Chapter 10 Decision Making by Individuals & Groups Nelson & Quick ? Chapter 10 Decision Making by Individuals & Groups Nelson & Quick 1

The Decision-Making Process 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 2

The Decision- Making Process Recognize the problem and the need for a decision The Decision- Making Process Identify the objective of the decision Gather and evaluate data and diagnose the situation List and evaluate alternatives 3

The Decision- Making Process Select the best course of action The Decision- Making Process Implement the decision Gather feedback Follow up 4

Models of Decision-Making Effective decision a timely decision that meets a desired objective and is acceptable to those individuals affected by it Rational Model Bounded Rationality Model Garbage Can Model 5

Rational Model 1. The outcome will be completely rational Rationality - a logical, step-by-step approach to decision making, with a thorough analysis of alternatives and their consequences Rational Model 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 6

Bounded Rationality Model Bounded Rationality - a theory that suggests that there are limits upon how rational a decision maker can actually be 1. Managers suggest the first satisfactory alternative 2. Managers recognize that their conception of the world is simple 3. Managers are comforable making decisions without determining all the alternatives 4. Managers make decisions by rules of thumb or heuristics 7

random and unsystematic Garbage Can Model Solutions Choice opportunities 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 8

Risk and the Manager Risk aversion - the tendency to choose options that entail fewer risks and less uncertainty Risk takers accept greater potential for loss tolerate greater uncertainty more likely to make risky decisions Evidence: Successful Managers Take Risks 9

Escalation of Commitment The tendency to continue to commit resources to a losing course of action Why it occurs humans dislike inconsistency optimism control How to deal with it split responsibility for decisions provide individuals with a graceful exit have groups make the initial decision 10

Jungian theory offers a way of understanding and Cognitive Style Cognitive Style - an individual’s preference for gathering information and evaluating alternatives Jungian theory offers a way of understanding and appreciating differences among individuals.

Jung’s Cognitive Style Sensing/thinking Sensing/feeling Intuiting/thinking Intuiting/feeling Ideal Organization Facts/ Impersonal Control Facts & Org. relationships Broad issues/ Impersonal & ideal Serve humankind/General values ST SF NT NF

Z Problem-Solving Model Look at the facts and details What alternatives do the facts suggest? Sensing Intuition Can it be analyzed objectively? What impact will it have on those involved? 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.

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

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

Influences on Creativity Individual examples Cognitive Processes Divergent Thinking Associational Abilities Personality Factors breadth of interests high energy self confidence Organizational ex. Flexible organization structure Participative decision-making Quality, supportive relationships with supervisors

Organizations Can Facilitate Creative Decision-Making Reward creativity Allow employees to fail Make work more fun Provide creativity training Vary work groups (internal/external) Encourage creative stimuli (music, art, etc.)

Participative Decision Making Individuals who are affected by decisions influence the making of those decisions 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

Two Brains, Two Cognitive Styles Left Hemisphere Right 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

Group Decision-Making Role of synergy - a positive force in groups that occurs 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 Wins First-shift rule

Group Decision-Making 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 1) more knowledge through pooling of group resources 2) increased acceptance & commitment due to voice in decisions 3) greater under- standing due to involvement in decision stages Disadvantages

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

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

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

Ethics Check Is it legal? Is it balanced? Does it violate law Does it violate company policy Is it balanced? Is it fair to all Does it promote win-win How will it make me feel about myself