Chapter 9 Nelson & Quick

Decision Making by Decision Making by Individuals & GroupsIndividuals & Groups

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.

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 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

Rationality - a logical, step-by-step approach to decision making, with a thorough analysis of alternatives and theirconsequences

Rational Model

1. Managers suggest the first satisfactory alternative

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

Bounded Rationality Model

Satisfice – to select the first alternative that is “goodenough,” because the costs in time and effort are toogreat to optimize

1. Managers suggest the first satisfactory alternative

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

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

Bounded Rationality Model

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

4. Managers make decisions by rules of thumb or heuristics Heuristics – shortcuts in decision

making that save mental activity

Garbage Can Model -

a theory that contends

that decisions in

organizations are

random and unsystematic

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

Garbage Can Model

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 sunk costs

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 failingcourse of action

Cognitive Style

Cognitive Style - an individual’s preference for gathering information and evaluating alternatives

Jungian theory offers a way of understanding and appreciating differences among individuals.

Jung’s Cognitive Style

Style

Sensing/thinking

Sensing/feeling

Intuiting/thinking

Intuiting/feeling

Ideal Organization

Facts/ Impersonal Analysis

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.

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

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

Verification

thinking,

sharing,

testing the

decision

Illumination

insight into

solving

a problem

Incubation

reflective,

often

unconscious

thought

Preparation experience/opportunity

to build knowledge

base

Influences on Creativity

Individual examples Cognitive Processes

Divergent ThinkingAssociational AbilitiesUnconscious Processes

Personality Factorsbreadth of interestshigh energyself-confidence

Organizational examples 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

Group Decision Making

Role of synergy - a positive force that occurs in groups 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

First shift

Group Decision Making

1) more knowledge through pooling of group resources2) Increased acceptance & commit- ment due to voice in decisions3) greater understanding due toinvolvement in decision stages

Advantages

1) pressure in groups to conform2) domination by one forceful member or dominant clique3) amount of time required, because group is slower than individual to make a decision

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

Preventing Groupthink

Ask each group member to act as critical evaluator Have the leader avoid stating his opinion prior to

the group decision Create several groups to work simultaneously Appoint a devil’s advocate Evaluate the competition carefully After consensus, encourage rethinking the position

From Janis, Irving L., Groupthink: Psychological Studies of Policy Decisions and Fiascoes, Second Edition. Copyright © 1982 by Houghton Mifflin Company.

Self-Managed Teams

DialecticalInquiry

Brainstorming

Devil’s Advocacy

Delphi Technique

Nominal Group Technique

Quality Circles & Quality Teams

GroupDecision

Techniques

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 in either face-to-face meetings or dispersed meetings

Virtual Teams - groups of geographically dispersed coworkers who work together using a combination of telecommunications and information technologies to accomplish a task

Desktop Videoconferencing

Systems

Internet/IntranetSystems

Tools for

Virtual Teams

Group DecisionSupport Systems

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 relationships

How will it make me feel about myself