Chapter 10
Decision
Making by
Individuals
and Groups
Michael A. Hitt
C. Chet Miller
Adrienne Colella
Slides by Ralph R. Braithwaite
10-1
Dawn Ostroff’s Decision Making
at the CW Television Network
• What are your thoughts about Ostroff’s
•
Dawn Ostroff
•
decision-making process regarding
programming at the “new” network?
Given the nature of the decisions needed, did
she used the knowledge and wisdom of her
advisors wisely?
What are your thoughts about the “creative
and somewhat risky tactics” that were
adopted?
• Do you think the network will survive and be
successful in the future?
Exploring Behavior in Action
10-2
Knowledge Objectives
1. Describe the fundamentals of decision making,
including the basic steps and the need to balance
ideal and satisfactory decisions.
2. Discuss four important decision-making styles,
emphasizing the effectiveness of each one.
3. Explain the role of risk-taking propensity and
reference points.
4. Define cognitive bias and explain the effects of
common types of cognitive bias on decision making.
5. Discuss common pitfalls of group decision making.
6. Describe key group decision-making techniques.
7. Explain the factors managers should consider in
determining the level of associate involvement in
managerial decisions.
10-3
Fundamentals of Decision
Making
Decisions are choices of actions from among
multiple feasible alternatives.
Making decisions is one of the primary activities
of senior managers.
Decisions are also made by managers at all
levels and by associates in high-involvement
organizations.
10-4
Decision-Making Process
Define the Problem
Identify Criteria
Gather and Evaluate Data
Feedback
List and Evaluate Alternatives
Select Best Alternative
Implement and Follow Up
Adapted from Exhibit 10-1: The Decision-Making Process
10-5
Optimal versus Satisfactory
Decisions
Optimal decision
Satisficing decision
10-6
Decision-Making Styles
Individuals’ predispositions can affect
decision process at two critical stages
Carl Jung
Gathering
(Perceiving)
of Information
Evaluating
(Judging) of
Alternatives
Sensing style
Intuition style
Thinking style
Feeling style
10-7
Define the
Problem
Decision-Making
Styles
List and Evaluate
Alternatives
Select Best
Alternative
Implement
and Follow Up
Perceptual
Influences
Gather and
Evaluate
Information
Judgmental
Influences
Feedback
Identify Criteria
Sensing
Intuition
Using the five
senses to identify
factual details
Using abstractions
and describing the
“big picture”
Objective
analysis, rational
procedures
Subjective values
with emotional and
personal factors
Thinking
Feeling
Adapted from Exhibit 10-2: Influence of Decision Styles
10-8
Gathering Information
Sensing
Intuition
A decision style
focused on gathering
concrete information
directly through the
senses, with an
emphasis on practical
and realistic ideas.
A decision style
focused on developing
abstractions and
figurative examples for
use in decision making,
with an emphasis on
imagination and
possibilities.
10-9
Intuition Style
Valuable when:
•
•
•
•
•
A high level of ambiguity exists
Few or no precedents exist
Facts are limited
Facts don’t clearly indicate which way to go
Time is limited and there is pressure to make the
right decision
• Several plausible alternative solutions exist with
good arguments for each
10-10
Evaluating Alternatives
Thinking
Feeling
A decision style
focused on objective
evaluation and
systematic analysis.
A decision style
focused on subjective
evaluation and the
emotional reactions of
others.
10-11
Managerial
Advice
Nurturing Alternative
Decision Styles
What are your thoughts about the comment that
many accountants believe that more data is
better and they hide behind “a mass of data”?
What are your thoughts that some marketers
have “blind spots” when it comes to having to
do data analysis?
What are you thoughts about the Six Thinking
Hats concept of Edward de Bono?
Edward de Bono
10-12
Degree of Acceptable Risk
• Risk exists when the outcome of a chosen
course of action is not certain
• Risk-taking propensity (Willingness to take
chances)
Reference
Point
10-13
Cognitive Biases
Ease of recall bias
Confirmation bias
Relying too much on
information that is
easy to recall from
memory
Seeking information
that confirms early
beliefs and ideas
Sunk-cost bias
Cognitive Mental shortcuts involving
Biases simplified ways of thinking
Not treating past
investments (time,
effort, money) as sunkcosts when deciding to
continue an investment
Anchoring bias
Emphasizing too
much the first piece
of information
encountered
10-14
Mount Everest Expeditions
• What role do “sunk costs” play in many decisions?
• Why would someone like Rob Hall ignore his predetermined turnaround time?
• Have you experienced the “perils of sunk cost” in
your work or personal lives? Give examples.
George Mallory (R)
and Andrew Irvine
Experiencing
Strategic OB
Rob Hall
Sir Edmund Hillary (L)
and Tenzing Norgay
10-15
Group Decision Making
• Some members may arrive with their own
expectations, problem definitions, and predetermined solutions
• Some members may have given more thought
to the decision situation and what is to be
accomplished
• Focus of the team leader may be in developing a
collaborative team rather than developing
individual decision making skills
10-16
Decision-Making Process
Common
Information
Bias
Diversitybased
Infighting
Groupthink
Risky Shift
Brainstorming
Nominal
Group
Technique
Group
Decision
Making
Delphi
Technique
Devil’s
Advocacy
Dialectical
Inquiry
Adapted from Exhibit 10-3: Group Decision-Making Phenomena – Pitfalls and Techniques
10-17
Group Decision-Making
Pitfalls
Groupthink
DiversityBased
Infighting
Nominal
Group
Technique
Common
Information
Bias
Risky
Shift
Delphi
Technique
Brainstorming
Dialectical
Inquiry
Devil’s
Advocacy
10-18
Vroom-Yetton Method
Victor Vroom
Philip Yetton
Requires managers to diagnose the problem situation and
then determine the extent to which associates will be
involved in the decision-making process. The involvement
depends on the probable effect participation will have on:
• the expected quality of the decision
• the acceptance or commitment needed from associates to
implement the solution
• the amount of time available (and needed) to make the
decision.
10-19
Who Should Decide?
Level of Associate Involvement in Decision
Low
AI
High
AII
CI
CII
GII
AI Manager solves problem or makes decision alone
AII Manager requests information but not alternatives
CI Manager explains problem individually but makes
decision alone
CII Manager explains problem to group, gets suggestions,
makes decision alone
GII Manager explains problem to group, facilitates problem
solving, implements decision supported by the group
Adapted from Exhibit 10-4: Managerial Approaches to Associate Involvement in Decision Making
10-20
Vroom-Yetton Method
Questions asked to determine level of associate
involvement in decision making
A. Is there a quality requirement such that one solution is likely to
be more rational than another solution, or will any number of
solutions work reasonably well?
B. Do I have sufficient information to make a high-quality decision?
C. Is the problem structured (do I know the question to ask and
where to look for relevant information)?
D. Is acceptance of the decision by associates critical to effective
implementation?
E. If I were to make the decision by myself, is it reasonably certain
that it would be accepted by my associates?
F. Do the associates share the organizational goals to be attained in
solving this problem?
G. Is conflict among associates likely in preferred solutions?
Adapted from Exhibit 10-5: Decision Tree Method
10-21
Vroom-Yetton Method
A
B
C
D
E
F
1-AI
No
Yes
Yes
G
2-AI
No
3-GII
No
4-AI
Problem
No
Yes
No
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
No
5-AI
No
Yes
Yes
9-AII
Yes
11-CII
8-CI
No
10-AII
Yes
No
Decision points
7-CII
6-GII
14-CII
No
Yes
12_GII
No
13-CII
Recommended strategies
Adapted from Exhibit 10-5: Decision Tree Method
10-22
Vroom-Yetton Model and the
Civil War
• What are your thoughts regarding the application of
the Vroom-Yetton Model to the Civil War battles
discussed in the text?
• How could you use this model to “fight” some of your
“battles” in your life?
Experiencing
Strategic OB
10-23
Value of Individual vs. Group
Decision Making
Important considerations for judging the overall
value of group decision vs. individual decision
making include:
Time
Cost
Nature of the
Problem
Satisfaction and
Commitment
Personal Growth
10-24
Group Decision Making
Advantages
Disadvantages
Can accumulate more
knowledge and facts and
generate better alternatives.
Take more time to reach
decisions than do individuals.
Often display superior
judgment when evaluating
alternatives.
Involvement in decisions leads
to a higher level of acceptance
and satisfaction.
Can result in growth for
members of the group.
Social interactions may lead to
premature compromise.
Often dominated by one or two
“decision leaders.”
Managers may rely too much on
group decisions – lose their
own skills.
Adapted from Exhibit 10-6: Advantages and Disadvantages of Group Decision Making
10-25
The Strategic Lens
1. You are a manager of a unit with 25 associates. You
have just been informed that you must lay off 20% of
the associates in your unit. What process will you
follow to make the decision and implement it?
2. If you made a decision that your manager told you was
important for the organization and later you learned
that you made an error in that decision, what actions
would you take? Assume that others will not notice the
error for some time.
3. You make decisions on a daily basis. Do you find it
difficult to make decisions, especially those of
importance? What can you do to improve your
decision-making abilities?
10-26
Questions
10-27