2 Chapter Nine Outline Models of Decision Making The Rational ModelSimon’s Normative ModelDynamics of Decision MakingContingecny Model of Decision MakingImproving Decision MakingGeneral Decision-Making StylesEscalation of CommitmentCreativity
3 Chapter Nine Outline (continued) Group Decision MakingAdvantages and Disadvantages of Group-Aided Decision MakingParticipative ManagementWhen to Have Groups Participate in Decision Making: The Vroom/Yetton/Jago ModelGroup Problem-Solving Techniques
4 The Rational Model of Decision Making 9-2The Rational Model of Decision MakingConsists of a structured four-step sequence * identifying the problem * generating alternative solutions * selecting a solution * implementing and evaluating the solution
5 Simon’s Normative Model of Decision Making Based on the notion of bounded rationality, i.e. decision makers face a variety of constraintsDecision making is characterized by * limited information processing * use of judgmental heuristics (rules, shortcuts) * satisficing
6 Judgmental Heuristics Availability Heuristic: A decision maker’s tendency to base decisions on information that is readily available in memory.Representativeness Heuristic: The tendency to assess the likelihood of an event occurring based on one’s impressions about similar occurrences.
7 Judgmental Heuristics (cont) Satisficing: Choosing a solution that meets a minimum standard of acceptance
8 A Contingency Model for Selecting a Solution Characteristics of Decision Task: The decision problem * Unfamiliarity * Ambiguity * Complexity *Instability The decision environment *Irreversibility * Significance*Accountability * Time and/or money constraintsStrategies to select a solution* Aided analytic * Unaided-analytic * NonanalyticGeneratingalternativesCharacteristics of Decision Maker * Knowledge * Ability* Motivation * Risk Propensity* Decision Making Style
9 Contingency Relationships in Decision Making Analytic Strategies are used when the decision problem is unfamiliar, ambiguous, complex, or unstableNonanalytic methods are employed when the problem is familiar, straightforward, or stable.Assuming there are no monetary or time constraints, analytic approaches are used when the solution is irreversible and significant and when the decision maker is accountable.Nonanalytic strategies are used when the decision can be reversed and is not very significant or when the decision maker is not held accountable.
10 Contingency Relationships in Decision Making (cont) As the probability of making a correct decision goes down, analytic strategies are used.As the probability of making a correct decision goes up, nonanalytic strategies are employed.Time and money constraints automatically exclude some strategies from being used.Analytic strategies are more frequently used by experienced and educated decision makers.Nonanalytic approaches are used when the decision maker lacks knowledge, ability, or motivation to make a good decision.
11 Improving Decision Making Through Effective Knowledge Management Sytems and practices that increase the sharing of knowledge and informationTypes of knowledgeTacit knowledge – intuition, experience, natural abilitiesExplicit knowledgeExplicit knowledge requires access to large amounts of information; tacit knowledge is obtained through observation, mentoring, collaboration, etc.
12 General Decision Making Styles Based on how one perceives and comprehends stimuli and chooses to respondValue orientation – task and technical concerns or people and social concernsTolerance for ambiguity – need of structure or control
13 Decision Making Styles AnalyticalConceptualDirectiveBehavioralTasks and Technical ConcernsPeople and Social ConcernsValue OrientationLowHighTolerance for Ambiguity
14 What is Your Decision Making Style? 9-8Hands on ExerciseWhat is Your Decision Making Style?Which of the four styles best represents your decision-making style? Which is least reflective of your style?How do your scores compare with the following norms: directive (75), analytical (90), conceptual (80), and behavioral (55)?What are the advantages and disadvantages of your decision-making style?
15 Escalation of Commitment Tendency to stick to a course of action even when it is associated with and unlikely to reverse a bad situation. Why?Psychological and socialBias facts to support a decision“Recover losses” more attractive than achieve gainsEgoOrganizational inertiaCharacteristics of project – long-term returnsContextual determinants – outside organization
16 9-9Skills and Best Practices: Recommendations to Reduce Escalation of CommitmentSet minimum targets for performance, and have decision makers compare their performance with these targets.Have different individuals make the initial and subsequent decisions about a project.Encourage decision makers to become less ego-involved with a project.Provide more frequent feedback about project completion and costs.Reduce the risk of penalties of failure.Make decision makers aware of the costs of persistence.
17 Stages Underlying the Creative Process 9-10Stages Underlying the Creative ProcessPreparation: Reflects the notion that creativity starts from a base of knowledge.Concentration: Where an individual concentrates on the problem at hand.Incubation: Done unconsciously. During this stage, people engage in daily activities while their minds simultaneously mull over information and make remote associations.Illumination: Remote associations from the incubation stage are ultimately generated.Verification: Entails going through the entire process to verify, modify, or try out the new idea.
18 Group decision-making Data suggests that innovative groups possessed high levels of both minority dissent and participation in decision makingNote four requirements of effective decision making in a group – focus on process, e.g. requirements for an effective choice, assess positive and negative qualities of alternative solutions, which suggest openness, dissent?
19 Advantages and Disadvantages of Group-Aided Decision Making 9-11Table 9-2Advantages and Disadvantages of Group-Aided Decision MakingAdvantages Disadvantages1. Greater pool of knowledge 1. Social pressure2. Different perspectives 2. Minority domination3. Greater comprehension 3. Logrolling4. Increased acceptance 4. Goal displacement5. Training ground 5. “Groupthink”
20 Group Problem Solving Techniques Definition of consensus – reached when all members can say they either agree Or have had their “day in court” and were unable to convince the others of their viewpoint. In the final analysis, everyone agrees to support the outcome
21 Group Problem Solving Techniques Other approaches to a group decisionUnanimityA minority or one decides
22 More Formal Group Problem Solving Techniques Brainstorming - disciplined processSilent idea (optional)Ideas/opinions solicited and written on a board, disallowing criticisms, allowing piggy-backing on ideas, clarificationDelphi technique is another, more formal form of brainstorming. Involves several rounds of questionnaire, feedback, etc. Useful in cases where participants are not in the same place.
23 More Formal Group Problem Solving Techniques Nominal Group Technique – used to narrow down options through votingComputer-aided Decision MakingUses computers to manage brainstorming or delphi questioning