Understanding
And
Managing
Organizational
Behavior
Chapter 15:
Decision Making
and Organizational
Learning
4th Edition
JENNIFER GEORGE
& GARETH JONES
15-1
©2005 Prentice Hall
Chapter Objectives
 Differentiate between nonprogrammed and
programmed decisions and explain why
nonprogrammed decision making is a
complex, uncertain process
 Explain the difference between the two
main models of decision making and
describe which is the most realistic
 Discuss the main sources of error in
decision making
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©2005 Prentice Hall
Chapter Objectives
 Describe the advantages and
disadvantages of group decision making
and explain the techniques that can be
used to improve it
 Understand how organization learning can
improve decision making and explain the
steps involved in creating a learning
organization
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©2005 Prentice Hall
Opening Case: A Big Turnaround in
Nike’s Decision Making
 In what ways has decision-making at Nike
changed?
 Decisions originating from design team
 Market changes
– Alternative sports shoes
– Shoes for urban wear
– New competition
 Shift to team-based decision-making
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What is Decision Making?
 The process by which members of an
organization choose a specific course of
action to respond to the opportunities and
problems that confront them
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Basic Types of
Organizational Decisions
 Nonprogrammed
– Novel opportunities
or problems
– Requires extra
information
– Uncertainty
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 Programmed
– Recurring
opportunities or
problems
– Based on
performance
program
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The Decision-Making Process
 Classical
 Administrative
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Classical Decision-Making Model
 Prescriptive
 Assumptions
– People have access to all necessary
information
– People choose the best possible solution
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Steps in the Classical Model
 List all alternatives
 List consequences of each alternative
 Rank sets from most preferred to least
preferred based on personal preference
 Select alternative that results in most
preferred set of consequences
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Problems with the
Classical Model
 All necessary information for optimal
decision
 Unable to use some information
– Cognitive abilities
– Information overload
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Administrative
Decision-Making Model
 Descriptive
 Assumptions
– Approximations of situation used
– Not all information considered
 Satisficing
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Bounded Rationality
 Ability to reason that is limited by the
limitations of the human mind itself
– Lack of cognitive abilities
– Subjective definitions of situation
– Satisfice rather than optimize
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Sources of Error in
Decision Making
 Shortcuts
 Escalation of commitment
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Figure 15.2 Heuristics and
Resulting Biases
 Availability
 Representativeness
 Anchoring and Adjustment
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Availability Heuristic
 Reflects tendency to determine the
frequency of an event and its causes by
how easy these events and causes are to
remember
 Biases
– Overestimation of frequency of
• vivid events
• recent events
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©2005 Prentice Hall
Representativeness Heuristic
 Reflects the tendency to predict the
likelihood of an event occurring from the
extent to which the event is typical of similar
kinds of past events
 Biases
– Failure to consider base rate
– Overestimating likelihood of rare event
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Anchoring and Adjustment
Heuristic
 Reflects tendency to make decisions based
on adjustments from some initial amount
 Biases
– Inappropriate decisions when initial
amounts are too high or too low
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Escalation of Commitment
 Tendency of decision makers to invest
additional time, money, or effort into poor
decisions
– Reconfirm correctness of original decision
– Desire to recoup losses
• Sunk costs
– Risky behaviors increased by negative
situation
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©2005 Prentice Hall
Enterprise Resource
Planning System (ERP)
 Company-wide Intranet based on multimodule software
– Reduces errors in decision making
– Reduces biases
– Generates more useful information
– Links and coordinates functional activities
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©2005 Prentice Hall
Group Decision Making
Advantages
 Availability/ diversity of
members’ skills,
knowledge, expertise
 Enhanced memory
 Greater ability to
correct errors
 Greater decision
acceptance
15-20
Disadvantages
 Time to make a
decision
 Group conflict
 Potential for groupthink
©2005 Prentice Hall
Use Individual Decision Making
When…
 An individual has all capabilities necessary
to make a good decision
 An individual can gather and assess all
necessary information
 Acceptance of decision is unnecessary or
likely to occur anyway
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©2005 Prentice Hall
Figure 15.5 Symptoms of
Groupthink
 Illusion of
invulnerability
 Belief in inherent
mortality of group
 Collective
rationalizations
 Stereotypes of
other groups
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 Self-censorship
 Illusions of
unanimity
 Direct pressure on
dissenters
 Emergence of selfappointed mind
guards
©2005 Prentice Hall
Steps for Minimizing Groupthink
 Group leader encourages thoughtfulness/ criticism
 Group leader refrains from expressing own opinion
and views until group has considered all
alternatives
 Group leader encourages group members to gather
information from outside people
 Group leader assigns devil’s advocate
 Group leader holds second meeting for important
decisions
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Other Consequences of Group
Decision Making
 Diffusion of Responsibility
 Group Polarization
 Potential for Conflict
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Group Decision Making
Techniques
 Brainstorming
 Nominal Group Technique
 Delphi Technique
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Brainstorming Problems
 Suppression of Ideas
 Production Blocking
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Group Decision Making Techniques
for TQM
 Benchmarking
– Selecting a highperforming group or
organization
– Using this group as
a model
– Improving to reach
standard of model
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 Empowerment
– Giving employees
authority to make
decisions
– Giving employees
responsibility for
those decisions
©2005 Prentice Hall
Organizational Learning
 Process managers seek out to improve
decision making ability of employees and
enhance organizational efficiency and
effectiveness
– Exploration
– Exploitation
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©2005 Prentice Hall
Figure 15.6 Principles of
Organizational Learning
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


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Personal Mastery
Systems Thinking
Shared Vision
Team Learning
Complex Mental Models
©2005 Prentice Hall