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? Chapter 10 Decision Making by Individuals & Groups.

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1 ? Chapter 10 Decision Making by Individuals & Groups

2 The Decision-Making Process 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

3 The 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

4 The Decision- Making Process Select the best course of action Implement the decision Gather feedback Follow up

5 Models of Decision-Making Effective decision a timely decision that meets a desired objective and is acceptable to those individuals affected by it Garbage Can Model Bounded Rationality Model Rational Model

6 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 Rational Model Rationality - a logical, step-by-step approach to decision making, with a thorough analysis of alternatives and their consequences

7 1. Managers suggest the first satisfactory alternative 2. Managers recognize that their conception of the world is simple 3. Managers are comforable making decisions without determining all the alternatives 4. Managers make decisions by rules of thumb or heuristics Bounded Rationality Model Bounded Rationality - a theory that suggests that there are limits upon how rational a decision maker can actually be

8 Garbage Can Model - a theory that contends that decisions in organizations are random and unsystematic Garbage Can Model Problems Solutions Choice opportunities Participants From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative Science Quarterly 17 (March 1972) Reprinted by permission of the Administrative Science Quarterly

9 The Quality, Timeliness, Acceptance, and Ethical Appropriateness of a Decision Influence its Effectiveness Quality Ethical Appropriateness AcceptanceTimeliness +++

10 A Manager’s Decision-Making Styles Will Influence the Way She Attacks Problems Left-brain thinkers tend to value technical/task issues Right-brain thinkers tend to value people/social issues ANALYTIC A problem solver who analyzes alternatives and innovates CONCEPTUAL A socially oriented person who sees the big picture DIRECTIVE A rapid decision maker who expects results and relies on rules BEHAVIORAL A person who needs affiliation and wants to help others High Cognitive Complexity Low Cognitive Complexity

11 Managers Take Six Steps in Making an Effective Decision Using the Rational Decision-Making Process ANALYZE THE SITUATION What are the key elements in the situation? What constraints affect the decision? What resources are available? SET OBJECTIVES Is the problem stated clearly? Do people understand what they will work on? By what criteria will decision making be judged? SEARCH FOR ALTERNATIVES Do people involved in the problem make the decision? Have they sought complete information? Do those with information make the decision? Do they use diversity to generate ideas? Are all ideas encouraged?

12 Six Steps (Cont.) EVALUATE THE ALTERNATIVES Do participants know that they are evaluating? Are criteria for assessment clear and understood? Are differences of opinion included in evaluation? Are some alternatives pilot tested? MAKE THE DECISION Do employees know that they are making the decision? Are they aware if they are satisficing or optimizing? Do action plans fit with the decision? Are they committed to the decision? EVALUATE THE DECISION Are responsibilities for data collection, analysis, and reporting clear? Is there a comprehensive evaluation plan? Is there an evaluation schedule?

13 Managers Can Ask These Questions When Evaluating Objectives Relevance Practicality Challenge Measurability Schedulability Balance Do the objectives relate to and support the basic purpose of the organization? Do the objectives recognize obvious constraints? Do the objectives provide a challenge for managers at all levels in the organization? Can managers quantify the objectives? Can managers monitor the objectives at interim points to ensure progress? Do the objectives provide a proper balance on all activities, given organizational goals? CriteriaQuestions to Ask

14 (cont.) Flexibility Timeliness Technology Growth Cost effectiveness Accountability Are the objectives sufficiently flexible or is the organization likely to find itself locked into a particular course of action? Given the organization’s environment, is this the proper time to adopt these objectives? Do the objectives fall within the boundaries of current technological development? Do the objectives help the organization grow, not just survive? Do the objectives’ expected costs clearly outweigh their benefit? Can managers assess the performance of those responsible for attaining the objectives? CriteriaQuestions to Ask

15 Problems Randomly Attach to Solutions in the “Garbage Can ” Problem A Problem C Solution Y Solution X Problem B Solution Z Problem A Solution X + SolutionsProblems

16 Gathering Ideas Brainstorming The Nominal Group Technique The Affinity Diagram The Delphi Method Electronic Meetings

17 Brainstorming Topic Take turns sharing ideas Record each idea No comments/criticisms Keep the tempo moving One idea per turn Members may pass Keep going until ideas are exhausted

18 Mangers Should Follow This Advice for Successful Brainstorming List all ideas. Do not Evaluate any ideas during the initial stages. Encourage creativity. Offer ideas related to those already listed. Ask each participant to offer a specific number (e.g. five to ten) of new ideas. Set a time for brainstorming.

19 Managers Use an Affinity Diagram to Organize Brainstorming in a Group of Employees THEME Why has the number of defects increased 10 times in the past year? The employees lack the right training Quality control procedures are inadequate The product design is faulty Materials received from suppliers have been defective Equipment has not been repaired in a timely fashion Top management needs to reexamine workers’ training needs and find ways to give them the right training for their jobs.

20 The Nominal Group Technique (Delbecq, Van de Ven and Gustafson, 1975) Silent idea generations, Round-robin sharing of ideas, Feedback to the group, Explanatory group discussion, Individual re-assessment, and Mathematical aggregation of revised judgements. A generic name for face-to-face group techniques in which instructions are given to group members not to interact with each other except at specific steps in the process.

21 Affinity Diagram Definition: A group decision-making technique designed to sort a large number of ideas, process variables, concepts, and opinions into naturally related groups. These groups are connected by a simple concept. Purpose: To sort a list of ideas into groups. Guidelines:  Insure ideas are described with phrases or sentences.  Minimize the discussion while sorting -- discuss while developing the header cards.  Aim for 5-10 groups.  If one group is much larger than others, consider splitting it.

22 How to Conduct an Affinity Sort: Clarify the list of ideas. Record them on small cards. Randomly lay out cards on table, flipchart, wall, etc. Sort the cards into "similar" groups in silence -- based on your gut reaction. If you don't like the placement of a particular card -- move it. Continue until consensus is reached. Create header cards consisting of a concise 3-5 word phrase description, the unifying concept for the group. Place header card at top of group. Discuss the groupings and try to understand how the groups relate to each other.

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24 Inquire if ideas are clarified. Use 3-5 words in the phrase on the header card to describe the group. If possible, have groupings reviewed by non-team personnel. To sort, physically get up and gather around the area the cards are placed. Team members will ultimately reach agreement on placement -- if for no other reason that exhaustion. Sorting begins when all team members are ready. If an idea fits in more that one category or group, after discussion, make a second card and place in both groups. Tips

25 Delphi Technique Problem stated Questionnaires Anonymous & Independent Compile results Distribute copies of results New round begins Does not require physical presence Time consuming

26 Electronic Meetings Horseshoe-shaped table Up to 50 participants Issues are presented Responses typed Projection screen display Anonymity, honesty, & speed 55% faster than traditional Lacks credit Fastest typist gets there first No face-to-face interchange

27 Risk and the Manager Risk aversion - the tendency to choose options that entail fewer risks and less uncertainty Risk takers –accept greater potential for loss –tolerate greater uncertainty –more likely to make risky decisions Evidence: Successful Managers Take Risks

28 Escalation of Commitment Why it occurs –humans dislike inconsistency –optimism –control How to deal with it –split responsibility for decisions –provide individuals with a graceful exit –have groups make the initial decision The tendency to continue to commit resources to a losing course of action

29 Cognitive Style Cognitive Style - an individual’s preference for gathering information and evaluating alternatives Jungian theory offers a way of understanding and appreciating differences among individuals.

30 Jung’s Cognitive Style Style Sensing/thinking Sensing/feeling Intuiting/thinking Intuiting/feeling Ideal Organization Facts/ Impersonal Control Facts & Org. relationships Broad issues/ Impersonal & ideal Serve humankind/General values ST SF NT NF

31 Z Problem-Solving Model Look at the facts and details Can it be analyzed objectively? What alternatives do the facts suggest? What impact will it have on those involved? Sensing Intuition Thinking Feeling 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.

32 Influences on Decision-Making Intuition - fast, positive force in decision making utilized at a level below consciousness, involves learned patterns of information Creativity - a process influenced by individual and organizational factors that results in the production of novel and useful ideas, products, or both

33 Four Stages of Creative Process Preparation - experience/ opportunity to build knowledge base Incubation - reflective, often unconscious thought Illumination - insight into problem Verification - thinking, sharing, testing the decision

34 Influences on Creativity Individual examples –Cognitive Processes Divergent Thinking Associational Abilities –Personality Factors breadth of interests high energy self confidence Organizational ex. –Flexible organization structure –Participative decision-making –Quality, supportive relationships with supervisors

35 Organizations Can Facilitate Creative Decision-Making Reward creativity Allow employees to fail Make work more fun Provide creativity training Vary work groups (internal/external) Encourage creative stimuli (music, art, etc.)

36 Participative Decision Making Organizational Foundations –Participative, supportive organizational culture –Team-oriented work design Individual Prerequisites –Capability to become psychologically involved in participative activities –Motivation to act autonomously –Capacity to see the relevance of participation for one’s own well-being Individuals who are affected by decisions influence the making of those decisions

37 Two Brains, Two Cognitive Styles Left HemisphereRight 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 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

38 Group Decision-Making Role of synergy - a positive force in groups that occurs 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 Wins First-shift rule

39 Group Decision-Making 1) more knowledge through pooling of group resources 2) increased acceptance & commitment due to voice in decisions 3) greater under- standing 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 Advantages Disadvantages

40 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

41 Group Decision Techniques Self-Managed Teams Dialectical Inquiry Brainstorming Devil’s Advocacy Delphi Technique Nominal Group Technique Quality Circles & Quality Teams

42 Technological Aids to Decision- Making Expert Systems - a programmed decision tool set up using decision rules Decision Support Systems - computer and communication systems that process incoming data and synthesize pertinent information for managers to use Group Decision Support Systems - systems that use computer software and communication facilities to support group decision-making processes

43 Ethics Check Is it legal? –Does it violate law –Does it violate company policy Is it balanced? –Is it fair to all –Does it promote win-win How will it make me feel about myself


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