Chapter NineNine

Making DecisionsMaking Decisions

Chapter Nine OutlineChapter Nine OutlineModels of Decision MakingModels of Decision Making

•The Rational Model

•Simon’s Normative Model

Dynamics of Decision MakingDynamics of Decision Making

•Contingecny Model of Decision Making

•Improving Decision Making

•General Decision-Making Styles

•Escalation of Commitment

•Creativity

Group Decision MakingGroup Decision Making•Advantages and Disadvantages of Group-Aided Decision Making•Participative Management•When to Have Groups Participate in Decision Making: The Vroom/Yetton/Jago Model•Group Problem-Solving Techniques

Chapter Nine Outline Chapter Nine Outline (continued)(continued)

9-2

•Consists of a structured four-step sequenceConsists of a structured four-step sequence * identifying the problem * generating alternative solutions * selecting a solution * implementing and evaluating the solution

The Rational Model of Decision The Rational Model of Decision MakingMaking

•Based on the notion of bounded rationality, Based on the notion of bounded rationality, i.e. decision makers face a variety of i.e. decision makers face a variety of constraintsconstraints•Decision making is characterized byDecision making is characterized by * limited information processing * use of judgmental heuristics (rules, shortcuts) * satisficing

Simon’s Normative Model of Simon’s Normative Model of Decision MakingDecision Making

Availability Heuristic:Availability Heuristic: A decision maker’s tendency to base decisions on information that is readily available in memory.

Representativeness Heuristic:Representativeness Heuristic: The tendency to assess the likelihood of an event occurring based on one’s impressions about similar occurrences..

Judgmental HeuristicsJudgmental Heuristics

Satisficing:Satisficing: Choosing a solution that meets a minimum standard of acceptance

Judgmental Heuristics (cont)Judgmental Heuristics (cont)

Strategies toStrategies toselect a solutionselect a solution* Aided analytic

* Unaided-analytic* Nonanalytic

Characteristics of Decision Task:Characteristics of Decision Task:The decision problemThe decision problem

* Unfamiliarity* Ambiguity* Complexity*Instability

The decision environmentThe decision environment*Irreversibility* Significance *Accountability

* Time and/or money constraints

Characteristics of Decision MakerCharacteristics of Decision Maker* Knowledge * Ability * Motivation

* Risk Propensity* Decision Making Style

GeneratingGeneratingalternativesalternatives

A Contingency Model for Selecting a A Contingency Model for Selecting a SolutionSolution

1.1. Analytic Strategies are used when the Analytic Strategies are used when the decision problem is unfamiliar, ambiguous, decision problem is unfamiliar, ambiguous, complex, or unstablecomplex, or unstable

2.2. Nonanalytic methods are employed when the Nonanalytic methods are employed when the problem is familiar, straightforward, or problem is familiar, straightforward, or stable.stable.

3.3. Assuming there are no monetary or time Assuming there are no monetary or time constraints, analytic approaches are used constraints, analytic approaches are used when the solution is irreversible and when the solution is irreversible and significant and when the decision maker is significant and when the decision maker is accountable.accountable.

4.4. Nonanalytic strategies are used when the Nonanalytic strategies are used when the decision can be reversed and is not very decision can be reversed and is not very significant or when the decision maker is not significant or when the decision maker is not held accountable.held accountable.

Contingency Relationships in Decision Contingency Relationships in Decision MakingMaking

5.5. As the probability of making a correct As the probability of making a correct decision goes down, analytic strategies are decision goes down, analytic strategies are used.used.

6.6. As the probability of making a correct As the probability of making a correct decision goes up, nonanalytic strategies are decision goes up, nonanalytic strategies are employed.employed.

7.7. Time and money constraints automatically Time and money constraints automatically exclude some strategies from being used.exclude some strategies from being used.

8.8. Analytic strategies are more frequently used Analytic strategies are more frequently used by experienced and educated decision by experienced and educated decision makers.makers.

9.9. Nonanalytic approaches are used when the Nonanalytic approaches are used when the decision maker lacks knowledge, ability, or decision maker lacks knowledge, ability, or motivation to make a good decision.motivation to make a good decision.

Contingency Relationships in Decision Contingency Relationships in Decision Making (cont)Making (cont)

Improving Decision Making Through Effective Knowledge Management Sytems and practices that increase the sharing of

knowledge and information Types of knowledge

Tacit knowledge – intuition, experience, natural abilities Explicit knowledge

Explicit knowledge requires access to large amounts of information; tacit knowledge is obtained through observation, mentoring, collaboration, etc.

General Decision Making Styles

Based on how one perceives and comprehends stimuli and chooses to respond

Value orientation – task and technical concerns or people and social concerns

Tolerance for ambiguity – need of structure or control

Analytical Conceptual

Directive Behavioral

Tasks and TechnicalTasks and TechnicalConcernsConcerns

People and SocialPeople and SocialConcernsConcerns

Value OrientationValue Orientation

LowLow

HighHigh

Tole

ran

ce f

or

Am

big

uit

yTole

ran

ce f

or

Am

big

uit

yDecision Making StylesDecision Making Styles

9-8

Hands on Exercise

• Which of the four styles best represents your decision-making style? Which is least reflective of your style?

• How do your scores compare with the following norms: directive (75), analytical directive (75), analytical (90), conceptual (80), (90), conceptual (80), and behavioral (55)behavioral (55)?

• What are the advantages and disadvantages of your decision-making style?

What is Your Decision Making What is Your Decision Making Style?Style?

Escalation of Commitment

Tendency to stick to a course of action even when it is associated with and unlikely to reverse a bad situation. Why? Psychological and social

Bias facts to support a decision “Recover losses” more attractive than achieve gains Ego

Organizational inertia Characteristics of project – long-term returns Contextual determinants – outside organization

9-9

1. Set minimum targets for performance, and have decision makers compare their performance with these targets.

2. Have different individuals make the initial and subsequent decisions about a project.

3. Encourage decision makers to become less ego-involved with a project.

4. Provide more frequent feedback about project completion and costs.

5. Reduce the risk of penalties of failure.

6. Make decision makers aware of the costs of persistence.

Skills and Best Practices: Skills and Best Practices: Recommendations to Reduce Recommendations to Reduce

Escalation of CommitmentEscalation of Commitment

9-10

1.1. Preparation:Preparation: Reflects the notion that creativity starts from a base of knowledge.

2.2. Concentration:Concentration: Where an individual concentrates on the problem at hand.

3.3. Incubation:Incubation: Done unconsciously. During this stage, people engage in daily activities while their minds simultaneously mull over information and make remote associations.

4.4. Illumination:Illumination: Remote associations from the incubation stage are ultimately generated.

5.5. Verification:Verification: Entails going through the entire process to verify, modify, or try out the new idea.

Stages Underlying the Creative Process

Group decision-making

Data suggests that innovative groups possessed high levels of both minority dissent and participation in decision making

Note four requirements of effective decision making in a group – focus on process, e.g. requirements for an effective choice, assess positive and negative qualities of alternative solutions, which suggest openness, dissent?

9-11

Table 9-2

AdvantagesAdvantages DisadvantagesDisadvantages1. Greater pool of knowledge 1. Social pressure2. Different perspectives 2. Minority

domination3. Greater comprehension 3. Logrolling4. Increased acceptance 4. Goal

displacement5. Training ground 5. “Groupthink”

Advantages and Disadvantages of Advantages and Disadvantages of Group-Aided Decision MakingGroup-Aided Decision Making

Group Problem Solving Techniques

Definition of consensus – . . . reached when all members can say they either agree . . . Or have had their “day in court” and were unable to convince the others of their viewpoint. In the final analysis, everyone agrees to support the outcome

Group Problem Solving Techniques

Other approaches to a group decisionUnanimityA minority or one decides

More Formal Group Problem Solving Techniques Brainstorming - disciplined process

Silent idea (optional) Ideas/opinions solicited and written on a board,

disallowing criticisms, allowing piggy-backing on ideas, clarification

Delphi technique is another, more formal form of brainstorming. Involves several rounds of questionnaire, feedback, etc. Useful in cases where participants are not in the same place.

More Formal Group Problem Solving Techniques Nominal Group Technique – used to

narrow down options through voting Computer-aided Decision Making

Uses computers to manage brainstorming or delphi questioning