Decision Making
Summer Academy 2007
Eurochambres
Session Objectives
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Understand the limits of the rational model
Examine decision making criteria
Know your own decision making style
Understand the cultural aspects of risk taking
and decision making
• Know the benefits and problems of group
decision making
What is a Decision
The process through which managers identify
and resolve problems and capitalize on
opportunities
Decision Making Models
• Rational Model
• Simon’s normative Model
• Group Decision Making
The Rational
Model of Decision
The Rational
Model Making
• Consists of a structured four-step
sequence
* identifying the problem
* generating alternative solutions
* selecting a solution using
explicit criteria
* implementing and evaluating
the solution
Identify the Problem
A problem exists when there is a gap
between an actual and desired situation
How to Identify Problems
• Historical cues
• The scenario technique
• Perceptions of others
Find solutions
Warp Speed Exercise
Generate solutions
You are the facility manager of an organisation.
The organisation has a large building with many floors.
There is a lift, but the lift is slow and you are receiving
many complaints from the employees about the time they
are wasting waiting for the lift.
You have undertaken an investigation of the problem and
the cost of replacing the lift would be high.
What is the problem?
Generate solutions
Evaluate Solutions
• Choosing criteria
• PMI (Plus- Minus- Interesting)
• Six Hats
• Domino effect
Evaluate!
Implementing Decisions
• Ensure implementers understand what
need to be done
• Ensure acceptance or motivation for what
needs to be done
• Ensure the provision of resources for what
needs to be done
(managerial decision making Huber1990)
Simon’s Normative Model
• Based on premise that decision making is
not rational
• Decision making is characterized by
* limited information processing
* use of judgmental heuristics
* sacrificing
Judgmental Heuristics
n Availability Heuristic: A decision maker’s
tendency to base decisions on information that
is readily available in memory.
n Representativeness Heuristic: The tendency
to assess the likelihood of an event occurring
based on one’s impressions about similar
occurrences.
• Satisficing: Choosing a solution that meets a
minimum standard of acceptance
Dynamics of Decision Making
• Contingency Perspective
• Decision Making Styles
• Culture
• Problem of escalation of Commitment
Contingency Perspective
Characteristics of Decision Task:
The decision problem
* Unfamiliarity
* Ambiguity
* Complexity
*Instability
The decision environment
*Irreversibility
* Significance
*Accountability
* Time and/or money constraints
Generating
alternatives
Characteristics of Decision Maker
* Knowledge
* Ability
* Motivation
* Risk Propensity
* Decision Making Style
Strategies to
select a solution
* Aided analytic
* Unaided-analytic
* Nonanalytic
Tolerance for Ambiguity
Decision Making Styles
High
Analytical
Conceptual
Directive
Behavioral
Low
Tasks and Technical
Concerns
People and Social
Concerns
Value Orientation
Analytical
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Tolerance of Ambiguity
Need for reflection
Need multible alternatives
Tendency to focus on minor details
Slow decision makers
Directive
• Low tolerance for ambiguity
• Biased towards task and technical
considerations
• Are practical and systematic in their
approach
• Likes quick decisions
• May be too focused on the short term
Conceptual
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High tolerance for ambiguity
Considers the people issues
Like to consider many options
Long term focus
Uses intuition and discussions with other
to guide decision making
• Tendency to indecision
Behavioural
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People focused
Supportive of others
receptive to new ideas
May be too focused on people issues
Tendency to avoid conflict
In face of conflict decision making often
avoided
What is Your Decision Making Style?
• Which of the four styles best represents
your decision-making style? Which is least
reflective of your style?
• How do your scores compare with the
following norms: directive (75), analytical
(90), conceptual (80), and behavioral (55)?
(55)
• What are the advantages and
disadvantages of your decision-making
style?
Culture: Decision Making and Risk
Taking
• High and Low context cultures
• Risk Taking
• Individual and group orientation
Psychological and Social
Determinants
Ego defence
Individual motivation
Peer pressure
Saving face
Organisational Determinants
Communication problems
Politics
Inertia
Project characteristics
Delayed ROI
Setbacks attributed to temporary
causes
Contextual Determinants
External political pressure
Escalation of
commitment
Poor
Results
To Reduce Escalation of Commitment
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Set minimum targets for performance, and have
decision makers compare their performance with
these targets
Have different individuals make the initial and
subsequent decisions about a project
Encourage decision makers to become less egoinvolved with a project
Provide more frequent feedback about project
completion and costs
Reduce the risk of penalties of failure
Make decision makers aware of the costs of
persistence
Groups
Advantages and Disadvantages of GroupAided Decision Making
Advantages
1. Greater pool of knowledge
2. Different perspectives
3. Greater comprehension
4. Increased acceptance
5. Training ground
Disadvantages
1. Social pressure
2. Minority domination
3. Logrolling
4. Goal displacement
5. “Groupthink”
Techniques
• Brainstorming
• Nominal Group Technique
• Delphi Technique
Group Decision Making Caution
• Asch effect
• Group Think
• Social conformity and authority
• Group Polarisation
Symptoms of Group Think
• An illusion of being invulnerable
• Defending the group’s position against any
objections
• A view that the group is clearly moral
• Stereotyped views of opponents
• Pressure against group members who disagree
• Self-censorship
• An illusion that everyone agrees
• Self-appointed “mind-guards”
Summary
• Use the rational model
• Be aware of human processing errors
• Know your own preferred decision making
style
• Use group decision making when
appropriate