Decision making
in organizations.
Fundamental problems
dr. hab. Jerzy Supernat
Institute of Administrative Studies
University of Wrocław
Decision making in organizations
One of the illusions of life
is that the present hour
is not the critical, decisive hour.
Write it on your heart
that every day
is the best day of the year.
Ralph Waldo Emerson
dr. hab. Jerzy Supernat
Decision making in organizations
The broadest and most
systematic approach to factual
decision-making in organizations
is represented in work
by a Nobel laureate in 1978
Herbert A. Simon (1916-2001)
and his students and colleagues.
This tradition is sometimes referred
to as the Carnegie School as much
of the work was done at CarnegieMellon University, where H.A. Simon
was a long-time faculty member.
dr. hab. Jerzy Supernat
What information consumes
is rather obvious:
it consumes the attention
of its recipients. Hence
a wealth of information
creates a poverty
of attention, and a need
to allocate that attention
efficiently among
the overabundance
of information sources
that might consume it.
Herbert A. Simon
Herbert A. Simon
Decision making in organizations
Bounded rationality
H.A. Simon pointed out that – in contrast
to prescriptive models of decision makingprocesses offered by economists – real
individuals have a very constrained cognitive
capacities – that is, a limited ability:

to think of the full range of possible options
in a decision making situation

to accurately anticipate what the consequences
of these options will be
to know how much they will actually value one
consequences versus another

Thus, rather than being fully rational, as
economic models assume, H.A. Simon argued
that individuals were characterized by bounded
rationality.
The concept of bounded rationality implies that
individuals typically are able to consider only a
limited number of options in making decisions,
and often select the first one that meets some
minimal criterion, that is good enough, rather
than searching for the very best option.
dr. hab. Jerzy Supernat
Decision making in organizations
Organization as a hierarchy of means-andends decisions
Given bounded rationality, H.A. Simon also
argued that individuals could achieve a grater
degree of rationality in decision-making in
organizations than they could if they acted on
their own.
This argument rests on the fact that individuals
at the top of the hierarchy make broad decisions
about general courses of actions to be taken;
these decisions define the ends that individuals
at the next level will seek to achieve by making
their own decisions about actions to be taken,
actions that will become the means to achieving
higher-level ends.
Because of this type of division of labor
in decision-making, H.A. Simon believed that
the decisions made in organizations are likely
to reflect a broader and more thoughtful
considerations of factors than if a single
individual had to think through these alone –
that is, to be more rational.
dr. hab. Jerzy Supernat
Decision making in organizations
Organizational structure
and decision-making
Structural properties
of organizations
 complexity
 formalization
 centralization
are important because they
provide the mechanisms
through which organizations
shape and control individuals’
decision-making.
Decision making in organizations
Consistent with the notion that decision making in organizations is
affected by individuals bounded rationality, political considerations are
assumed to come into play because there is often uncertainty
surrounding decision-making processes: uncertainty about which
objectives are most important to an organization, and what means
should be used to pursue a given objective. These core types of
uncertainty were highlighted in the framework for thinking about
different types of organizational decisions presented by James D.
Thompson (1920-1973).
According to J.D. Thompson decision issues always involve two
major dimensions:
beliefs about cause/effect relationships (it refers to whether
there is certainty about the outcome of an action choice)

preferences regarding possible outcomes (it refers to the
degree to which there is consensus about what the organization is or should be trying to achieve)

dr. hab. Jerzy Supernat
Decision making in organizations
Suggesting that each dimension can be (artificially) dichotomized (certainty – uncertainty) J.D. Thompson proposed the
following typology of organizational decisions or decisionmaking strategies:

computational strategy (the decision is obvious)

judgmental strategy (outcome preferences are clear, but
cause and effect relationships are uncertain)

compromise strategy (there is certainty regarding cause
and effect but uncertainty regarding outcome preferences)

inspirational strategy (there is uncertainty on both dimensions); it presumably entails a significant effort to forge
agreement between parties with different views – that is,
political negotiations
dr. hab. Jerzy Supernat
Decision making in organizations
It is worth noting that J.D. Thompson is the author of important distinction among three basic forms of organizational interdependence:

pooled interdependence

sequential interdependence

mutual (reciprocal) interdependence
The fact that an organization is a wholeness consisting of
interdependent parts means that one of the most important functions of top management (top level decisionmakers) is coordination.
dr. hab. Jerzy Supernat
No man is an island,
entire of itself;
every man is
a piece of the continent,
a part of the main;
if a clod be washed away
by the sea,
Europe is the less...
any man's death
diminishes me,
because I am involved
in mankind...
John Donne (1572-1631)
Decision making in organizations
Although there is a tendency to
assume the decisions at high levels
of organizations reflect high levels
of rationality (careful consideration
of the best means to achieve some
given objective) empirical evidence
suggests that this assumption
is very problematic.
The fact that considerations other
than rationality often influence
strategic decisions is especially
stressed in the following concepts:



the garbage can model
of decision making
the concept of previous
commitment
the concept of social
embeddedness
Decision making in organizations
 Garbage can model
This model begins with the points noted by J.D. Thopmson that
preferences and technology (cause and effect relations) are
often unclear. In this context, James G. March (born 1928) and
his colleagues argue that decisions are shaped by four more or
less independent factors:
 perceptions of current problems facing the organization
 potential solutions
 decision-making opportunities (meetings or committees that
are assigned to make a recommendation for action)
 participants (individuals who are present at decision-making
opportunities)
The model suggests that decisions result from random combination of these factors in
an organization – conceived of as a large garbage can in which the factors are mixed.
In other words, the model suggests that decision outcomes are very unpredictable.
Other research, though, suggests some structural constraints that ‘put a lid on the
garbage can’ and make decision making somewhat more predictable.
dr. hab. Jerzy Supernat
James G. March
What might make a difference to
us, I think, is whether in our tiny
roles, in our brief time, we inhabit
life gently and add more beauty
than ugliness.
James G. March
Jim March is to organization theory
what Miles Davis is to jazz.
John Padgett
Decision making in organizations
 Previous commitment
According to Richard M. Cyert and J.G. March one constraint on
decisions is the existence of previous decisions that commit
organizational resources to certain courses of actions. While
having the benefit of reducing conflict over choices of action,
commitments can have negative consequences for organizational decision making as well: organizations committed to
loosing courses of action are apt to continue to make decisions
that make matters even worse. These are called escalation
situations. Escalation situations occur when:

organizational projects have little salvage value

when decision makers want to justify their own past behavior

people in a project are bound to each other
organizational inertia and internal politics combine to prevent
a project from being shut down

dr. hab. Jerzy Supernat
Decision making in organizations
 Social embeddedness
Mark Granovetter underlies the fact that organizations (as
well as individuals) have enduring relationships with other
actors and are part of ongoing social networks. These
relationships shape decisions both because they are an
important source of information about different choices
that may be made, and because in order to maintain the
relations, organizations may have to take certain courses
of action.
dr. hab. Jerzy Supernat
Decision making in organizations
Strategic impact on decision
making
Making decisions, especially
strategic decisions under conditions
of high uncertainty, is always risky.
Decisions that turn out badly may
affect decision makers’ credibility
and their ability to exercise
influence in later decision-making
situations. Because of this, those
with authority to make strategic
decisions (top-level decisionmakers) may resist making
decisions by themselves and leave
such decisions to groups
or committees.
dr. hab. Jerzy Supernat
Decision making in organizations
Nonetheless, those
in positions of authority
have a number of ways
to influence decision
outcomes in ways that
reflect their preferences:

agenda setting
(defining what issues
will be discussed, and
in what order)

controlling information

forming coalitions
Concluding remark
For every complex problem there is a simple solution that is wrong.
George Bernard Shaw
dr. hab. Jerzy Supernat