Chapter Ten
Making Decisions
McGraw-Hill/Irwin
Copyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved.
After reading the material in this chapter,
you should be able to:
• Compare and contrast the rational model of decision
making, Simon’s normative model, and the garbage can
model
• Identify common decision-making biases.
• Discuss knowledge management techniques used by
companies to increase knowledge sharing.
• Describe the model of decision-making styles, the role of
intuition in decision-making and the stages of the creative
process.
• Summarize the pros and cons of involving groups in the
decision-making process.
• Contrast brainstorming, the nominal group technique, the
Delphi technique, and computer-aided decision making.
10-2
Models of Decision Making
• Decision making
- identifying and choosing solutions that lead to
a desired result
10-3
Models of Decision Making
• The Rational Model
- proposes that managers use a logical fourstep approach to decision making.
1.Identifying the problem
2.Generating alternative solutions
3.Selecting a solution
4.Implementing and evaluating the solution
10-4
Rational Model
• Identifying the Problem
- Problem – exists when the actual situation and
the desired situation differ
• Generating Solutions
- For routine decisions alternatives are readily
available through decision rules
10-5
Methods for Identifying Problems
1. Assume the recent past is the best
estimate of the future
2. Use projections or scenarios
3. Rely on the perceptions of others
10-6
Rational Model
• Selecting a Solution
- Want to maximize the expected utility of an
outcome
- People vary in their preferences for safety or
risk
- Ethics should be considered
10-7
Rational Model
• Selecting a Solution
- Evaluating alternatives assume they can be
judged according to some criteria
- Assumes valid criteria exists
- Each alternative can be compared to these
criteria
- Decision maker actually uses the criteria
10-8
Rational Model
• Implementing and Evaluating the
Solution
- After solution is implemented, the evaluation
phase is used to evaluate its effectiveness
- Optimizing – choosing the best possible
solution
10-9
Question?
Gloria is never happy with "good enough"
solutions. She is determined to find the
best possible solution in solving her
problems. What Gloria is doing is
described as
A.
B.
C.
D.
Optimizing
Brainstorming
Rationalizing
Satisfying
10-10
Nonrational Models of Decision
Making
• Nonrational models
- decision models that explain how decisions
are actually made
1.Decision making is uncertain
2.Decision makers do not possess complete
information
3.Difficult for managers to make optimal
decisions
10-11
Simon’s Normative Model
• Bounded rationality
- constraints that restrict rational decision
making
• Satisficing
- choosing a solution that meets a minimum
standard of acceptance
10-12
Simon’s Normative Model
Most frequent causes of poor decision
making
• Poorly defined processes and practices
• Unclear company vision, mission, and goals
• Unwillingness of leaders to take responsibility
• Lack of reliable, timely information
10-13
Garbage Can Model
• Garbage Can Model
- decision making is sloppy and haphazard
- decisions result from complex interaction of
four streams of events: problems, solutions,
participants and choice opportunities
10-14
Implications of the Garbage Can
Model
1. Many decisions are made by oversight
2. Political motives frequently influence
decision makers
3. Decision making process is difficult to
load
4. Important decisions are more likely to be
solved
10-15
Decision-Making Biases
• Judgmental heuristics
- rules of thumb or shortcuts that people use to
reduce information processing demands.
10-16
Decision-Making Biases
• Availability heuristic
• Representativeness heuristic
• Confirmation bias
• Anchoring bias
• Overconfidence bias
• Hindsight bias
• Framing bias
• Escalation bias
10-17
Question?
From January to October, Jamie's work
performance was at best mediocre. In November
and December, he significantly picked up his
performance and did an excellent job. His
supervisor evaluated him as outstanding
performer. This can be explained partially due to
the
A.
B.
C.
D.
Escalation of commitment effect.
Representativeness heuristic
Nominal group effect.
Availability heuristic.
10-18
Dynamics of Decision Making
• Knowledge management
- implementing systems and practices that
increase the sharing of knowledge and
information throughout an organization
Read an
article on
Knowledge
Management
10-19
Knowledge Management
• Tacit knowledge
- information gained through experience that is
difficult to express and formalize.
• Explicit knowledge
- information that can be easily put into words
and shared with others.
10-20
Question?
Mike has been a top salesman for 20+ years. He
has developed a reputation as one who can
close a deal, but has been unable to teach new
trainees how to be as successful. This is called
________ knowledge.
A. Implicit
B. Explicit
C. Tacit
D. Unstated
10-21
General Decision Making Styles
• Value orientation
- reflects the extent to which an individual
focuses on either task and technical concerns
or people and social concerns when making
decisions
• Tolerance for ambiguity
- extent to which a person has a high need for
structure or control in his life
10-22
Decision Making Styles
Figure 10-1
10-23
Intuition in Decision Making
• Intuition
- a capacity for attaining direct knowledge
without the apparent intrusion of rational
thought or logical interference
10-24
A Model of Intuition
• Holistic hunch
- judgment that is based on a subconscious
integration of information stored in memory
• Automated experiences
- choice based on a familiar situation and a
partially subconscious application of
previously learned information related to that
situation
10-25
A Model of Intuition
Figure 10-2
10-26
Creativity
• Creativity
- process of using intelligence, imagination, and
skill to develop a new or novel product, object,
process, or thought
10-27
Question?
Dominick has a low tolerance for ambiguity
and is generally oriented towards task and
technical concerns when making decisions.
Dominick can be described as having
which decision-making style?
A.
B.
C.
D.
Directive
Analytical
Conceptual
Behavioral
10-28
Group Involvement
• Minority dissent
- extent to which group members feel
comfortable disagreeing with other group
members,
and a group’s level
of participation in
decision making
10-29
Advantages and Disadvantages of
Group-Aided Decision Making
10-30
Question?
Jeanie has many good ideas for her work group,
but is unwilling to bring them up for group
consideration. She is more concerned about
conforming to group norms and not “rocking
the boat”. This is due to ___________.
A.
B.
C.
D.
Different perspectives
Social pressure
Groupthink
Increased acceptance
10-31
Group Problem Solving Techniques
• Consensus
- presenting opinions and gaining agreement to
support a decision
• Brainstorming
- process to generate a quantity of ideas
10-32
Rules for Brainstorming
1.
2.
3.
4.
5.
6.
7.
Defer judgment
Build on the ideas of others
Encourage wild ideas
Go for quantity over quality
Be visual
Stay focused on the topic
One conversation at a time
10-33
Group Problem Solving
Techniques
• Nominal Group Technique
- process to generate ideas and evaluate
solutions.
• Delphi technique
- process to generate ideas from physically
dispersed experts
10-34
Question?
Dana has project employees working in New York,
South Carolina, Texas, and California. She wants
to get them together as a group to discuss ways
to improve the work process. She will probably
use ___________.
A. Delphi technique
B. Nominal group technique
C. Garbage can technique
D. Ostensible group technique
10-35
Group Problem Solving
Techniques
• Computer-aided decision making
- reduces consensus roadblocks while
collecting more information in a shorter period
of time
10-36
Computer-aided Decision Making
• Chauffeur-driven systems
- ask participants to answer predetermined
questions on electronic keypads
• Group-driven meetings
- conducted in special facilities equipped with
individual workstations that are networked to
each other
10-37
Supplemental Slides
• Slides 40-45 contain extra non-text
examples to integrate and enhance
instructor lectures
- Slide 40-41: Making Tough Calls
- Slide 42: Garbage Can Model of Organizational
Decision-Making
- Slide 43: Decision Making Pitfalls
- Slide 44-45: Video discussion slides
10-38
Making Tough Calls
• Jim Collins – studied the inner workings of
organizations to understand how they
became great
• People decisions are most important
- Making the right choices on who to can
adapt to a changing environment has more
long term impact than decisions about
strategy.
10-39
Making Tough Calls
• Once good people are in place, how do
you make good decisions?
- Strive for conflict, challenging assumptions
and ways of thinking
• Consensus is not necessary
- Once an issue has been debated the leader
needs to make the decision
- Having the right people in place means they’ll
get behind a decision even if there is still
10-40
some disagreement
Garbage Can Model of
Organizational Decision-Making
A
Problems
Problems
Solutions
Participants
Solutions
Participants
Choice
opportunities
Choice
opportunities
Problems
Solutions
B
Participants
Choice opportunities
10-41
Decision Making Pitfalls
• Pitfall: Analysis paralysis
- Device: the 70% solution
• Pitfall: Sunk-cost syndrome
- Device: Burn the boat
• Pitfall: Yes-man echoes
- Device: Voice questions, not opinions
10-42
Video: Leadership: Making Decisions
During Hurricane Katrina
• What roadblocks to using a rational decision making
model were placed before the Sister’s in this case?
Could anything have been done to make their decisions
easier?
• Identify how intuition and creativity helped the Sisters in
the decisions they had to make.
• Without the ability to communicate or have the resources
they normally had at their disposal, what did the Sister’s
rely on in making the decisions they needed to make?
• Why was timely decision making so essential in this
case?
10-43
Video Case: Columbia Space
Shuttle Disaster
• What has seemed to be the major problem facing
NASA? Apply your knowledge of group dynamics to
identify the problem.
• What must NASA accomplish to ensure the vitality
of the space program? Has groupthink accounted
for some of NASA’s problems? If so, what
symptoms can you identify?
• What challenges has NASA faced in changing its
culture? How can many different groups be brought
together to work toward a common goal?
10-44