Types of DecisionsTypes of Decisions

Programmed Programmed DecisionDecision

a simple, routine a simple, routine matter for which matter for which a manager has an a manager has an

established established decision ruledecision rule

Nonprogrammed Nonprogrammed DecisionDecision

a new, complex a new, complex decision that decision that

requires a creative requires a creative solutionsolution

Recognize the problem and the need for a decision

Gather and evaluate dataand diagnose the situation

Identify the objective ofthe decision

List and evaluatealternatives

Decision Making Process

Select the bestcourse of action

Gather feedback

Implementthe decision

Follow up

Decision Making Process

RationalityRationality

a logical, step-by-step approach a logical, step-by-step approach

to decision making, with a to decision making, with a

thorough analysis of alternatives thorough analysis of alternatives

and their consequencesand their consequences

Models of Decision MakingModels of Decision Making

Effective Effective DecisionDecision

a timely decision that meets a desired objective and is acceptable to those individuals affected by it

1. The outcome will be completely rational1. The outcome will be completely rational

2. The decision maker uses a consistent system 2. The decision maker uses a consistent system of preferences to choose the best alternativeof preferences to choose the best alternative

3. The decision maker is aware of all alternatives3. The decision maker is aware of all alternatives

4. The decision maker can calculate the 4. The decision maker can calculate the probability of success for each alternativeprobability of success for each alternative

Rational Model

Bounded RationalityBounded Rationality

a theory that suggests that a theory that suggests that

there are constraints that force there are constraints that force

a decision maker to be less than a decision maker to be less than

completely rationalcompletely rational

1.1. Managers select the first Managers select the first alternative that is satisfactoryalternative that is satisfactory

2.2. Managers recognize that their Managers recognize that their conception of the world is simpleconception of the world is simple

3.3. Managers are comfortable making Managers are comfortable making decisions without determining all decisions without determining all the alternativesthe alternatives

4.4. Managers make decisions by rules Managers make decisions by rules of thumb or heuristicsof thumb or heuristics

Bounded Rationality Model

Assumes that managers Assumes that managers satisficesatisfice – select the first alternative that – select the first alternative that is “good enough”is “good enough”

Assumes that managers develop Assumes that managers develop heuristicsheuristics, short cuts, to make , short cuts, to make decisions in order to make decisions in order to make decisions to save mental activity.decisions to save mental activity.

Bounded Rationality Model

Garbage Can ModelGarbage Can Model

a theory that a theory that contends contends that that decisions in decisions in organizations are organizations are random and random and unsystematicunsystematic

Problems

Participants

Solutions

Choiceopportunities

Beyond the Book:Beyond the Book:

Z Problem-Solving ModelZ Problem-Solving Model

Escalation of CommitmentEscalation of Commitment

the tendency to continue to commit the tendency to continue to commit

resources to a failing course of actionresources to a failing course of action

Escalation of CommitmentEscalation of Commitment

Why it occursWhy it occurs– people dislike inconsistencypeople dislike inconsistency– overly optimisticoverly optimistic– illusion of controlillusion of control– sunk costssunk costs

How to deal with itHow to deal with it– split responsibility for decisionssplit responsibility for decisions– closely monitor decision makersclosely monitor decision makers– provide individuals with a graceful exitprovide individuals with a graceful exit– have groups make the initial decisionhave groups make the initial decision

Cognitive StyleCognitive Style

an individual’s preference an individual’s preference

for gathering information for gathering information

and evaluating alternativesand evaluating alternatives

Risk AversionRisk Aversion

the tendency to choose optionsthe tendency to choose options

that entail fewer risks and less that entail fewer risks and less

uncertaintyuncertainty

Risk and the ManagerRisk and the Manager

Many decisions involve some Many decisions involve some element of risk.element of risk.

Individuals differ in terms of risk Individuals differ in terms of risk aversion. aversion.

Risk aversion is determined by Risk aversion is determined by individual tendencies and individual tendencies and organizational factors. organizational factors.

To encourage risk taking, must To encourage risk taking, must view failure as “enlightened trial view failure as “enlightened trial and error.”and error.”

Personality, Attitudes, and ValuesPersonality, Attitudes, and Values

Influences onInfluences onDecision MakingDecision Making

IntuitionIntuition – fast, – fast, positive force in positive force in decision making decision making utilized at a level utilized at a level below consciousness, below consciousness, involves learned involves learned patterns of patterns of information information

CreativityCreativity –– a a process influenced process influenced by individual and by individual and organizational organizational factors that results factors that results in the production of in the production of novel and useful novel and useful ideas, products, or ideas, products, or bothboth

Influences on CreativityInfluences on Creativity Individual:Individual:

– Cognitive ProcessesCognitive Processes Divergent ThinkingDivergent Thinking Associational AbilitiesAssociational Abilities Unconscious ProcessesUnconscious Processes

– Personality FactorsPersonality Factors breadth of interestsbreadth of interests high energyhigh energy self-confidenceself-confidence

Organizational:Organizational:– Flexible organization structureFlexible organization structure– Participative decision makingParticipative decision making– Quality, supportive relationships with Quality, supportive relationships with

supervisorssupervisors

Creative performance is highest when there is a match or fit between the

individual and organizational

influences.

Four Types of CreativityFour Types of Creativity

Responsive

Expected Contributory

Proactive

Can you think of new solutions to these common organizational problems?

• Employees’ productivity declines sharply the day after the Super Bowl.

• Your organization has been in deficit for three consecutive quarters. Where do you make cuts in the budget?

• You learn that the company can no longer afford to provide lunch to employees. How would you maintain morale?

Beyond the Book:Beyond the Book:Be Creative! Be Creative!

Group Decision MakingGroup Decision Making

Synergy –Synergy – occurs when group members occurs when group members stimulate new solutions to problems stimulate new solutions to problems through the process of mutual influence through the process of mutual influence and encouragement within the group. and encouragement within the group.

Social decision schemes –Social decision schemes – simple rules simple rules used to determine final group decisions used to determine final group decisions

Majority WinsTruth Wins

Two-thirds Majority First-shift

Group Decision MakingGroup Decision Making1. more knowledge through pooling of

group resources2. increased acceptance and

commitment due to voice in decisions

3. greater understanding due to involvement in decision stages

Advantages

1. pressure in groups to conform2. domination by one forceful member

or dominant clique3. amount of time required, because

group is slower than individual to make a decision

Disadvantages

Limits of Group Decision Limits of Group Decision MakingMaking

GroupthinkGroupthink – – a deterioration of mental a deterioration of mental efficiency, reality testing, and moral efficiency, reality testing, and moral judgment resulting from in-group judgment resulting from in-group pressurespressures

Group PolarizationGroup Polarization – – the tendency for the tendency for group discussion to produce shifts toward group discussion to produce shifts toward more extreme attitudes among membersmore extreme attitudes among members

Preventing GroupthinkPreventing Groupthink

Ask each group member to act as Ask each group member to act as critical evaluatorcritical evaluator

Have the leader avoid stating his Have the leader avoid stating his opinion prior to the group opinion prior to the group decisiondecision

Create several groups to work Create several groups to work simultaneouslysimultaneously

Appoint a devil’s advocateAppoint a devil’s advocate Evaluate the competition Evaluate the competition

carefullycarefully After consensus, encourage After consensus, encourage

rethinking the positionrethinking the position

Self-Managed Teams Dialectical

InquiryBrainstorming

Devil’s Advocacy

Delphi Technique

Nominal Group Technique

Quality Circles and Quality Teams

Group Decision Techniques

Special Decision-Making Special Decision-Making GroupsGroups

Quality circles – small groups that Quality circles – small groups that meet voluntarily to address work-meet voluntarily to address work-related problems. related problems.

Quality teams – a team that is part of Quality teams – a team that is part of an organization, empowered to act on an organization, empowered to act on its decisions regarding qualityits decisions regarding quality

Self-managed teams – more broadly Self-managed teams – more broadly focused than above two typesfocused than above two types

Hofstede’s DimensionsHofstede’s Dimensions Styles of Styles of

decision making decision making vary by culturevary by culture

Many of Many of Hofstede’s Hofstede’s dimensions dimensions

have have implication for implication for

how people how people deploy the deploy the

decision-decision-making processmaking process

Beyond the Book:Beyond the Book:Decisions in Japan Decisions in Japan

““Teamwork” and “Collaboration” look much Teamwork” and “Collaboration” look much different in Japan than in the United States. different in Japan than in the United States. In Japanese firms, workers (especially lower In Japanese firms, workers (especially lower level) tend to remain silent during level) tend to remain silent during meetings, avoid sitting next to upper meetings, avoid sitting next to upper management, and rigorously avoid using management, and rigorously avoid using their boss’ first name. Upper management, their boss’ first name. Upper management, meanwhile, steer clears of direct feedback meanwhile, steer clears of direct feedback or delivering the “hard truth.” At all levels, or delivering the “hard truth.” At all levels, harmony and restraint, rather than harmony and restraint, rather than independence and risk-taking, are prized independence and risk-taking, are prized values.values.

Decision Making in the Decision Making in the Virtual WorkplaceVirtual Workplace

Desktop Videoconferencing

Systems

Internet/IntranetSystems

Tools for

Virtual Teams

Group DecisionSupport Systems

Beyond the Book:Beyond the Book:Ethics CheckEthics Check

Is it legal? Is it legal? – Does it violate lawDoes it violate law– Does it violate Does it violate

company policycompany policy Is it balanced?Is it balanced?

– Is it fair to allIs it fair to all– Does it promote win–win Does it promote win–win

relationshipsrelationships How will it make me feel about How will it make me feel about

myself?myself?