C H A P T E R
E L E V E N
Decision Making
in Organizations
Decision Making
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Define decision making
Explain conditions that affect
decisions
Describe and differentiate between
decision types
Understand goals
Understand three models of
decision making
Decision Making
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The process of defining problems,
gathering information, making
sense of that information,
generating alternatives, and
choosing a course of action
Conditions that affect
decisions
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Information Availability
Certainty/Uncertainty and Risk
Objective Probability and
Subjective Probability
Experience
Types of Decisions to be
Made
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Based on Conditions
Routine
Adaptive
Continuous Improvementincremental
Innovative Decisions - reengineering
Decision Making Model
1. Identify
problem
6. Evaluate
decision
2. Choose
decision
style
5. Implement
solution
3. Develop
alternatives
4. Choose
best solution
Programmed Decisions
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Routine, virtually automatic
decision making that follows
established rules or guidelines
 automatic
reorders
 categorizing based on set
information
Non-Programmed
Decision Making
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Non-routine decision making that
occurs in response to unusual,
unpredictable opportunities and
threats
adaptive
based on judgement and intuition
Bounded Rationality
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Cognitive limitations that constrain
one’s ability to interpret, process,
and act on all information
Individuals do not have perfect or
complete information
limited search because of limited
resources-time, money, personnel,
ability, etc.
Satisficing - Selecting less than the
best alternative
Information Processing
Biases
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Availability
Selective perception-seeing what
your background predisposes you
to see
Concrete information-experience
outweighs real probabilities
Ambiguous Information information that can be interpreted
in multiple and conflicting ways
continued
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Law of Small Numbers - one or two
experiences influence rationality
(making generalizations)
Gambler’s Fallacy - past results
have an impact on future
performance
Escalation of Commitmenttendency to commit additional
resources to a failing project when
evidence of failure exists
Escalation of
Commitment
Escalation occurred when the
British government continued
funding the Concorde
supersonic jet long after it’s lack
of commercial viability was
apparent. To this day, some
scholars refer to escalation of
commitment as the “Concorde
fallacy.”
© Corel Corp. With permission
Causes of Escalation of
Commitment
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Self-justification
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Gambler’s fallacy
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Perceptual
blinders
Closing costs
© Corel Corp. With permission
Team Decision Making
Problems
Group
polarization
Groupthink
Team Decision
Making Problems
Conformity
to peer
pressure
Time
constraints
Evaluation
apprehension
Conditions for
Groupthink
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Team is highly cohesive
Team is isolated from outsiders
Team faces external threat
Team has recent decision failures
Team leader tries to influence
decision
Group Polarization
Process
High Risk
Decision Process
Team Decision
Individual
Opinions
Social Support
Persuasion
Shifting Responsibility
Team Decision
Low Risk
Generating Constructive
Controversy
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Form heterogeneous decision
making groups
Ensure team meets often to face
contentious issues
Members should take on different
discussion roles
Think about the decision under
different scenarios
Features of
Brainstorming
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No Criticism
Encourage Freewheeling
Piggyback Ideas
Encourage Many Ideas
Electronic
Brainstorming at IBM
An electronic
brainstorming session at
an IBM decision support
center.
Photo: Courtesy of IBM.
Nominal Group
Technique
Describe
problem
Individual
Activity
Team
Activity
Individual
Activity
Write down
possible
solutions
Possible
solutions
described
to others
Rework
solutions
presented
Evaluating Electronic
Brainstorming
Benefits
+
+
+
+
Less production blocking
Less evaluation
apprehension
More creative synergy
More decision efficiency
Problems
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Too structured
Lacks interpersonal
dynamics
Candid feedback is
threatening
Photo: Courtesy of IBM.