Chapter 7
Decision Making
© 2015 YOLO Learning Solutions
The Essence of Decision Making
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Decision making is the process of choosing among
alternative courses of action to resolve a problem.
Most decisions can be classified as either:
◦ Programmed—Made in response to situations that are
routine, somewhat structured, and fairly repetitive
◦ Non-programmed—Made in response to situations that are
unique, relatively unstructured, undefined, and of major
consequence to the organization
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Certainty, risk, and uncertainty often exert a significant
effect on decision making.
© 2015 YOLO Learning Solutions
© 2015 YOLO Learning Solutions
The Steps in the Decision Making
Process
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The decision making process consists of six steps:
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Identifying the problem
Generating alternative courses of action
Evaluating the alternatives
Selecting the best alternative
Implementing the decision
Evaluating the decision
© 2015 YOLO Learning Solutions
© 2015 YOLO Learning Solutions
Decision Making Models
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The classical model prescribes how managers should
make decisions and asserts that managers are logical,
rational individuals who make decisions that are in the
best interests of the organization.
The administrative model describes how managers
actually make decisions and includes the following
concepts:
◦ Bounded rationality—The idea that people have limits, or
boundaries, to their rationality
◦ Satisficing—The decision maker’s decision to choose the first
alternative that appears to resolve the problem satisfactorily
© 2015 YOLO Learning Solutions
Decision Making Models (continued)
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The political model of decision making is based on the
idea that certain individuals or groups will be able to
influence others to achieve their goals. In general, the
political model attempts to develop coalitions to
promote ideas, obtain resources, or negotiate an
advantage.
The decision making models are valuable because they
help managers better understand the decision making
process.
© 2015 YOLO Learning Solutions
© 2015 YOLO Learning Solutions
Four General Decision Making Styles
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Managers with a directive style dislike ambiguity and
desire power. These leaders base their decisions on
facts and are focused on results.
Managers with an analytical style can tolerate a
greater degree of ambiguity and like to tackle new
challenges. They like to use logic and problem solving.
Managers with a conceptual style are skilled at
developing new solutions and relying on intuition.
Behavioral decision makers focus more on the
individual. They tend to be supportive of and
empathetic to their followers.
© 2015 YOLO Learning Solutions
Factors That Affect Decision Making
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Intuition—Immediately comprehending that
something is the case, seemingly without the use of
any reasoning process or conscious analysis
Emotion and stress—Feelings that can derail rational
decision making and result in nonproductive or
counterproductive behavior
Framing—Refers to how information is phrased,
presented, or labeled and serves to bias judgment, or
interpretation, of information
© 2015 YOLO Learning Solutions
Factors That Affect Decision Making
(continued)
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Escalation of commitment—The tendency of
individuals and organizations to persist with failing
courses of action
Confidence and risk propensity—The notion that the
higher your confidence level in your decisions, the
greater the likelihood that you will take risks in
decision making
© 2015 YOLO Learning Solutions
© 2015 YOLO Learning Solutions
Decision Making in Groups
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In more and more organizations today, groups, rather
than individuals, are making most of the decisions.
Today’s complex, dynamic business world requires
more specialized knowledge than just one person can
usually possess.
Thus, companies are almost forced to rely on groups of
individuals to obtain sufficient information and
expertise needed to make sound business decisions.
© 2015 YOLO Learning Solutions
Decision Making in Groups (continued)
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Participative decision making generally results in
greater job satisfaction, employee motivation, and
involvement within the organization.
Two common group decision techniques are:
◦ Brainstorming—A technique in which group members
spontaneously suggest ideas to solve a problem
◦ Nominal group technique—Involves the use of a highly
structured meeting agenda and restricts discussion and
interpersonal communication during the decision making
process
© 2015 YOLO Learning Solutions
Decision Making in Groups (continued)
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The major advantages that groups offer over individuals
in decision making are that they:
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Provide a greater pool of knowledge and information
Provide more experiences, perspectives, and interests
Are more likely to generate more alternative solutions
Clarify ambiguous problems, reduce uncertainty about
alternatives, and increase intellectual stimulation
Foster greater comprehension of the decision
Foster increased acceptance of and commitment to the decision
Have increased legitimacy
Provide a training ground
© 2015 YOLO Learning Solutions
Decision Making in Groups (continued)
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The major disadvantages of group decision making are
that groups
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Are time consuming
May be dominated by one or more group members
Are subject to social pressure
May compromise decisions, or satisfice
Have ambiguous decision responsibility
May experience goal displacement
Are subject to groupthink
© 2015 YOLO Learning Solutions
© 2015 YOLO Learning Solutions