Chapter 10
Decision Making by
Individuals & 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
DecisionMaking
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
DecisionMaking
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,
step-by-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
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
Garbage Can Model
Solutions
Problems
Garbage Can Model a theory that contends Participants
that decisions in
organizations are
random and unsystematic
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
The Quality, Timeliness, Acceptance, and Ethical
Appropriateness of a Decision Influence its
Effectiveness
Quality
+
Timeliness
+
Acceptance
+
Ethical
Appropriateness
A Manager’s Decision-Making Styles Will
Influence the Way She Attacks Problems
Left-brain thinkers tend to value
technical/task issues
Right-brain thinkers tend
to value
people/social issues
ANALYTIC
CONCEPTUAL
High Cognitive A problem solver who analyzes A socially oriented person
alternatives and innovates
who sees the big picture
Complexity
Low Cognitive
Complexity
DIRECTIVE
A rapid decision maker who
expects results and relies on rules
BEHAVIORAL
A person who needs
affiliation and wants to help
others
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
Criteria
Relevance
Questions to Ask
Do the objectives relate to and support the basic purpose of
the organization?
Practicality
Do the objectives recognize obvious constraints?
Challenge
Do the objectives provide a challenge for managers at all
levels in the organization?
Measurability
Can managers quantify the objectives?
Schedulability
Can managers monitor the objectives at interim points to
ensure progress?
Balance
Do the objectives provide a proper balance on all activities,
given organizational goals?
(cont.)
Criteria
Flexibility
Questions to Ask
Are the objectives sufficiently flexible or is the organization
likely to find itself locked into a particular course of action?
Timeliness
Given the organization’s environment , is this the proper time
to adopt these objectives?
Technology
Do the objectives fall within the boundaries of current
technological development?
Growth
Do the objectives help the organization grow, not just
survive?
Cost
effectiveness
Do the objectives’ expected costs clearly outweigh their
benefit?
Accountability
Can managers assess the performance of those responsible
for attaining the objectives?
Problems Randomly Attach to Solutions in
the “Garbage Can”
Solutions
Problems
Problem A
+
Solution X
Problem C
Solution Y
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
THEME
Why has the number of
defects increased 10 times
in the past year?
The employees
lack the right
training
Equipment has not
been repaired in a
timely fashion
Materials received
from suppliers have
been defective
Quality control
procedures are
inadequate
The product
design is
faulty
Top management needs
to reexamine workers’
training needs and find
ways to give them the
right training for their jobs.
The Nominal Group Technique
(Delbecq, Van de Ven and Gustafson, 1975)
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.
•Silent idea generations,
•Round-robin sharing of ideas,
•Feedback to the group,
•Explanatory group discussion,
•Individual re-assessment, and
•Mathematical aggregation of revised judgements.
Affinity Diagram
Definition: 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.
Tips
•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.
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
The tendency to continue to
commit resources to a losing
course of action
• 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
Cognitive Style
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
Style
Ideal Organization
ST
Sensing/thinking
Facts/ Impersonal Control
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.
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
Individuals who are affected
by decisions influence the
making of those decisions
• 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
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
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
Majority Wins
final group decisions
Truth Wins
(prediction 80% correct) Two-thirds Majority Wins
First-shift rule
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
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
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
Brainstorming
Nominal Group Technique
Self-Managed Teams
Group
Decision
Techniques
Delphi Technique
Quality Circles & Quality Teams
Dialectical Inquiry
Devil’s Advocacy
Technological Aids to DecisionMaking
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