Chapter 10
Decision Making by Individuals &
Groups
Learning Outcomes
1 Identify the steps in the decision-making process.
2 Describe various models of decision making.
3 Discuss the individual influences that affect decision
making.
4 Explain how groups make decisions.
5 Describe the role culture plays in decision making.
6 Explain how organizations can improve the quality of
decisions through participation.
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Types of Decisions
Programmed
Decision
a simple,
routine matter
for which a
manager has
an established
decision rule
Nonprogrammed
Decision
a new, complex
decision that
requires a
creative solution
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Decision-Making Process
Recognize the problem and
the need for a decision
Identify the objective of
the decision
Gather and evaluate data
and diagnose the situation
List and evaluate
alternatives
Decision-Making Process
Select the best
course of action
Implement
the decision
Gather feedback
Follow up
Biz Flix
Dr. Seuss’ How the
Grinch Stole
Christmas
What are the Grinch’s decision alternatives or
options? What decision criteria does the Grinch use
to choose from the alternatives?
Rationality
a logical, step-by-step approach to decision
making, with a thorough analysis of
alternatives and their consequences
© 2009 Cengage Learning. All rights reserved.
Models of Decision Making
Effective
Decision
a timely decision
that meets a
desired objective
and is acceptable
to those individuals
affected by it
Rational Model
Bounded Rationality
Model
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Rational Model
1. The outcome will be completely rational
2. The decision maker uses a consistent system of
preferences to choose the best alternative
3. The decision maker is aware of all alternatives
4. The decision maker can calculate the
probability of success for each alternative
Bounded Rationality
a theory that suggests that there are
limits upon how rational a decision
maker can actually be
© 2009 Cengage Learning. All rights reserved.
Bounded Rationality
Model
1. Managers suggest the first satisfactory
alternative
Satisfice – to select the first alternative that is “good
enough,” because the costs in time and effort are
too great to optimize
Bounded Rationality
Model
1. Managers suggest the first
satisfactory alternative
2. Managers recognize that their
conception of the world is simple
3. Managers are comfortable making decisions
without determining all the alternatives
4. Managers make decisions by rules of thumb
or heuristics
Heuristics – shortcuts in decision
making that save mental activity
Beyond the Book:
Garbage Can Model
Problems
Participants
Garbage Can Model –
a theory that contends
that decisions in
organizations are
random and unsystematic
From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative
Science Quarterly 17 (March 1972) 1.25.
Reprinted by permission of the Administrative Science Quarterly
© 2009 Cengage Learning. All rights reserved.
Solutions
Choice
opportunities
Z Problem-Solving Model
Look at
the facts
and details
Can it be
analyzed
objectively?
Sensing
Thinking
What alternatives
Intuition
do the facts
suggest?
What impact
Feeling will it have on
those involved?
Figure from Type Talk at Work by Otto Kroeger and Janet M. Thuesen. Copyright © 1992 by Otto Kroeger
and Janet M. Thuesen. Used by permission of Dell Publishing, a division of Random House. Inc.
Escalation of Commitment
The tendency to continue to commit
resources to a failing course of action
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Escalation of Commitment
• Why it occurs
–
–
–
–
humans dislike inconsistency
optimism
control
sunk costs
• How to deal with it
– split responsibility for decisions
– provide individuals with a graceful exit
– have groups make the initial decision
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Cognitive Style
an individual’s preference for gathering
information and evaluating alternatives
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Jung’s Theory
Jungian theory offers a way of
understanding and appreciating
differences among individuals.
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Risk and the Manager
[Risk takers]
– accept greater potential for loss
– tolerate greater uncertainty
– more likely to make risky decisions
Evidence: Successful Managers Take Risks
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Risk Aversion
the tendency to choose options that entail
fewer risks and less uncertainty
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Jung’s Cognitive Style
Style
Ideal Organization
ST
Sensing/thinking
Facts/ Impersonal Analysis
SF
Sensing/feeling
Facts & Org. Relationships
NT
NF
Intuiting/thinking Broad Issues/ Impersonal & Ideal
Intuiting/feeling
Serve Humankind/General Values
Two Brains, Two Cognitive Styles
Left Hemisphere
Right Hemisphere
Verbal
Sequential, temporal,
digital
Logical, analytic
Rational
Western thought
Nonverbal, visuospatial
Simultaneous, spatial,
analogical
Gestalt, synthetic
Intuitive
Eastern thought
Ideal = “brain-lateralized” making use of
either or both sides, depending on situation
© 2009 Cengage Learning. All rights reserved.
From Left Brain, Right Brain by Springer and Deutsch ©
1989, 1985, 1981 by Sally Springer and Georg Deutsch.
Used with permission by W.H. Freeman and Company
Group Decision Making
• Role of synergy – a positive force that occurs in
groups when group members stimulate new
solutions to problems through the process of
mutual influence and encouragement in the group
• Role of social decision schemes – simple rules
used to determine final group decisions
(prediction 80% correct)
Majority Wins
Truth Wins
Two-thirds Majority
First-shift
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Group Decision Making
Advantages
Disadvantages
1. more knowledge through pooling of
group resources
2. increased acceptance and
commitment due to voice in
decisions
3. greater understanding due to
involvement in decision stages
1. pressure in groups to conform
2. domination by one forceful member
or dominant clique
3. amount of time required, because
group is slower than individual to
make a decision
Group Phenomenon
Groupthink – a deterioration of mental
efficiency, reality testing, and moral
judgment resulting from in-group
pressures
Group Polarization – the tendency for group
discussion to produce shifts toward
more extreme attitudes among members
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Preventing Groupthink
• Ask each group member to act as critical
evaluator
• Have the leader avoid stating his opinion
prior to the group decision
• Create several groups to work
simultaneously
• Appoint a devil’s advocate
• Evaluate the competition carefully
• After consensus, encourage rethinking
the position
From Janis, Irving L., Groupthink: Psychological Studies of Policy Decisions and Fiascoes, Second Edition. Copyright
© 1982 by Houghton Mifflin Company.
© 2009 Cengage Learning. All rights reserved.