Individual Decision Making Essentials of Organizational Behavior, 8/e Stephen P. Robbins Chapter 6 Individual Decision Making © 2005 Prentice-Hall

Decision making - making choices from among two or more alternatives © 2005 Prentice-Hall

The Six-Step Rational Decision-Making Model Define the problem Identify decision criteria Weight the criteria Generate alternatives Rate each alternative on each criterion Compute the optimal decision © 2005 Prentice-Hall

Assumptions of the Model Problem clarity Known options Clear preferences Constant preferences No time or cost constraints Maximum payoff © 2005 Prentice-Hall

Creativity - ability to produce novel and useful ideas Helps decision maker identify all viable alternatives © 2005 Prentice-Hall

The Three Components of Creativity Creativity Skills Expertise Creativity Task Motivation © 2005 Prentice-Hall

Five Organizational Factors Impeding Creativity Expected evaluation Surveillance External motivators Competition Constrained choice © 2005 Prentice-Hall

Bounded Rationality Due to the limited capacity of the mind to be fully rational; decision makers construct simplified models to extract the essential features from complex problems © 2005 Prentice-Hall

Typical Use of Bounded Rationality Limited list of criteria based on most conspicuous choices Final solution represents a satisficing choice, not an optimum one Satisficing - first acceptable choice © 2005 Prentice-Hall

Common Biases and Errors Overconfidence bias Anchoring bias Confirmation bias Availability bias © 2005 Prentice-Hall

Common Biases and Errors Representative bias Escalation of commitment Randomness error Hindsight bias © 2005 Prentice-Hall

Intuition Unconscious process created out of distilled experience; resulting in a rapid decision with what appears to be very limited information © 2005 Prentice-Hall

When is Intuition Used? When a high level of uncertainty exists When there is little precedent to draw on When variables are less scientifically predictable When “facts” are limited When facts don’t clearly point the way © 2005 Prentice-Hall

When is Intuition Used? When analytical data are of little use When there are several plausible alternative solutions from which to choose When time is limited and there is pressure to come up with the right decision © 2005 Prentice-Hall

Tolerance for Ambiguity Decision-Style Model Conceptual Behavioral Analytical Directive Way of Thinking Tolerance for Ambiguity High Low Rational Intuitive © 2005 Prentice-Hall

Gender Differences Evidence indicates that women analyze decisions more than men Reason is not clear © 2005 Prentice-Hall

Stages of Moral Development Level Stage Description Principled 6. Following self-chosen ethical principles, even if they violate the law 5. Valuing rights of others; upholding non-relative values and rights regardless of the majority’s opinion Conventional 4. Maintaining conventional order by fulfilling obligations to which you have agreed 3. Living up to what is expected by people close to you Pre-conventional 2. Following rules only when it’s in your immediate interest 1. Sticking to rules to avoid physical punishment © 2005 Prentice-Hall

Organizational Constraints Performance Evaluation Reward Systems Formal Regulations System-Imposed Time Constraints Historical Precedents © 2005 Prentice-Hall

Cultural Differences Cultural background can significantly influence Selection of problems Depth of analysis Importance placed on logic and rationality Whether decisions should be made Autocratically by individual manager Collectively in groups © 2005 Prentice-Hall

Criteria in Making Ethical Choices Utilitarianism Rights Justice © 2005 Prentice-Hall

Implications for Managers Five suggestions to improve decision making: Analyze the situation and adjust to the national culture and criteria of organization Be aware of biases Combine rational analysis with intuition Do not assume your specific decision style is appropriate for every job Use creativity-stimulation techniques © 2005 Prentice-Hall