Chapter 9 Nelson Quick Decision Making by

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 and the need for a decision Identify the objective of the decision Gather and evaluate data and diagnose the situation List and evaluate alternatives

The Decision. Making Process Select the best course of action Implement the decision Gather feedback 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 Rational Model Bounded Rationality Model Garbage Can Model

Rational Model Rationality - a logical, stepby-step approach to decision making, with a thorough analysis of alternatives and their consequences 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

Bounded Rationality Model Bounded Rationality - a theory that suggests that there are limits upon how rational a decision maker can actually be 1. Managers suggest the first satisfactory alternative Satisfice – to select the first alternative that is “good enough, ” because the costs in time and effort are too great to optimize

Bounded Rationality Model Bounded Rationality - a theory that suggests that there are limits upon how rational a decision maker can actually be 1. Managers suggest the first satisfactory alternative 2. Managers recognize that their conception of the world is simple 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 Solutions Problems Participants Choice opportunities 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

Risk and the Manager Risk Aversion - the tendency to choose options that entail fewer risks and less uncertainty Risk takers n accept greater potential for loss n tolerate greater uncertainty n more likely to make risky decisions Evidence: Successful Managers Take Risks

Escalation of Commitment The tendency to continue to commit resources to a failing course of action w Why it occurs n humans dislike inconsistency n optimism n control n sunk costs w How to deal with it n split responsibility for decisions n provide individuals with a graceful exit n have groups make the initial decision

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 Ideal Organization ST Sensing/thinking Facts/ Impersonal Analysis SF Sensing/feeling Facts & Org. Relationships NT Intuiting/thinking Broad Issues/Impersonal & Ideal NF Intuiting/feeling Serve Humankind/General Values

Z Problem-Solving Model Look at the facts and details Can it be analyzed objectively? Sensing Thinking What alternatives Intuition do the facts suggest? Feeling What impact will it have on those involved? Figure from Type Talk at Work by Otto Kroeger and Janet M. Thuesen. Copyright © 1992 by Otto Kroeger and Janet M. Thuesen. Used by permission of Dell Publishing, a division of Random House. Inc.

Two Brains, Two Cognitive Styles Left Hemisphere Verbal Sequential, temporal, digital Logical, analytic Rational Western thought Right Hemisphere Nonverbal, visuospatial Simultaneous, spatial, analogical Gestalt, synthetic Intuitive Eastern thought Ideal = “brain-lateralized” making use of either 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 Preparation experience/ opportunity to build knowledge base Incubation reflective, often unconscious thought Illumination insight into solving a problem Verification thinking, sharing, testing the decision

Influences on Creativity w Individual examples n Cognitive Processes Divergent Thinking l Associational Abilities l Unconscious Processes w Organizational examples n l n Personality Factors breadth of interests l high energy l self-confidence l n n Flexible organization structure Participative decision making Quality, supportive relationships with supervisors

Organizations Can Facilitate Creative Decision Making w w w 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 Individuals who are affected by decisions influence the making of those decisions w Organizational Foundations n Participative, supportive organizational culture n Team-oriented work design w Individual Prerequisites n Capability to become psychologically involved in participative activities n Motivation to act autonomously n Capacity to see the relevance of participation for one’s own well-being

Group Decision Making w 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 w 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 Advantages 1) more knowledge through pooling of group resources 2) Increased acceptance & commitment due to voice in decisions 3) greater understanding due to involvement in decision stages Disadvantages 1) pressure in groups to conform 2) domination by one forceful member or dominant clique 3) amount of time required, because group is slower than individual to make a decision

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 w Ask each group member to act as critical evaluator w Have the leader avoid stating his opinion prior to the group decision w Create several groups to work simultaneously w Appoint a devil’s advocate w Evaluate the competition carefully w 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.

Brainstorming Self-Managed Teams Dialectical Inquiry Quality Circles & Quality Teams Nominal Group Technique Group Decision Techniques Delphi Technique Devil’s Advocacy

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 Group Decision Support Systems Tools for Virtual Teams Desktop Videoconferencing Systems Internet/Intranet Systems

Ethics Check w Is it legal? n Does it violate law n Does it violate company policy w Is it balanced? n Is it fair to all n Does it promote win–win relationships w How will it make me feel about myself