1. Management A Practical Introduction Third Edition
Angelo Kinicki &
Brian K. Williams

2. Chapter 7: Individual & Group Decision Making
How Managers Make Things Happen
The Nature of Decision Making
Rational & Nonrational Decision Making
Evidence-Based Decision Making & Analytics
Making Ethical Decisions
How to Work With Others
How to Overcome Barriers to Decision Making
The Management Tool Box: How Exceptional Managers Make Decisions
Summary
Managers have to continually make decisions, some of which could turn out to be bad ones.
Managers need to consider when to make a decision and when to wait
be sure to understand the problem
be comfortable with the possible outcomes
be sure you couldn’t make a better decision if you waited
be sure you won’t lose the opportunity if you wait
2. Managers need to know how to make tough choices
decide in a timely fashion
don’t sweat the small stuff
separate outcome from process
know when you have enough information
narrow your choices to keep from being overwhelmed
For Discussion: Managers need to be able to face the facts about what works and what doesn’t. Could you make the decisions that managers must make? Are there situations that you might avoid? Why?

3. 7.1 The Nature Of Decision Making
HOW DO MANAGERS MAKE DECISIONS?
A choice made from available alternatives is a decision
The process of identifying and choosing alternative courses of action is decision making
Decisions that are repetitive and routine and made automatically are programmed
Decisions that occur under nonroutine, unfamiliar circumstances and are not automatic are nonprogrammed

4. 7.1 The Nature Of Decision Making
The willingness to gamble or to undertake risk for the possibility of gaining an increased payoff is referred to as risk propensity
The combination of how an individual perceives and responds to information is the individual’s decision-making style
Decision-making styles differ according to value orientation (the extent to which a person focuses on either task and technical issues or people and social concerns when making a decision) and tolerance for ambiguity (the extent to which a person has a need for structure or control)

5. 7.1 The Nature Of Decision Making
When the dimensions of value orientation and tolerance for ambiguity are combined, four decision-making styles emerge:
1. Managers with a directive style are efficient, logical, practical, and systematic
2. Analytical managers have a higher tolerance for ambiguity and tend to overanalyze situations
3. Conceptual managers have a high tolerance for ambiguity and focus on the people or social aspects of a situation
4. Behavioral managers are the most people oriented and work well with others
Lecture Note: Ask students to identify managers that demonstrate each of the decision making styles. Are there any patterns in the type of manager (functional area, level, etc.) that are associated with the different styles? What conclusions can be drawn from these patterns?

6. 7.1 The Nature Of Decision Making
Figure 7.1: Decision-Making Styles

7. 7.2 Two Kinds Of Decision Making: Rational & Nonrational
HOW CAN MANAGERS MAKE LOGICAL & OPTIMAL DECISIONS?
The rational model of decision making (also known as the classical model) explains how managers should make decisions
There are four stages in the rational decision making process
Stage 1: Identify the problem or opportunity
Stage 2: Think up alternative solutions
Stage 3: Evaluate alternatives & select a solution
Stage 4: Implement & evaluate the solution chosen

8. 7.2 Two Kinds Of Decision Making: Rational & Nonrational
Figure 7.2: The Four Steps in Rational Decision Making

9. 7.2 Two Kinds Of Decision Making: Rational & Nonrational
WHAT’S WRONG WITH THE RATIONAL MODEL?
The rational model describes what a manager ought to do (it is prescriptive), it does not describe how a manager should actually make a decision
The model also assumes that the manager has complete information

10. 7.2 Two Kinds Of Decision Making: Rational & Nonrational
WHY DO MANAGERS MAKE NONRATIONAL DECISIONS?
Nonrational models of decision making assume that decision making is usually uncertain and risky
Nonrational models are descriptive - they describe how managers actually make decisions
There are two nonrational models: satisficing and incremental

11. 7.2 Two Kinds Of Decision Making: Rational & Nonrational
1. The satisficing model suggests that because of bounded rationality (when the ability of decision makers to be rational is limited by numerous constraints), managers do not seek all alternative solutions, but instead seek alternatives only until they find one that is satisfactory, not optimal
2. The incremental model of decision making argues that managers take small, short-term steps to solve problems

12. 7.2 Two Kinds Of Decision Making: Rational & Nonrational
CAN MANAGERS MAKE BETTER DECISIONS THROUGH KNOWLEDGE MANAGEMENT?
Today, managers are shifting toward knowledge management or the development of an organizational culture (tools, processes, systems, and structures) that encourages continuous learning and sharing of knowledge and information among employees, for the purpose of making better decisions
There are two types of knowledge:
1. explicit knowledge
2. tacit knowledge

13. 7.3 Evidence–Based Decision Making & Activities
WHY IS EVIDENCE BASED DECISION MAKING USEFUL?
Evidence based decision making requires managers to put aside beliefs and conventional wisdom and act on the facts
The philosophy is based on three truths: there are few really new ideas, true is better than new, doing well usually dominates
Managers who use evidence-based decision making often have a competitive advantage over those who do not

14. 7.3 Evidence–Based Decision Making & Activities
Analytics or business analytics refers to sophisticated forms of business data analysis and is one of the purest forms of evidence-based management
Competitors that use analytics share three key attributes:
1. they go beyond basic statistics and use other techniques like predictive modeling (a data mining technique used to predict future behavior and anticipate the consequences)
2. they do not rely on a single method, but instead use multiple applications
3. they have support from top level executives

15. 7.4 Making Ethical Decisions
HOW CAN MANAGERS BE SURE THEIR DECISIONS ARE ETHICAL?
Today, ensuring that employees understand what constitutes desirable business behavior has become important
Many companies have ethics officers (someone trained about matters of ethics in the workplace, particularly about resolving ethical dilemmas)

16. 7.4 Making Ethical Decisions
Companies use decision trees (graphs of decisions and their possible consequences that are used to crate a plan to reach a goal) to help them reach ethical decisions
When using a decision tree, managers should ask:
is the proposed action legal?
if yes, does the proposed action maximize shareholder value?
if yes, is the proposed action ethical?
if no, would it be ethical not to take the proposed action?

17. 7.4 Making Ethical Decisions
Figure 7.4: The Ethical Decision Tree:
What’s The Right Thing To Do?

18. 7.5 Group Decision Making: How To Work With Others
WHY WORK IN GROUPS?
There are five advantages to using groups:
groups provide a greater pool of knowledge
groups offer different perspectives
groups encourage intellectual stimulation
groups allow for a better understanding of decision rationale
groups encourage a deeper commitment to the decision
Lecture Note: Most students have direct experience working in groups for class projects. Ask students to consider the benefits of working in groups. Do the students feel that they can do a better project through groups analysis or would they prefer to work alone? Why? Is there a difference between working in groups for a school project versus working in groups for a work project?

19. 7.5 Group Decision Making: How To Work With Others
WHAT ARE THE DISADVANTAGES OF GROUPS?
There are several disadvantages of groups:
groups can result in a few people dominating or intimidating
groups encourage groupthink which occurs when group members strive to agree for the sake of unanimity and avoid accurately assessing the decision situation
groups encourage satisficing
groups promote goal displacement which occurs when the primary goal is subsumed by a secondary goal

20. 7.5 Group Decision Making: How To Work With Others
WHAT SHOULD MANAGERS KNOW ABOUT GROUPS & DECISION MAKING?
Managers should be aware of four characteristics of groups:
1. groups are less efficient
2. group size affects the quality of decisions
3. groups may be too confident about their decisions
4. group decision making tends to be better when members know more about relevant issues, and when leaders can weight members’ opinions

21. 7.5 Group Decision Making: How To Work With Others
SHOULD EMPLOYEES BE INVOLVED IN DECISION MAKING?
One technique to improve productivity is participative management (the process of involving employees in setting goals, making decisions, solving problems, and making changes to the organization)
Studies have found that participative management is effective in some cases such as when management is supportive and employees trust managers

22. 7.5 Group Decision Making: How To Work With Others
When groups make decisions, they have to reach a consensus (when members are able to express their opinions and reach agreement to support the final decision)
Three techniques that can help groups solve problems are brainstorming (helps groups generate ideas and alternatives for solving problems, nominal groups (generate ideas and evaluate solutions by writing down as many ideas as possible, listing them on a blackboard, and then taking a secret vote), and delphi groups (use physically dispersed experts who fill out questionnaires to anonymously generate ideas)
These can be assisted with computer-aided decision making

23. 7.6 How To Overcome Barriers To Decision Making
HOW DO MANAGERS RESPOND TO DECISION SITUATIONS?
There are four ineffective reactions:
1. relaxed avoidance
2. relaxed change
3. defensive avoidance
4. panic
When a manager agrees that he must decide what to do about a problem or opportunity, and takes effective decision-making steps, we say he is deciding to decide

24. 7.6 How To Overcome Barriers To Decision Making
There are several common decision making biases (called heuristics) that simplify the process of making decisions:
1. availability bias
2. confirmation bias
3. representativeness bias
4. sunk cost bias
5. adjustment bias
6. escalation of commitment bias
Practical Action: Being Aware of Your Possible Biases: How Can Your Judgment Be Distorted?
Summary:
This Practical Action explores how decision-making biases can distort a manager’s judgment.
Specifically, a manager should ask:
whether he’s being too cocky
whether actual evidence is being considered
whether events are truly connected or whether they’re from chance
whether the data is sufficient to make a decision
whether given 20/20 hindsight, they make the same decision again