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Corporate Strategy and Decision MakingLecture 2: Choice and Types of Decision

IntroductionDecision making is generally considered by managers, and the academic discipline of management, to be central to organizational activity. There are several reasons why decisionmaking is considered to be so crucial. There is the need to formalize and codify managementwork, to promote communication between managers and others in organizations, and to be able to

justify a selected course of action from the range of likely or perceived options. There is also thevery real disciplinary imperative to distinguish management work from other types of work inorganizations. Describing management work as decision making seems so obvious and naturalthat it is hard to conceive of an alternative to it. Nevertheless, we will critically evaluate some of the assumptions behind traditional decision-making studies, including the notions of choice! and

decision!, drawing on traditions which normally lie outside the management discipline and itsdecision-making literature. "e will e#amine some major difficulties associated with thesetraditional management decision-making theories and later we will introduce a postmodern,te#tual process model of organizations $%larke &''&, &''() *instead &'+ , &''' , whichaddresses some of the concerns raised in our evaluation of the traditional decision-makingliterature.

Despite the fact that managers are often e#pected to be and to appear decisive!, andfre uently report themselves to be decision makers!, actually defining a decision! andidentifying when it has been made is e#tremely difficult $/iller, 0ickson and "ilson &''1 . The

process of decision making most often seems to resist reduction to discrete decisions taken, or choices avoided or suppressed.

The 2cientific /anagement approach even reduced the idea of the decision itself to the pointof disappearance, implying that management was a process of applying and following abstract

principles. Decision making was, at best, a matter which was tightly constrained by evidencegathered through scientific methods, on the optimal way of accomplishing a task. 3t was %hester 4arnard $&'5+ , in The Functions of the Executive, who contested these assumptions and arguedthat managers have a range of possible actions over which they can e#ercise discretion andchoice . Decision making for 4arnard is rational, purposeful and intentional, and thesecharacteristics have dominated subse uent approaches.

/any writers on decision making have emphasized the rational aspect of decision making,seeing causes and effects and assuming that all actions have clear and identifiable antecedents andconse uences. The theorists tend to assume that decision makers are fully aware of what they aredoing, and that they look for the best or optimum outcome in all circumstances. There is also atendency to regard decisions as being made at specific moments in time, perhaps at meetingsspecially called for the purpose. 2everal pieces of research, which we will discuss later, havedemonstrated that all of these assumptions can be uestioned.

"e will e#amine in more detail the following approaches to decision making6 the rationalmodel of decision making, the administrative or bureaucratic model $which uestions whether managers are capable of making rational decisions , the garbage can model of decision making$which tries to introduce the idea that decisions are really problems looking for solutions , and the

political model of decision making $which includes discussion of the role of very powerfulgroups in decision making called dominant coalitions! and why many decisions are really non-

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decisions! . 4efore we e#amine these models, however, we need to consider what mightconstitute a decision!.

What is a decision?"e discuss the developments associated with later versions of the rational decision-making modellater, but what concerns us now is how the assumptions of this model have led people to define a

decision! as a product of decision-making processes . 3n fact, the process of identifying a decisionis often problematic, as 0enry /intzberg, 7ames 8. "aters, 8ndrew /. 9ettigrew and :ichard4utler $&'';6 ( argue, because decisions are difficult to track down! and, as the cases aboveillustrate, managers often seek to avoid making decisions or obscure them.

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knows what is going to happen, and has only the responsibility of making the range of possiblechoices, never the choice itself, and feels a sense of being unburdened@ The point here is that thedie imposes a set of decision rules, which are appropriate to its technology $a si#-sided cube , andalso to its genre, or the style of its use, that of a game which one can win or lose. The rules,technology and genre of the decision system, especially with more comple# systems, unfold tocreate a pattern of inclusion and e#clusion which we can regard as a text. To pursue :einhardt!se#ample, the dice-man is included as a definer of alternatives but e#cluded as a chooser betweenthese alternatives, although he has, of course, already taken another choice, that of having his liferun by the die according to the self-imposed rules of his game. Ane unfolding of a life ordered inthis way is the te#t of The Dice-Man .

*ater we will look more closely at what a textual approach to decision making looks like.0owever, we will now take a look at what traditional theories of decision making have to sayabout choice!.

Traditional decision-making theories and choiceDecision making is a comple# process which can be seen to involve many different stages or events before an actual decision is taken. Despite what we have just argued, managers do have tomake decisions, and under varying circumstances, pressures and constraints. These have naturallyled to competing e#planations of decision making in organizations. There is strong evidenceamong traditional theories of a polarization between unitary and pluralist approaches to decisionmaking. nitar! approaches to decision making posit a general agreement about goals and the

best means to achieve them. "luralist approaches to decision making emphasize conflict and power struggles between individuals coalitions in organizations in circumstances in which participants have substantial knowledge and information.

The basis of most of the traditional models of decision making, as we have observed, ischoice. Decision making in this approach can be defined as a response to a situation re#uiring achoice . This is made after evaluation of alternatives on the basis of relevant choice criteria.?#amples of such criteria could be ma#imum contribution to profitability!, must complemente#isting product range! or must have an engine capacity of two litres!. 3n practice, however, aswe have also noted, decision making is not always as objective and rational as this suggests. 3tmay be influenced by values and institutional arrangements which bias data collection andevaluation, and affect the formulation of choice criteria $/arch, &'+B . 9arties to a decision

process may be unaware of the influence of these factors or may be outflanked because of their ignorance. 3f one accepts that organizational participants pursue objectives then the uestion of choice inevitably arises because there will not always be agreement about goals or the means toachieve them. ?ven if there is agreement on these things, the constrained nature of organizationalresources is such that there will always be a weighing of pros and cons about particular courses of action. Decision situations in organizations range from relatively simple within policy! matters of staffing and operations to more open-ended concerns about goals, missions and strategicdirection.

2ome approaches to decision making focus on identifying the types of choices available tomanagers. These are6 clear choice, competing choice, choice avoidance and choice suppression.8n e#ample of a relatively clear choice would be that between which of two new products toadopt, 8 or 4. This type of choice is straightforward because the same decision-makingmethodologies can be applied to each alternative. 3f the choice criterion to be applied in this caseis ma#imum contribution to profitability!, it should be a relatively simple matter to estimate thee#pected returns for each alternative and calculate contribution to profitability. This e#ampleassumes that agreement has already been reached that there should be a new product, and that

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choice is limited to determining the best one financially. 8n e#ample of a competing choicewould be the alternatives of improving profitability by either launching a new product or upgrading computing facilities in order to improve bad debt collection. This type of choice ismore open-ended than the previous e#ample, and though it is still possible to evaluate eachalternative in terms of profitability, it involves different assumptions and affects different interestswithin the organization. 3t might therefore be more problematical and conflict ridden. $hoiceavoidance occurs when issues arise re uiring resolution but this does not occur. Non-action inthis situation is itself a decision. $hoice suppression is when information is distorted or suppressed in such a way that any decision made on an issue entails a predetermined outcome.This is a form of non-decision making, or to put it another way, the decision in pre-fabricated sothat, as the e# 4ritish 9rime /inister, /argaret Thatcher, was fond of saying, There is noalternative!.

Ather approaches to decision making have sought to identify or categorize decisions intovarious types. Ane advantage of looking at decisions in this way is that it helps highlight thevarying comple#ity of decisions that managers have to deal with. 3t also overcomes the tendencyto simplify this aspect of decision making. *ater when we e#amine various models of decisionmaking, it will become apparent that many of these focus on certain types of decisions to the

e#clusion of others. 3n doing so, they tend to simplify the decision-making aspect of management by focussing upon only those types of decisions that can be e#plained by the particular theory being posited.

Decision types3n the largest study of decisions to date $undertaken by David 0ickson, :ichard 4utler, David%ray, Ceoffrey /allory and David "ilson $&'+1 , the researchers found it necessary to describethe processes of decision making by categorizing decisions. The 4radford researchers $i.e. from4radford niversity in the > argued that the categorization was related to the content of thedecision. They identified three types of categorization for decisions6 sporadic, fluid or constricted,and these are illustrated in

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