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ChapterChapter NineNine D ECISION MAKING IN ORGANIZATIONS.
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Transcript of ChapterChapter NineNine D ECISION MAKING IN ORGANIZATIONS.
ChapterChapterChapterChapter
NineNineNineNine
DECISION MAKING IN ORGANIZATIONS
1. Identify the steps in the analytical model of decision making.
2. Distinguish programmed from nonprogrammed decisions, certain from uncertain decisions, and top-down from empowered decisions.
3. Distinguish the various individual decision styles.
4. Describe the trade-offs involved in group vs. individual decision making.
5. Identify the various organizational and cultural factors that influence the decision-making process.
6. Distinguish between three approaches to decision making: the rational-economic model, the administrative model, and image theory.
7. Identify the various types of framing effects and heuristics that potentially limit the effectiveness of decisions.
8. Describe how the bias toward implicit favorites and the escalation of commitment lead to imperfect decisions.
9. Compare the conditions in which groups make superior decisions with those in which individuals make superior decisions.
10. Describe the various techniques for enhancing the quality of individual as well as group decisions.
After reading this chapter you should be able to:
The Nature of Decision Making (Pp. 331-337)
Decision Making - the process of choosing among several alternatives
Analytical Model of the Decision-Making Process - general model thatdescribes the formulation and implementation of decisions Formulation - process of understanding a problem and making a
decision about itImplementation - process of carrying out that decision
1. Identify the Problem
2. DefineObjectives
3. Make aPredecision
4.GenerateAlternatives
5. EvaluateAlternatives
6. Make aChoice
7. ImplementChoice
8. Follow Up
Eight Steps in the Analytical Model - a general model, and many decisionsdo not conform to itProblem identification - difficult because people do not always
perceive a social situation accurately
The Nature of Decision Making (cont.)
Define the objectives to be met in solving the problem - conceiveproblems so that it is possible to identify solutions
Make a predecision - decide how to make the final decisionDecision support systems (DSS) - computer programs that
present information about organizational behaviorto decision makers in a manner that helps them tostructure their responses to decisions
Alternative generation - identify possible solutionsEvaluate alternative solutions - examine feasibility and
effectiveness of each alternative solutionChoose an alternative - optimality of choice variesImplement the chosen alternative - perform the chosen alternativeFollow up - monitor the effectiveness of the decision
The Nature of Decision Making (cont.)
Broad Spectrum of Organizational Decisions - three dimensions of decisionsRoutineness of the decision
Programmed - highly routine decisions made according to pre-established organizational routines and procedures
Nonprogrammed decisions - decisions about highly novel problems for which no ready-made actions existStrategic decisions - typically made by high-level
managers regarding the direction theorganization should take to achieve its mission
Type of Task Simple, routine Complex, creative
Reliance on Considerable guidance No Guidanceorganizational policies from past decisions from past decisions
Typical decision maker Lower-level workers Upper-level workers(usually alone) (usually in groups
Type of DecisionVariable Programmed Nonprogrammed
Table 9.1
Broad Spectrum of Organizational Decisions (cont.)
The Nature of Decision Making (cont.)
Riskiness of the decision - risk defined by the probability of obtaining the desired outcome
Objective probability - uses concrete and verifiable dataSubjective probability - uses personal beliefs or hunches
- uncertainty may be reduced by:- establishing linkages with other organizations- acquiring knowledge about the past and present
Figure 9.2
Riskiness of decision
Higher risk Lower risk
Knowledge of decision outcomes
Complete uncertainty(outcome unknown)
Complete uncertainty(outcome known)
Probability ofdecision outcomes
Information
Objective Subjective
High Low
Broad Spectrum of Organizational Decisions (cont.)
The Nature of Decision Making (cont.)
Level of the organization at which decision is madeTop-down - decision making power vested in superiors as
opposed to their lower-level employees- most organizations operate in this fashion
Empowered decision making - decision making power vestedin the employees- rationale - workers who know the job best make the
the decisions - workers more likely to be committed to
actions based on their own decisions- work teams also may be empowered
Factors Affecting Decision Making (Pp. 337-343)
Decision Style - meaningful differences between people in their orientationtoward decisions- four predominant styles- most managers may have one predominant style, but often use
different styles
• Prefer complex problems• Carefully analyze alternatives• Enjoy solving problems• Willing to use innovative methods
Analytical Conceptual
• Socially oriented• Humanistic and artistic approach• Solve problems creatively• Enjoy new ideas
Behavioral• Concern for their organization• Interest in helping others• Open to suggestions• Rely on meetings
Directive• Prefer simple, clear solutions• Make decisions rapidly• Do not consider many alternatives• Rely on existing rules
Figure 9.4
Factors Affecting Decision Making (cont.)
Group InfluencesPotential benefits of decision-making groups
Pooling of resources - provides more informationSpecialization of labor - people perform tasks they do bestGreater acceptance of decisions
Potential problems of decision-making groupsWaste of timeGroup conflict - may result from disagreements over issuesIntimidation by group leaders - hinders honest discussion
Groupthink - tendency for members of highly cohesive groups to conform so strongly to group pressures regarding a certaindecision that they fail to think critically and reject the potentially correcting influences of outsiders- strategies for avoiding groupthink
Promote open inquiryUse subgroupsAdmit shortcomingsHold second-chance meetings
Factors Affecting Decision Making (cont.)
Organizational Influences on Decisions - also interfere with rational decisionmakingTime constraints - often do not permit exhaustive decision makingPolitical “face-saving” pressure - people make decisions that help
them to look good to others, even though the resulting decisionmight not be in the best interest of their organization
Cultural Differences in Decision Making - widespread differences exist in the way people from various cultures make decisions- people from different cultures may not perceive the same situations
as presenting problems- decision-making unit differs
- individualist cultures foster individual decision making- collectivist cultures foster group decision making
- cultures differ in their expectations about who is expected to makedecisions
- cultures differ in their expectations about the amount of time thatought to be devoted to making a decision
How Are Individual Decisions Made? (Pp. 343-346)
Rational-Economic Model - decision maker presumed to consider allpossible alternatives before selecting the optimal solution- assumes that decision maker has complete information and can
process it accurately and without bias- does not appreciate human fallibility- is a normative or prescriptive approach
Rational decisions - maximize the chance of attaining an individual’sgroup’s, or organization’s goals
Administrative Model - recognizes that decision makers may have a limited view of the problems confronting them which hinders makingrational decisions- is a descriptive or proscriptive approachSatisficing decisions - decisions made by selecting the first minimally
acceptable alternative that becomes availableBounded rationality - organizational, social, and human limitations
assumed to promote satisficing rather than optimal decisionsBounded discretion - limits decision alternatives to those falling
within the bounds of current moral and ethical standards
How Are Individual Decisions Made? (cont.)
Image Theory - recognizes that decisions are made in an automatic, intuitivefashion- people adopt courses of action that best fit their individual
principles, current goals, and future plans- deals primarily with decisions about adopting a certain course of
action or changing a current course of action
- decision making is both rapid and simple- not necessary to ponder decisions- rather use intuitive process
- decision making is a two-step processCompatibility test - comparison of the degree to which a
particular course of action is consistent with variousimages (e.g., individual principles or current plans)
Profitability test - people consider the extent to which variousalternatives fit with their values, goals, and plans
- these tests made within a decision frame- e.g., past experience may provide context for the
decision
Decision to adopt a course ofaction (e.g., Which job should
I accept?)
Decide toREJECT
No
Decide to ACCEPT
Step 2: Profitability test(Which job is best?) Consider
which of several alternativesbest coincides with your
personal principles, goals, andplans. Select that one.
Yes
Step 1: compatibility test (Does the job fit?)Ask yourself if the information you have about the
job options is consistent with images of yourselfwith respect to principles (does it match my values?),goals (will it take me where I wan to go?), and plans
(beliefs about what will happen if you follow through).
Dec
isio
n F
ram
e: I
nfo
rmat
ion
Ab
out
Pas
t S
ucc
esse
san
d F
ailu
res
Figure 9.6Image Theory: A Summary and Example
Imperfections in Individual Decisions (Pp. 346-352)Framing Effects - tendency for people to make different decisions based on
how the problem is presented- illustrates that people are not completely rational decision makers,
- are influenced by cognitive distortions based on simple differences in how situations are presented
Attribute framing - tendency for people to evaluate a characteristic more positively when it is presented in positive terms thanin negative terms- involves evaluations
Goal framing - tendency for people to be persuaded more strongly by information framed in negative terms than by informationframed in positive terms- involves taking behavioral action
Risky choice frames - tendency for people to avoid risks when situations are presented in a way that emphasizes positive gains and to take risks when presented in a way thatemphasizes potential losses- involves making decisions about courses of action
Figure 9.7Three Types of Framing Effects
Type of Framing Negative Frame Positive Frame
Risky ChoiceFraming
Avoid losses (lives lost)
Experience gains(lives saved)
less likely
Likelihood oftaking risks
more likely
negative positiveEvaluation
AttributeFraming
Negative qualities(25% fat)
Positive qualities(75% lean)
more likely less likely
Likelihood ofperforming exam
GoalFraming
Suffer loss(no breast exam -
decreased chance offinding early tumor)
Experience gain(breast exam -
increased chance offinding early tumor)
Imperfections in Individual Decisions (cont.)
Reliance on Heuristics - simple decision rules used to make quick decisionsabout complex problems- rules of thumb may be useful for simplifying complex decisions- also represent potential impediments to decision making
- may discourage the collection and processing of enoughinformation to make a superior decision
Availability heuristic - the tendency for people to base judgments on readily available, though potentially inaccurate information- may adversely affect the quality of the decision
Representative heuristic - tendency to perceive others in stereotypical ways if they appear to be typical representativesof the category to which they belong
Imperfections in Individual Decisions (cont.)
Bias Toward Implicit Favorites - inclination to choose one’s preferred decision alternative, which is selected even before all the options have been considered- people often make decisions early in the process- options other than the preferred alternative are not given serious
consideration- rather, used to convince oneself that the implicit favorite is
the best choiceConfirmation candidate - decision alternative considered
only to convince oneself of the wisdom of selectingthe implicit favorite
Escalation of Commitment - tendency for individuals to continue supportingpreviously unsuccessful courses of action because:- previous ineffective decisions have resulted in sunk costs- refusal to back previous decisions viewed as an admission of failure
Self-justification- people may refrain from escalating commitment under several
conditions
Conditions underwhich escalationof commitmentis unlikely
• Limited resources• Overwhelming evidence of negative outcomes• Diffused responsibility for previous decisions
Present
Do X Again?
Yes
Escalate commitment;throw good money afterbad in order to justifypreviously made decisions
No
Give up; cutlosses and run
Figure 9.8Escalation of Commitment
Time
Decision
Outcome
Do X Do X Do X Do X Do X Do X
Negative Negative Negative Negative Negative Negative
Past
Group Decisions (Pp. 352-354)
When Are Groups Superior to Individuals? - depends on the type of taskComplex decision tasks - groups are superior when they are a hetero-
geneous collection of experts with complementary skills whocan contribute to their group’s product freely and openly
Simple decision tasks - to attain a group benefit from a pooling ofresources, there must be some resources to pool
SimpleProblems
Does anyone in the grouphave the correct answer?
Will the group membersaccept the correct answer?
• Group members are heterogeneous • Members have complementary skills• Ideas may be freely communicated• Good ideas are accepted.
Groups are superiorto even the best
individuals
Group performs worsethan the best individual
No
Group performs
as well as thebest individual
Yes
ComplexProblems
Figure 9.9
Group Decisions (cont.)
When Are Individuals Superior to Groups? - individuals perform better on poorly structured, creative tasksBrainstorming - technique to foster group productivity by
encouraging interacting members to express their ideas noncritically- four main rules
- avoid criticizing others’ ideas- share even far-out suggestions- offer as many comments as possible- build on others’ ideas to create your own
- individuals using brainstorming rules for idea generation perform better than brainstorming groups
Techniques For Improving the Effectiveness of Decisions(Pp. 354-362)
Individual Techniques - make individuals better decision makersTraining individuals - people make better decisions just by
considering the following errors:
Unconflicted adherence - tendency to stick with the firstidea that comes to mind without more deeplyevaluating the consequences
Unconflicted change - tendency for people to change theirminds quickly and to adopt the first new idea that comes along
Defensive avoidance - tendency for decision makers to failto solve problems because they avoid working onthem
Hypervigilance - an individual frantically searches for quicksolutions and goes from idea to idea from desperationthat one is not working and another must be consideredbefore time runs out
Techniques For Improving the Effectiveness of Decisions (cont.)
Individual Techniques (cont.)Making ethical decisions - answer the following questions about
contemplated decisions to avoid rationalizing unethical actsDoes it violate the obvious “shall nots”?Will anyone get hurt?How would you feel if the newspaper reported your
decision on the front page?What if you did it 100 times?How would you feel if someone did it to you?What is your gut feeling?
5. Responsesare shared with
all others.
1. Enlist thecooperationof experts.
2. Proposethe problemto experts.
3. Experts recordsolutions,
recommendations.
6. Experts commenton others’ ideas andpropose a solution.
4. Experts’ responsesare compiled
and reproduced.
7. Solutions are compiled. Solution
If a consensusIf a consensusis reached. . .is reached. . .
Techniques For Improving the Effectiveness of Decisions (cont.)
Group Techniques - structure the group to take advantage of its strengths
Problem
Figure 9.11 - The Delphi Group
If no consensusIf no consensusis reached . . .is reached . . .
1. A small group gathers around a table andreceives instructions; problem is identified.
4. Each idea is discussed, clarified, andevaluated by group members.
2. Participants privately write downideas about problem solving.
3. Each participant’s ideas are presented, oneat a time, and are written on a chart until all
ideas are expressed.
5. Participants privately rank the ideasin order of their preference.
6. The highest-ranking idea is taken asthe group’s decision
Figure 9.12TheNominal Group
Step 1 Individual decision byPerson A
Individual decision byPerson B
Step 2 Tentative group decision made byPerson A and Person B
Individual decision byPerson C
Step 3 Tentative group decision made byPerson A, Person B, and Person C
Individual decision byPerson D
Step 4 Final group decision made byPerson A, Person B, Person C, and Person D
Figure 9.14The Stepladder Technique