1. Individual & Group Decision Making
Chapter Seven
Individual & Group Decision Making

2. Decision Making Defined
Decision: is a choice made from among available alternatives.
Decision Making: is the process of identifying and choosing alternative courses of action.
Types of Decisions
Programmed Decisions: are repetitive and routine.
Nonprogrammed Decisions: are those that occur under nonroutine, unfamiliar circumstances.
Decision Making Style
Decision Making Style: reflects the combination of how an individual perceives and
responds to information.
Rational Decisions
Rational Model of Decision Making: also called the classical model explains how managers
should make decisions; it assumes managers will make logical decisions that will be optimum
in furthering the organization’s best interests.
The Rational Model is based on unrealistic assumptions:
Complete information, no uncertainty
Logical, unemotional analysis,
Best Decision for the organization
Nonrational Decision Making
Nonrational models of decision making: explain how managers do make decisions; they assume the
decision making is nearly always uncertain and risky, making it difficult for managers to make the optimum
decisions.
Nonrational Models are:
Satisficing
Incremental
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

3. Decision Making Styles
Analytical
Conceptual
Directive
Behavioral
High
Tolerance for ambiguity
Low
Task & technical concerns
People & social concerns
Value Orientation
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

4. The Four Steps in Rational Decision Making
Stage 2
Think up alternative solutions
Stage 3
Evaluate alternatives & select a solution
Stage 4
Implement & evaluate the solution chosen
Stage 1
Identify the problem or opportunity
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

5. Disadvantages Advantages
Making Better Decisions Through Knowledge Management
Explicit Knowledge: information that can be easily put into words.
Tacit knowledge: individual based, intuitive, acquired through considerable experience, and hard to express and to share.
Advantages & Disadvantages of Group Decision Making
Disadvantages
Advantages
A few people dominate or intimidate
Greater pool of knowledge
Groupthink
Different perspectives
Satisficing
Intellectual stimulation
Better understanding of decision rationale
Goal displacement
Deeper commitment to the decision
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

6. The Ethical Decision Tree
Is the proposed action legal?
Does it maximize shareholder value?
Don’t do it.
Is it ethical?
Would it be ethical not to take action?
Do it.
Yes No
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

7. What Managers Need to know about Groups & Decision Making
They are less efficient
Their size affects decision quality
They may be too confident
Knowledge countsWhen a Group Can Help in Decision Making
When it can increase quality
When it can increase acceptance
When it can increase development
Participative Management
Participative Management: the process of involving employees in setting goals, making decisions, solving problems, and making changes in the organization.
Factors that Can Help Participative Management Work
Top management is continually involved
Middle and supervisory managers are supportive
Employees trust managers
Employees are ready
Employees don’t work in interdependent jobs
PM is implemented with TQM
More Group Problem Solving Techniques
Interacting group
Nominal group
Delphi group
Computer aided decision making

8. How Do Individuals Respond to a Decision Situation?
Effective Responses:
Importance
Credibility
Urgency
Ineffective Responses:
Relaxed avoidance
Relaxed change
Defensive avoidance
Panic
Decision Making Biases
Availability bias
Representativeness bias
Anchoring and adjustment bias