Decision Making

Learning Goals

• Managers constantly engaged with issues that have no optimal answers. How do you make these decisions.

• Help to prepare with Cases.

• Group decision making issues (Groupthink).

Warm Up

• Think of a problem that your are currently having. Describe the problem. Need to be willing to share it with others.

• Share with you my problem.

• Apply what we are talking about today to that problem (3 participation points).

Definitions

• Decisions—choices made from among two or more alternatives. Simple where to eat to whom to hire.

• Problem solving—resolving a discrepancy between current state of affairs and desired state—only with negative situations.

• Managers involved with both, mostly problem solving.

More (not in the book)

• Routine decisions. Repeated types of choices situations that fall into clear categproies and responses.

• Non-routine decisions—unique choice situations that have never been experienced before.

Rational decision modelRecommended for Cases

• Defining the problem. What is the problem? How is the problem framed?

• Issues: presenting problem and deeper problems. Which ones do you address?

• Which are most critical; which one is easiest to change.

• Is it a problem or an opportunity?

Defining the problem

• Ask “Why” does this occur. Dragonfly airlines.

• Other examples.• Step is commonly skipped.• How do you pick the most relevant

problem? Common sense and intuition.• How you define the problem frames your

solutions you consider.

Develop criteria

• Selection---

• Important to do this before getting alternatives.

Susan Felix Sharon PaulPrinciple of Supervision Written communication oral communication Red Cross Knowledge OSHA Knowledge Knowledge of labor pools Knowledge of company policies total

Develop alternatives.

• Do not stop at first acceptable alternative.

• Generate a big list.

Evaluate

• All alternatives have negative consequences in non-routine decisions. Important to consider negative consequences! Sometimes skip step 2 and just consider the pros and cons of each alternative.

Susan Felix Sharon PaulPrinciple of Supervision 9 8 10 8Written communication 8 8 10 8oral communication 9 8 10 8Red Cross Knowledge 10 9 6 8OSHA Knowledge 6 8 6 8Knowledge of labor pools 9 8 4 8Knowledge of company policies 9 9 4 8total 60 58 50 56

Select

• Perhaps modify to address negative qualities. Implement more than one alternative.

Ethics double check (not in book).

Enron and audit.

Environmental issues.

Would you make efforts to gain favor of governmental officials in China?

Back to your problems in the beginning.

Intuitive decision making is commonly used too.

• Spontaneous, creative way to make decisions. Actions out of desperation. Action is better than inaction.

• Unable to teach it per se. Learn by experience and get better with more experience.

• Selection decisions.

Intuitive Decision Making

High uncertainty levels Little precedent Hard to predictable variables Limited facts Unclear sense of direction Analytical data is of little use Several plausible alternatives Time constraints

Cricket Farm

• Intuitive or Rational Decisions.

Group decision making

• Exercise

• What are the advantages and disadvantages of group decision making.

Groupthink

• Occurs when the norm for consensus in groups overrides the realistic appraisal of alternative courses of action

Examples

• Unethical choices—Auditor and Enron.

• Enron itself and accounting practices

• American car industry and Japan 1970’s.

• President at Iowa State University and Catt Hall Committee.

Groupthink Decision by minority or by one person in some cases

• Often the designated group leader. Leader is simply looking for confirmation of preferred alternative. More defensible justification if “committee approved it”.

The process

• Leader or informal leader—beliefs about preferred options. Communicated directly, or in some cases indirectly—critical of alternative.

• Members avoid rocking the boat—lets get done with this task.

• So rationalizations occur. Justification for pre-determined course of action—never consider the negative consequences.

• If people outside the organization are complaining—you stereotype the enemy as being archevil or constant complainers.

• Land developers and environmentalists. Thus, no need to address those concerns.

• Direct pressure on those who challenge assumptions of preferred alternative.

• Cast aspersions—self interest of party.

• Gang up and heated arguments. 2 or more against 1, the one eventually gives up.

• Leader indicates disapproval. (NASA and space shuttle).

• Those who have doubts remain silent—want to remain a member of the group. Important to look for social approval. Do not want to lose face. May actually know the purpose is to tell the leader what they want to hear.

• Negative consequence of preferred choice are never considered.

Framing the question

• Only one alternative considered: all others have been dismissed or not expressed.

• Those who have doubt do not express them.

• No real vote. Just seems like there is lack of movement in any other direction. Illusions of unanimity.

Avoiding groupthink

• Follow decision making process.

• Define the problem

• Generate more than one alternative

• Evaluate the pros and cons of every alternative.

Generating Alternatives

• Brainstorming

• Break into subunits.

• Give everyone a chance to generate at least one idea.

• Separate evaluation from generation of alternatives.

Evaluation

• Pick criteria before alternatives.

• Devil’s advocate

• Ask non-group members to evaluate.

• Listen.

• Seek negatives of every alternative.

• Committee Chair Role is to facilitate group discussion. Committee chair should avoid generating alternatives or evaluating alternatives.

summary