??Chapter 10Chapter 10

Decision Making by Decision Making by Individuals & GroupsIndividuals & Groups

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 andthe need for a decision

Identify the objective ofthe decision

Gather and evaluate dataand diagnose the situation

List and evaluatealternatives

The Decision-Making Process

Select the bestcourse of action

Implementthe decision

Gatherfeedback

Follow up

Models of Decision-Making

Effective decisionEffective decision

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

Garbage Can Model

Bounded Rationality Model

Rational Model

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

Rational ModelRationality - a logical,step-by-step approachto decision making, with athorough analysis ofalternatives and theirconsequences

1. Managers suggest the first satisfactory alternative

2. Managers recognize that their conception of the world is simple

3. Managers are comforable making decisions without determining all the alternatives

4. Managers make decisions by rules of thumb or heuristics

Bounded Rationality Model

Bounded Rationality - a theory that suggests that there are limits upon how rational a decision maker can actually be

Garbage Can Model -

a theory that contends

that decisions in

organizations are

random and unsystematic

Garbage Can Model

Problems

Solutions

Choiceopportunities

Participants

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

The Quality, Timeliness, Acceptance, and Ethical Appropriateness of a Decision Influence its

Effectiveness

QualityEthicalAppropriateness

AcceptanceTimeliness+ ++

A Manager’s Decision-Making Styles Will Influence the Way She Attacks Problems

Left-brain thinkers tend to valuetechnical/task issues

Right-brain thinkers tend to value

people/social issues

ANALYTICA problem solver who analyzesalternatives and innovates

CONCEPTUALA socially oriented person

who sees the big picture

DIRECTIVEA rapid decision maker whoexpects results and relies on rules

BEHAVIORALA person who needs

affiliation and wants to helpothers

High CognitiveComplexity

Low CognitiveComplexity

Managers Take Six Steps in Making an Effective Decision Using the Rational Decision-Making Process

ANALYZE THE SITUATION•What are the key elements in the situation?•What constraints affect the decision?•What resources are available?

SET OBJECTIVES•Is the problem stated clearly?•Do people understand what they will work on?•By what criteria will decision making be judged?

SEARCH FOR ALTERNATIVES•Do people involved in the problem make the decision?•Have they sought complete information?•Do those with information make the decision?•Do they use diversity to generate ideas?•Are all ideas encouraged?

Six Steps (Cont.)EVALUATE THE ALTERNATIVES•Do participants know that they are evaluating?•Are criteria for assessment clear and understood?•Are differences of opinion included in evaluation?•Are some alternatives pilot tested?

MAKE THE DECISION•Do employees know that they are making the decision?•Are they aware if they are satisficing or optimizing?•Do action plans fit with the decision?•Are they committed to the decision?

EVALUATE THE DECISION•Are responsibilities for data collection, analysis, and reporting clear?•Is there a comprehensive evaluation plan?•Is there an evaluation schedule?

Managers Can Ask These Questions When Evaluating Objectives

Relevance

Practicality

Challenge

Measurability

Schedulability

Balance

Do the objectives relate to and support the basic purpose of the organization?

Do the objectives recognize obvious constraints?

Do the objectives provide a challenge for managers at all levels in the organization?

Can managers quantify the objectives?

Can managers monitor the objectives at interim points to ensure progress?

Do the objectives provide a proper balance on all activities, given organizational goals?

Criteria Questions to Ask

(cont.)

Flexibility

Timeliness

Technology

Growth

Cost effectiveness

Accountability

Are the objectives sufficiently flexible or is the organization likely to find itself locked into a particular course of action?

Given the organization’s environment , is this the proper time to adopt these objectives?

Do the objectives fall within the boundaries of currenttechnological development?

Do the objectives help the organization grow, not just survive?

Do the objectives’ expected costs clearly outweigh their benefit?

Can managers assess the performance of those responsible for attaining the objectives?

Criteria Questions to Ask

Problems Randomly Attach to Solutions in

the “Garbage Can”

Problem A

Problem C

Solution Y

Solution X

Problem B

Solution Z

Problem A

Solution X+

Solutions Problems

Gathering Ideas

•Brainstorming•The Nominal Group Technique•The Affinity Diagram•The Delphi Method•Electronic Meetings

Brainstorming

•Topic•Take turns sharing ideas•Record each idea•No comments/criticisms•Keep the tempo moving•One idea per turn•Members may pass•Keep going until ideas are exhausted

Mangers Should Follow This Advice for Successful Brainstorming

•List all ideas.

•Do not Evaluate any ideas during the initial stages.

•Encourage creativity.

•Offer ideas related to those already listed.

•Ask each participant to offer a specific number (e.g. five to ten) of new ideas.

•Set a time for brainstorming.

Managers Use an Affinity Diagram to Organize Brainstorming in a Group of Employees

THEMEWhy has the number ofdefects increased 10 timesin the past year?

The employeeslack the right training

Quality control procedures areinadequate

The productdesign is faultyMaterials received

from suppliers havebeen defective

Equipment has notbeen repaired in atimely fashion

Top management needsto reexamine workers’training needs and findways to give them theright training for their jobs.

The Nominal Group Technique (Delbecq, Van de Ven and Gustafson, 1975)

•Silent idea generations, •Round-robin sharing of ideas, •Feedback to the group, •Explanatory group discussion, •Individual re-assessment, and •Mathematical aggregation of revised judgements.

A generic name for face-to-face group techniques in which instructions are given to group members not to interact with each other except at specific steps in the process.

Affinity DiagramDefinition: A group decision-making technique designed to sort a large number of ideas, process variables, concepts, and opinions into naturally related groups. These groups are connected by a simple concept.

Purpose: To sort a list of ideas into groups.

Guidelines:

Insure ideas are described with phrases or sentences. Minimize the discussion while sorting -- discuss while developing the header cards.Aim for 5-10 groups. If one group is much larger than others, consider splitting it.

How to Conduct an Affinity Sort:

•Clarify the list of ideas. Record them on small cards. •Randomly lay out cards on table, flipchart, wall, etc. •Sort the cards into "similar" groups in silence -- based on your gut reaction. If you don't like the placement of a particular card -- move it. Continue until consensus is reached. •Create header cards consisting of a concise 3-5 word phrase description, the unifying concept for the group. Place header card at top of group. •Discuss the groupings and try to understand how the groups relate to each other.

•Inquire if ideas are clarified. •Use 3-5 words in the phrase on the header card to describe the group. •If possible, have groupings reviewed by non-team personnel. •To sort, physically get up and gather around the area the cards are placed. •Team members will ultimately reach agreement on placement -- if for no other reason that exhaustion. •Sorting begins when all team members are ready. •If an idea fits in more that one category or group, after discussion, make a second card and place in both groups.

Tips

Delphi Technique

•Problem stated•Questionnaires•Anonymous & Independent•Compile results•Distribute copies of results•New round begins•Does not require physical presence•Time consuming

Electronic Meetings•Horseshoe-shaped table•Up to 50 participants•Issues are presented•Responses typed•Projection screen display•Anonymity, honesty, & speed•55% faster than traditional•Lacks credit•Fastest typist gets there first•No face-to-face interchange

Risk and the Manager

Risk aversion - the tendency to choose options that entail fewer risks and less uncertainty

Risk takers– accept greater potential for loss

– tolerate greater uncertainty

– more likely to make risky decisions

Evidence: Successful Managers Take Risks

Escalation of Commitment

• Why it occurs– humans dislike inconsistency– optimism– control

• How to deal with it– split responsibility for decisions– provide individuals with a graceful exit– have groups make the initial decision

The tendency to continue tocommit resources to a losingcourse of action

Cognitive Style

Cognitive Style - an individual’s preference for gathering

information and evaluating alternatives

Jungian theory offers a way of understanding andappreciating differences among individuals.

Jung’s Cognitive Style

Style

Sensing/thinking

Sensing/feeling

Intuiting/thinking

Intuiting/feeling

Ideal Organization

Facts/ Impersonal Control

Facts & Org. relationships

Broad issues/ Impersonal & ideal

Serve humankind/General values

ST

SF

NT

NF

Z Problem-Solving Model

Look at the facts

and details

Can it beanalyzed

objectively?

What alternativesdo the facts

suggest?

What impactwill it have on

those involved?

Sensing Intuition

Thinking Feeling

Figure from Type Talk at Work by Otto Kroeger and Janet M. Thuesen. Copyright © 1992 by Otto Kroegerand Janet M. Thuesen. Used by permission of Dell Publishing, a division of Random House. Inc.

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 problem

• Verification - thinking, sharing, testing the decision

Influences on Creativity

• Individual examples– Cognitive Processes

• Divergent Thinking• Associational Abilities

– Personality Factors• breadth of interests• high energy• self confidence

• Organizational ex.– Flexible organization

structure– Participative

decision-making– Quality, supportive

relationships with supervisors

Organizations Can Facilitate Creative Decision-Making

• 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

• Organizational Foundations– Participative, supportive organizational culture– Team-oriented work design

• Individual Prerequisites – Capability to become psychologically involved in

participative activities– Motivation to act autonomously– Capacity to see the relevance of participation for

one’s own well-being

Individuals who are affectedby decisions influence themaking of those decisions

Two Brains, Two Cognitive Styles

Left Hemisphere Right Hemisphere

VerbalSequential, temporal,

digitalLogical, analytic

RationalWestern thought

Nonverbal, visuospatialSimultaneous, spatial,

analogicalGestalt, synthetic

IntuitiveEastern thought

Ideal = “brain-lateralized” making use ofeither 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

Group Decision-Making

• Role of synergy - a positive force in groups that occurs when group members stimulate new solutions to problems through the process of mutual influence and encouragement in the group

• Role of social decision schemes - simple rules used to determine

final group decisions

(prediction 80% correct)

Majority Wins

Truth Wins

Two-thirds Majority Wins

First-shift rule

Group Decision-Making

1) more knowledgethrough pooling of group resources2) increasedacceptance & commitment dueto voice in decisions3) greater under-standing due toinvolvement indecision stages

1) pressure ingroups to conform2) domination byone forceful memberor dominant clique3) amount of timerequired, becausegroup is slowerthan individualto make a decision

Advantages

Disadvantages

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

GroupDecision

Techniques

Self-Managed Teams

Dialectical Inquiry

Brainstorming

Devil’s Advocacy

Delphi Technique

Nominal Group Technique

Quality Circles & Quality Teams

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

Ethics Check

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

company policy

• Is it balanced?– Is it fair to all– Does it promote win-win

• How will it make me feel about myself