree Method

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Vroom-Yetton MethodVroom-Yetton Method

14-CII

10-AII

4-AI

1-AI 2-AI

3-GII

5-AI

9-AII

11-CII

13-CII

12_GII

6-GII7-CII

8-CI

No

Yes

No

No

No

No

NoNo

No

No

NoNo

NoNo

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Decision points

Recommended strategies

A B C D E F G

Pro

ble

m

Adapted from Exhibit 10-5: Decision Tree Method

10-23ExperiencingStrategic OB

Vroom-Yetton Model and the Vroom-Yetton Model and the Civil WarCivil War

• What are your thoughts regarding the application of the Vroom-Yetton Model to the Civil War battles discussed in the text?

• How could you use this model to “fight” some of your “battles” in your life?

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Value of Individual vs. Group Value of Individual vs. Group Decision MakingDecision Making

Important considerations for judging the overall value of group decision vs. individual decision making include:

TimeTime CostCost

Nature of theNature of theProblemProblem

Satisfaction andSatisfaction andCommitmentCommitment

Personal GrowthPersonal Growth

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Group Decision MakingGroup Decision Making

Adapted from Exhibit 10-6: Advantages and Disadvantages of Group Decision Making

Can accumulate more knowledge and facts and generate better alternatives.

Often display superior judgment when evaluating alternatives.

Involvement in decisions leads to a higher level of acceptance and satisfaction.

Can result in growth for members of the group.

AdvantagesAdvantagesTake more time to reach decisions than do individuals.

Social interactions may lead to premature compromise.

Often dominated by one or two “decision leaders.”

Managers may rely too much on group decisions – lose their own skills.

DisadvantagesDisadvantages

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The Strategic LensThe Strategic Lens

1. You are a manager of a unit with 25 associates. You have just been informed that you must lay off 20% of the associates in your unit. What process will you follow to make the decision and implement it?

2. If you made a decision that your manager told you was important for the organization and later you learned that you made an error in that decision, what actions would you take? Assume that others will not notice the error for some time.

3. You make decisions on a daily basis. Do you find it difficult to make decisions, especially those of importance? What can you do to improve your decision-making abilities?

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QuestionsQuestions