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© 2003 McGraw-Hill Ryerson Ltd.
Chapter Six
Decision Making and Decision Making and EthicsEthics
© 2003 McGraw-Hill Ryerson Ltd.
Chapter Six OutlineChapter Six Outline
Models of Decision MakingModels of Decision Making
•The Rational Model
•Bounded Rationality Model
Dynamics of Decision MakingDynamics of Decision Making
•Selecting Solutions: A Contingency Perspective
•Personal Decision-Making Styles
•Escalation of Commitment
•Creativity
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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
Fostering Ethical Organizational Fostering Ethical Organizational BehaviourBehaviour
•Group Problem-Solving Techniques•How to Improve the Organization’s Ethical Climate
Chapter Six Outline Chapter Six Outline (cont’d)(cont’d)
© 2003 McGraw-Hill Ryerson Ltd.
•Consists of a structured four-step Consists of a structured four-step
sequencesequence * identifying the problem * generating alternative solutions * selecting a solution * implementing and evaluating the solution
The Rational Model of The Rational Model of Decision MakingDecision Making
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•Based on premise that decision Based on premise that decision
making is not rationalmaking is not rational
•Decision making is characterized byDecision making is characterized by * limited information processing * use of judgmental heuristics * satisficing choosing a solution
that meets a minimum standard
of acceptance
Bounded Rationality Model of Bounded Rationality Model of Decision MakingDecision Making
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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
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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
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1.1. Analytic strategiesAnalytic strategies are used when the decision problem is unfamiliar, ambiguous, complex, or unstable
2.2. Nonanalytic methodsNonanalytic methods are employed when the problem is familiar, straightforward, or stable.
3. Assuming there are no monetary or time constraints, analytic approachesanalytic approaches are used when the solution is irreversible and significant and when the decision maker is accountable.
4.4. Nonanalytic strategiesNonanalytic strategies are used when the decision can be reversed and is not very significant or when the decision maker is not held accountable.
Contingency Relationships in Contingency Relationships in Decision MakingDecision Making
© 2003 McGraw-Hill Ryerson Ltd.
5. As the probability of making a correct decision goes down, analytic strategiesanalytic strategies are used.
6. As the probability of making a correct decision goes up, nonanalytic strategiesnonanalytic strategies are employed.
7. Time and money constraints automatically exclude some strategies from being used.
8.8. Analytic strategiesAnalytic strategies are more frequently used by experienced and educated decision makers.
9.9. Nonanalytic approachesNonanalytic approaches are used when the decision maker lacks knowledge, ability, or motivation to make a good decision.
Contingency Relationships in Contingency Relationships in Decision Making Decision Making (cont’d)(cont’d)
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Analytical Conceptual
Directive Behavioural
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
y
Personal Decision Making Personal Decision Making StylesStyles
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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.
Recommendations to Reduce Recommendations to Reduce Escalation of CommitmentEscalation of Commitment
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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 Stages Underlying the Creative ProcessProcess
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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
© 2003 McGraw-Hill Ryerson Ltd.
1. Illusion of invulnerability2. Belief in inherent morality of the group3. Rationalization4. Stereotyped view of opposition5. Self-censorship6. Illusion of unanimity7. Peer pressure8. Mindguards
Symptoms of GroupthinkSymptoms of Groupthink
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1. Assign each member of the group the role of critical evaluator, to voice objections and doubts.
2. Top level executives should not use policy commitment to rubber-stamp decisions that have already been made
3. Different groups with different leaders should explore the same policy questions
4. Subgroup debates and outside experts should be used to introduce fresh perspectives
5. Someone should be given the role of devil’s advocate when discussing major alternatives.
6. Once a consensus has been reached, everyone should rethink their position to check for flaws.
How to Prevent GroupthinkHow to Prevent Groupthink
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AIAI –The manager solves the problem or make the decision him or herself, using information available to him or her at that time.
AIIAII –The manager obtains the necessary information from his or her subordinate(s), then decides on the solution to the problem alone.
CICI –The manager shares the problem with relevant subordinates individually, getting their ideas and suggestions without bringing them together as a group. Then he or she makes the decision that may or may not reflect the subordinates’ influence.
CIICII –The manager shares the problem with subordinates as a group, collectively obtaining their ideas and suggestions. Then the manager make the decision that may or may not reflect subordinates’ influence.
GIIGII –The manager shares a problem with subordinates as a group. Together they generate and evaluate alternatives and attempt to reach agreement (consensus) on a solution.
Management Decision Styles in Management Decision Styles in the Vroom-Yetton-Yago Modelthe Vroom-Yetton-Yago Model
© 2003 McGraw-Hill Ryerson Ltd.
QRState theProblem
CRCP
Low LowHigh
CR
LI
NoYes
ST
ST
CP
CP
CP
High
High
Yes
No
No
Yes
No
GC
GC
GC
GCYes CO
Yes
No
No
CO
Yes
SI
SI
AIAI
GIIGII
CIICII
GIIGII
CIICII
AIIAII
CICI
CIICII
AIAI
GIIGII
Yes
No
YesNo
NoYes
YesNo
No No
YesNo
Yes
Low
NoNo
Yes
LI
QR
CR
LI
ST
CP
GC
CO
SI
Quality Requirement
Commitment Requirement
Leader’s Information
Problem Structure
Commitment Probability
Goal Congruence
Subordinate Conflict
SubordinateInformation
Vroom and Jago’s Vroom and Jago’s Decision-Decision-
Making ModelMaking Model
© 2003 McGraw-Hill Ryerson Ltd.
Cultural InfluencesCultural Influences- Family
- Education-Religion
- Media/entertainment
Organizational InfluencesOrganizational Influences- Ethical codes
- Organizational culture- Role models
- Perceived pressure for results- Rewards/punishment system
IndividuaIndividual- Personality
- Values- Moral
principles- History of
reinforcement- Gender
Political/legal/Political/legal/economiceconomicinfluencesinfluences
Ethical Ethical behaviourbehaviour
Role
Role
Expectatio
Expectatio
nsns
A Model of Ethical Behaviour in A Model of Ethical Behaviour in the Workplacethe Workplace
© 2003 McGraw-Hill Ryerson Ltd.
• Behave ethically yourself
• Screen potential employees
• Develop a meaningful code of ethics
Distributed to every employee
Firmly supported by top management
Refer to dilemmas likely to be encountered
Evenly enforced
• Provide ethics training
• Reinforce ethical behaviour
• Create specific positions in the organization to deal with ethics
How to Improve an How to Improve an Organization’s Ethical ClimateOrganization’s Ethical Climate