1. © 2009 Cengage Learning. All rights reserved. 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.

2. © 2009 Cengage Learning. All rights reserved. Learning Outcome Identify the steps in the decision-making process. 1

3. © 2009 Cengage Learning. All rights reserved. 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

4. Recognize the problem and the need for a decision Gather and evaluate data and diagnose the situation Identify the objective of the decision List and evaluate alternatives Decision-Making Process

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

6. © 2009 Cengage Learning. All rights reserved. Learning Outcome Describe various models of decision making. 2

7. © 2009 Cengage Learning. All rights reserved. Rationality a logical, step-by-step approach to decision making, with a thorough analysis of alternatives and their consequences

8. © 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 Bounded Rationality Model Rational Model

9. 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

10. © 2009 Cengage Learning. All rights reserved. Bounded Rationality a theory that suggests that there are limits upon how rational a decision maker can actually be

11. 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

12. 1. Managers suggest the first satisfactory alternative 2. Managers recognize that their conception of the world is simple Bounded Rationality Model 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

13. © 2009 Cengage Learning. All rights reserved. Garbage Can Model – a theory that contends that decisions in organizations are random and unsystematic Problems Participants 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 Garbage Can Model Solutions Choice opportunities Beyond the Book:

14. 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.

15. © 2009 Cengage Learning. All rights reserved. Escalation of Commitment The tendency to continue to commit resources to a failing course of action

16. © 2009 Cengage Learning. All rights reserved. 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

17. © 2009 Cengage Learning. All rights reserved. Learning Outcome Discuss the individual influences that affect decision making. 3

18. © 2009 Cengage Learning. All rights reserved. Cognitive Style an individual’s preference for gathering information and evaluating alternatives

19. © 2009 Cengage Learning. All rights reserved. Jung’s Theory Jungian theory offers a way of understanding and appreciating differences among individuals.

20. © 2009 Cengage Learning. All rights reserved. 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

21. © 2009 Cengage Learning. All rights reserved. Risk Aversion the tendency to choose options that entail fewer risks and less uncertainty

22. Jung’s Cognitive Style Style Sensing/thinking Sensing/feeling Intuiting/thinking Intuiting/feeling Ideal Organization Facts/ Impersonal Analysis Facts & Org. Relationships Broad Issues/ Impersonal & Ideal Serve Humankind/General Values ST SF NT NF

23. © 2009 Cengage Learning. All rights reserved. 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

24. © 2009 Cengage Learning. All rights reserved. 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

25. © 2009 Cengage Learning. All rights reserved. GPS devices and freely-available online maps are forcing the mapping industry to change how it does business. Map companies are incorporating digital services into their business model, capitalizing on the benefits of paper maps, expanding into related fields like astronomy and planetary mapping, or simply scaling back their businesses. Beyond the Book: Mapping Changes in the Industry Faced with a challenge, map industry professionals are charting a variety of courses--which decisions will succeed?

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

27. © 2009 Cengage Learning. All rights reserved. Influences on Creativity Individual examples –Cognitive Processes Divergent Thinking Associational Abilities Unconscious Processes –Personality Factors breadth of interests high energy self-confidence Organizational examples –Flexible organization structure –Participative decision making –Quality, supportive relationships with supervisors

28. © 2009 Cengage Learning. All rights reserved. CREATIVITY 13 2 4 because it is expected of you in your job because you want to be creative You discover problems You respond to problems Expected creativity Responsive creativity Proactive creativity Contributory creativity 4 TYPES

29. © 2009 Cengage Learning. All rights reserved. Subjects in a study were assigned a task requiring creative solutions and allowed varying amounts of sleep throughout the task. The group that was introduced to the problem, “slept on it,” and returned to the task were twice as likely to discover the creative solution than other groups. Conclusion: a full night’s sleep facilitates creative problem solving! Beyond the Book: Eight Hours of Power

30. © 2009 Cengage Learning. All rights reserved. Learning Outcome Explain how groups make decisions. 4

31. © 2009 Cengage Learning. All rights reserved. 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

32. Group Decision Making 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 Advantages 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 Disadvantages

33. © 2009 Cengage Learning. All rights reserved. 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

34. © 2009 Cengage Learning. All rights reserved. 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.

35. Self-Managed Teams Dialectical Inquiry Brainstorming Devil’s Advocacy Delphi Technique Nominal Group Technique Quality Circles and Quality Teams Group Decision Techniques

36. © 2009 Cengage Learning. All rights reserved. Learning Outcome Describe the role culture plays in decision making. 5

37. © 2009 Cengage Learning. All rights reserved. Hofstede’s Dimensions Styles of decision making vary by culture Many of Hofstede’s dimensions have implication for how people deploy the decision- making process

38. © 2009 Cengage Learning. All rights reserved. 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 in either face-to-face meetings or dispersed meetings Beyond the Book:

39. © 2009 Cengage Learning. All rights reserved. Decision Making in the Virtual Workplace Desktop Videoconferencing Systems Internet/Intranet Systems Tools for Virtual Teams Group Decision Support Systems Beyond the Book

40. © 2009 Cengage Learning. All rights reserved. Learning Outcome Explain how organizations can improve the quality of decisions through participation. 6

41. © 2009 Cengage Learning. All rights reserved. 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 : Participative Decision Making

42. © 2009 Cengage Learning. All rights reserved. Beyond the Book: 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 relationships How will it make me feel about myself

43. © 2009 Cengage Learning. All rights reserved. Your top salesperson Jake was picked up by the police for a DUI on New Year’s Eve and had his car impounded. You later discover Jake didn’t tell you the whole story: his BAC was.20 (over twice the legal limit) and he’s had two other DUIs. Jake can’t make sales appointments until he bails his car out. How do you decide whether or not to keep Jake on? Is Jake’s performance as number-one salesperson worth the potential risks of continued employment? Beyond the Book: Decision Making: Your Turn