DECISION MAKING
Individual Decision Making
1. Rational Approach.
2. Bounded Rationality Perspective.
RATIONAL APPROACH
 Mangers should use systematic procedures to arrive at a good decision.
 Systematic analysis of the problem.
 Implementation in a logical step by step sequence.
 Not fully achievable (Uncertainty, complexity, change)
 Help to think about decisions more clearly and rationally.
 Helps in decision making when there is lack of clear information.
1. Monitor the Decision Environment
 A manager will monitor internal and external environment.
 Deviation from planned and expected behavior will be noticed.
 Discussions with colleagues.
 Review of financial statements, industry indices etc.
2. Define the Decision Problem
 Respond to deviations by identifying essential details of the problem,
where, when, who was involved, who was affected, how current activities
are influenced.
3. Specify Decision Objectives
 The manger determines what performance outcomes should be achieved
by a decision.
4. Diagnose the Problem
 Manager digs below surface to analyze the cause of the problem.
 Gather additional data to facilitate the diagnosis.
 Understanding will enable appropriate treatment.
5. Develop Alternative Solutions
 Clear understanding of the various options available to achieve desired
objectives.
 The manger may seek ideas and suggestions from other people.
6. Evaluate Alternatives
 Use any statistical technique or personal experience to check the
probability of success.
 Access the merits of each alternative and check the probability that will it
achieve the desired objective.
7. Choose the Best Alternative
 Analysis of the problem, objectives, and alternatives to select the a single
alternative that has the best chance for success.
8. Implement the chosen alternative.
 Manger uses managerial, administrative and persuasive abilities and gives
directions to ensure that the decision is carried out.
 Any decision that isn’t successfully implemented is a failed decision.
 Managers have to mobilize the people and resources to put the decision
into action.
 Hardest step of decision making.
Bounded Rationality Perspective
 Mangers make decisions based on what they sense to be right.
 Managers often are unable to follow an ideal procedure.
 Many decisions must be made quickly.
 Time pressure, large number of external and internal factors affecting the
decision and the ill defined nature of many problems makes systematic
analysis difficult.
 The attempt to rational is bounded (limited)by the complexity of many
problems.
Constraints and Trade offs
 Organization circumstances are ambiguous.
 Require social support, acceptance and agreement.
 Personal Constraints.
 Decision style, work pressure, desire for prestige, feelings of insecurity.
 These all may constrain either the search for alternative or acceptability of
an alternative.
 Some mangers may make decisions based on a mind set of trying to please
upper mangers or in other cases due to respect.
 Un adaptive decision style.
The Role of Intuition
 Bounded rationality perspective is often associated with intuitive decision
process.
 Experience and judgment rather than sequential logic or explicit reasoning
are used to make decision.
 Effective mangers use a combination of rational analysis and intuition in
making complex decisions under pressure.
 Intuition is not arbitrary or irrational.
 It is based on years of practice and experience.
 When manger use their intuition based on long experience with
organizational issues, they rapidly perceive and understand problems.
 Develop a gut feeling which alternative will solve the problem.
 Having in depth knowledge and experience in any particular area results in
a right decision.
 Individual recognizes patterns based on information.
 Mangers use experience and judgment to incorporate intangible elements
at both problem identification and problem solution stage.
 Intangible Factors:
 Person’s concern about support of other executives.
 Fear of failure.
 Social attitudes.
Garbage Can Model
 Patterns and flow of multiple decisions within organization.
 The garbage can model was developed to explain the pattern of decision
making in organizations that experience extremely high uncertainty.
 The garbage can model helps you think about the whole organization and
the frequent decisions being made by managers throughout.
Organized Anarchy
 Pattern of decision making in organizations that involve high uncertainty.
 These highly uncertain conditions are called organized anarchy.
 Rapid Change
 Non bureaucratic environment.
 Unclear, Problematic circumstances
Characteristics
 Problematic Preferences:
 Goals, problems, alternatives and solutions are ill defined.
 Ambiguity in step of the decision process.
Unclear, poorly understood technology
 Cause and effect relationships within the organization are difficult to
identify.
 Database for making decisions is not available.
Turn Over
 Organizational positions experience turnover of participants.
 Employees are busy and have limited time to allocate to one problem or
decision.
 Participation in any decision will be limited.
Stream of Events
 Decision process is not seen as a sequence of steps that begins with a
problem and ends with a solution.
 Problem identification and problem solution may not be connected with
each other.
 An idea may be proposed as a solution when no problem is specified.
Problems.
 Problems are points of dissatisfaction with current activities and
performance.
 They represent a gap between desired performance and current activities.
 However, they are distinct from solutions and choices.
 A problem may lead to a proposed solution or it may not. Problems may
not be solved when solutions are adopted.
Potential solutions.
 A solution is an idea somebody proposes for adoption.
 Such ideas form a flow of alternative solutions through the organization.
 Ideas may be brought into the organization by new personnel or may be
invented by existing personnel.
 Participants may simply be attracted to certain ideas and push them as
logical choices regardless of problems.
 Attraction to an idea may cause an employee to look for a problem to
which the idea can be attached and, hence, justified.
 The point is that solutions exist independent of problems.
Participants.
 Organization participants are employees who come and go throughout
the organization. People are hired, reassigned, and fired.
 Participants vary widely in their ideas, perception of problems, experience,
values, and training.
 The problems and solutions recognized by one manager will differ from
those recognized by another manager.
Choice opportunities.
 Choice opportunities are occasions when an organization usually makes a
decision. They occur when contracts are signed, people are hired, or a
new product is authorized.
 A manager who happened to learn of a good idea may suddenly become
aware of a problem to which it applies and, hence, can provide the
organization with a choice opportunity.
 Match-ups of problems and solutions often result in decisions.
Consequences.
 There are four specific consequences of the garbage can decision process
for organizational decision making:
1. Solutions may be proposed even when problems do not exist.
An employee might be sold on an idea and might try to sell it to the rest of the
organization.
An example was the adoption of computers by many organizations during
the1970s. The computer was an exciting solution and was pushed by both
computer manufacturers and systems analysts within organizations. The
computer did not solve any problems in those initial applications.
Indeed, some computers caused more problems than they solved.
 2. Choices are made without solving problems.
 Creating a new department or revising work procedures, a choice made to
solve a problem but prove to be incorrect due to high uncertainty.
 Budget cut, new policy.
 3. Problems may persist without being solved.
 Organizations participants get used to certain problems and give up trying
to solve them.
 May not know how to solve a problem because technology is unclear.
 4. A few problems are solved.
 Problem reduction.
ORGANIZATIONAL CONFLICT AND
POLITICS
Interdepartmental Conflict in
Organizations
 Intergroup Conflict:
Conflict among departments and groups in organizations.
 Definition:
 The behavior that occurs among organizational groups when participant
identify with one group and perceive that the other groups may block their
group’s goal achievement or expectations.
 Reasons:
1. Group identification
2. Observable group differences
3. Frustration
 Conflict:
Conflict means that the group clash directly.
They are in fundamental opposition.
Direct interference with goal achievement.
 Competition:
Rivalry among groups in the pursuit of a common prize.
 Intergroup conflict within organizations can occur horizontally across
departments OR vertically between different levels of the organization.
 Production and Quality Control.
 R&D and Finance.
Vertical conflict may occur when employee clash with bosses about new work
methods or job assignments.
 Unions and management.
 Franchise owners and head quarters.
 Conflicts can occur between different divisions or business units within an
organization.
 In global organizations, conflicts between regional managers and business
division managers among different divisions, or between divisions and head
quarters are common because of he complexities of international business.
 Conflicts and shifting power relationships in inter organizational
collaboration.
Sources of Conflict
 Goal incompatibility.
 Differentiation.
 Task interdependence.
 Limited Resources.
 EXHIBIT 7.1
Rational VS Political Model.
Rational Model:
 In rational organization behavior is not random or accidental.
 Goals are clear and choices are made in logical way.
 When decision is needed, the goal is defined, alternatives are identified
and the choice with the highest probability of success is selected.
 Purely rational procedures do not work for many circumstances.
Political Model:
 When differences are great, organization groups have separate interests,
goals and values.
 Disagreement and conflict is normal so power and influence are needed to
reach decisions.
 Information is ambiguous and incomplete.
EXHIBIT 7.2
Power VS Authority
 Authority is a force for achieving desired outcomes, but only as prescribed by
the formal hierarchy and reporting relationships.
 The concept of formal authority is related to power but is narrow in scope.
 Managers can have formal authority but real power.
Vertical Sources of Power
 All employees along the vertical hierarchy have access to some sources of
power.
 A large amount of power is typically allocate to top managers by the
organizational structures.
 People throughout the organization often obtain power disproportionate to
their formal positions.
The Power of Empowerment
 Empowerment is power sharing.
 The delegation of power or authority to subordinates in an organization.
 Empowering employees involves giving them three elements that enable
them to act more freely to accomplish their jobs.
1. Employee receive information about company performance. (financial
and operational)
2. Employee have knowledge and skills to contribute to company goals.
(training programs)
3. Employees have power to make substantive decisions. (Influence work
procedures and organizational performance)
Horizontal Sources of Power
 Horizontal power pertains to relationships across departments, divisions or
other units.
 Power shifts among departments depending upon circumstances.
 Horizontal power is difficult to measure power differences are not defined
on organizational chart.