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  • CSE & Enterprise Systems CenterLehigh University

    1

    Roger N. Nagel 2006

    Organizational Behavior and Organizational Change

    Decisions

    Roger N. NagelSenior Fellow & Wagner Professor

    Lehigh University

  • CSE & Enterprise Systems CenterLehigh University

    2

    Roger N. Nagel 2006

    Topics This PresentationDecision making in OB

    Steps in the Decision-Making ModelCommon Biases and ErrorsIntuitive Decision MakingOrganizational Constraints on Decision MakersPotential Cultural Differences in Decision MakingEthics in Decision Making

    Ways to Improve Decision MakingReducing Bias and Errors

    Organizational behaviorEleventh Edition

    By Steve RobbinsISBN 0-13-191435-9

    Reference Book

    Organizational behaviorEleventh Edition

    By Steve RobbinsISBN 0-13-191435-9

    Reference Book

    2

    o r g a n i z a t i o n a l b e h a v i o ro r g a n i z a t i o n a l b e h a v i o r

    stephen p. robbins

    e l e v e n t h e d i t i o ne l e v e n t h e d i t i o n

  • CSE & Enterprise Systems CenterLehigh University

    3

    Roger N. Nagel 2006

    How Are Decisions Actually Made in Organizations

    Simplifying

    Individuals make decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity.

  • CSE & Enterprise Systems CenterLehigh University

    4

    Roger N. Nagel 2006

    How Are Decisions Actually Made in Organizations

    How/Why problems are identifiedVisibility over importance of problem

    Attention-catching, high profile problems Desire to solve problems

    Self-interest (if problem concerns decision maker)

    Alternative DevelopmentSatisfying: seeking the first alternative that solves problem.Engaging in incremental rather than unique problem solving through successive limited comparison of alternatives to the current alternative in effect.

  • CSE & Enterprise Systems CenterLehigh University

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    Roger N. Nagel 2006

    What should we do?

    Identify Problems Opportunities Develop Alternative approaches

  • CSE & Enterprise Systems CenterLehigh University

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    Roger N. Nagel 2006

    1. Define the problem or opportunity.

    2. Identify the decision criteria.

    3. Allocate weights to criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.

    1. Define the problem or opportunity.

    2. Identify the decision criteria.

    3. Allocate weights to criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.

    Steps in the Decision-Making Model

    E X H I B I T 53 Page 144

    E X H I B I T 53 Page 144

    Assumptions Problem clarity Known options Clear preferences Constant

    preferences No time or cost

    constraints Maximum payoff

    Assumptions Problem clarity Known options Clear preferences Constant

    preferences No time or cost

    constraints Maximum payoff

  • CSE & Enterprise Systems CenterLehigh University

    7

    Roger N. Nagel 2006

    Discussion of steps and assumptions

    What left out? What should be added?

    6

    Assumptions Problem clarity Known options Clear preferences Constant

    preferences No time or cost

    constraints Maximum payoff

    Assumptions Problem clarity Known options Clear preferences Constant

    preferences No time or cost

    constraints Maximum payoff

    1. Define the problem.2. Identify the decision

    criteria.3. Allocate weights to

    criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.

    1. Define the problem.2. Identify the decision

    criteria.3. Allocate weights to

    criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.

  • CSE & Enterprise Systems CenterLehigh University

    8

    Roger N. Nagel 2006

    The Three Components of CreativityCreativity

    The ability to produce novel and useful ideas.

    Three-Component Model of Creativity

    Proposition that individual creativity requires expertise, creative-thinking skills, and intrinsic task motivation.

    E X H I B I T 54 Page 146

    E X H I B I T 54 Page 146

    Source: T.M. Amabile, Motivating Creativity in Organizations, California Management Review, Fall 1997, p. 43.

  • CSE & Enterprise Systems CenterLehigh University

    9

    Roger N. Nagel 2006

    Common Decision Biases and Errors1. Overconfidence Bias

    Believing too much in our own decision competencies.

    2. Anchoring BiasFixating on early, first received information.

    3. Confirmation BiasUsing only the facts that support our decision.

    4. Availability BiasUsing information that is most readily at hand.

    5. Representative BiasAssessing the likelihood of an occurrence by trying to match it with a preexisting category.

    Page 148 -151

  • CSE & Enterprise Systems CenterLehigh University

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    Roger N. Nagel 2006

    Common Decision Biases and Errors

    6. Escalation of CommitmentIncreasing commitment to a previous decision in spite of negative information.

    7. Randomness ErrorTrying to create meaning out of random events by falling victim to a false sense of control or superstitions.

    8. Hindsight BiasFalsely believing to have accurately predicted the outcome of an event, after that outcome is actually known.

    Page 148 -151

  • CSE & Enterprise Systems CenterLehigh University

    11

    Roger N. Nagel 2006

    Rate the decision making of your subordinates. How often do they make each type of error?

    1. Overconfidence Bias _______ (Never, occasionally, often)Believing too much in our own decision competencies.

    2. Anchoring Bias _______ (Never, occasionally, often)Fixating on early, first received information.

    3. Confirmation Bias _______ (Never, occasionally, often)Using only the facts that support our decision.

    4. Availability Bias _______ (Never, occasionally, often)Using information that is most readily at hand.

    5. Representative Bias _______ (Never, occasionally, often)Assessing the likelihood of an occurrence by trying to match it with a preexisting category.

    6. Escalation of Commitment _______ (Never, occasionally, often)Increasing commitment to a previous decision in spite of negative information.

    7. Randomness Error _______ (Never, occasionally, often)Trying to create meaning out of random events by falling victim to a false sense of control or superstitions.

    8. Hindsight Bias _______ (Never, occasionally, often)Falsely believing to have accurately predicted the outcome of an event, after that outcome is actually known. Page 148 -151

  • CSE & Enterprise Systems CenterLehigh University

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    Roger N. Nagel 2006

    Intuition

    Intuitive Decision MakingAn unconscious process created out of distilled experience.

    Conditions Favoring Intuitive Decision Making1. A high level of uncertainty exists2. There is little precedent to draw on3. Variables are less scientifically predictable4. Facts are limited5. Facts dont clearly point the way6. Analytical data are of little use7. Several plausible alternative solutions exist8. Time is limited and pressing for the right decision

  • CSE & Enterprise Systems CenterLehigh University

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    Roger N. Nagel 2006

    Different Approaches To Decisions

    People differ along two dimensions1. The first is their way of thinking.

    a. Some people are logical and rational. They process information serially.

    b. Some people are intuitive and creative. They perceive things as a whole.

    2. The second is a persons tolerance for ambiguityc. Some people have a high need to minimize ambiguity.d. Others are able to process many thoughts at the same time.

  • CSE & Enterprise Systems CenterLehigh University

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    Roger N. Nagel 2006

    Decision-Style Model

    E X H I B I T 55 Page 154

    E X H I B I T 55 Page 154

    Source: A.J. Rowe and J.D. Boulgarides, Managerial Decision Making, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29.

  • CSE & Enterprise Systems CenterLehigh University

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    Roger N. Nagel 2006

    Decision-Style Model: 4 Styles Of Decision Making

    1. DirectiveLow tolerance for ambiguity and seek rationalityEfficient and logicalDecisions are made with minimal information and with few alternatives assessed. Make decisions fast and focus on the short-run.

    2. AnalyticGreater tolerance for ambiguityDesire for more information and consideration of more alternativesBest characterized as careful decision makers with the ability to adapt

  • CSE & Enterprise Systems CenterLehigh University

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    Roger N. Nagel 2006

    Decision-Style Model: 4 Styles Of Decision Making

    3. ConceptualTend to be very broad in their outlook and consider many alternativesTheir focus is long range, and they are very good at finding creative solutions to problems.

    4. BehavioralCharacterizes decision makers who work well with othersConcerned with the achievement of peers and subordinates and are receptive to suggestions from others, relying heavily on meetings for communicatingTries to avoid conflict and seeks acceptance

  • CSE & Enterprise Systems CenterLehigh University

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    Roger N. Nagel 2006

    What Style do You Prefer? Why?

    E X H I B I T 55 Page 154

    E X H I B I T 55 Page 154

    Source: A.J. Rowe and J.D. Boulgarides, Managerial Decision Making, (Upper Sa