© 2005 Prentice-Hall 6-1 Individual Decision Making Chapter 6 Essentials of Organizational Behavior, 8/e Stephen P. Robbins

© 2005 Prentice-Hall 6-2 1)Explain the six-step rational decision- making model and its assumptions 2)Identify the key components in the three-component model of creativity 3)Describe actions of the boundedly rational decision maker 4)Identify six common decision errors or biases After reading this chapter, you should be able to:

© 2005 Prentice-Hall 6-3 5)Explain when intuition can enhance the quality of a decision 6)Identify four decision-making styles 7)Describe how organizational constraints affect decision making 8)Explain the implications of stages of moral development to decision making After reading this chapter, you should be able to:

© 2005 Prentice-Hall 6-4 Decision making - making choices from among two or more alternatives

© 2005 Prentice-Hall 6-5 The Six-Step Rational Decision-Making Model 1)Define the problem 2)Identify decision criteria 3)Weight the criteria 4)Generate alternatives 5)Rate each alternative on each criterion 6)Compute the optimal decision

© 2005 Prentice-Hall 6-6 Assumptions of the Model 1)Problem clarity 2)Known options 3)Clear preferences 4)Constant preferences 5)No time or cost constraints 6)Maximum payoff

© 2005 Prentice-Hall 6-7 Creativity - ability to produce novel and useful ideas Helps decision maker identify all viable alternatives

© 2005 Prentice-Hall 6-8 The Three Components of CreativityExpertise Creativity Skills Task Motivation Creativity

© 2005 Prentice-Hall 6-9 Five Organizational Factors Impeding Creativity 1)Expected evaluation 2)Surveillance 3)External motivators 4)Competition 5)Constrained choice

© 2005 Prentice-Hall 6-10 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 6-11 Typical Use of Bounded Rationality Limited list of criteria based on most conspicuous choices satisficingFinal solution represents a satisficing choice, not an optimum one first acceptableSatisficing - first acceptable choice

© 2005 Prentice-Hall 6-12 Common Biases and Errors Overconfidence bias Anchoring bias Confirmation bias Availability bias

© 2005 Prentice-Hall 6-13 Common Biases and Errors Representative bias Escalation of commitment Randomness error Hindsight bias

© 2005 Prentice-Hall 6-14 Intuition Unconscious process created out of distilled experience; resulting in a rapid decision with what appears to be very limited information

© 2005 Prentice-Hall 6-15 When is Intuition Used? 1)When a high level of uncertainty exists 2)When there is little precedent to draw on 3)When variables are less scientifically predictable 4)When “facts” are limited 5)When facts don’t clearly point the way

© 2005 Prentice-Hall 6-16 When is Intuition Used? 6)When analytical data are of little use 7)When there are several plausible alternative solutions from which to choose 8)When time is limited and there is pressure to come up with the right decision

© 2005 Prentice-Hall 6-17 Decision-Style ModelConceptual Behavioral Analytical Directive Way of Thinking Tolerance for Ambiguity High Low Rational Intuitive

© 2005 Prentice-Hall 6-18 Gender Differences Evidence indicates that women analyze decisions more than men Reason is not clear

© 2005 Prentice-Hall 6-19 Stages of Moral Development Level Stage Description Principled Conventional Pre-conventional 1. Sticking to rules to avoid physical punishment 2. Following rules only when it’s in your immediate interest 3. Living up to what is expected by people close to you 4. Maintaining conventional order by fulfilling obligations to which you have agreed 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

© 2005 Prentice-Hall 6-20 Organizational Constraints Performance Evaluation Reward Systems Formal Regulations System-Imposed Time Constraints Historical Precedents

© 2005 Prentice-Hall 6-21 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 6-22 Criteria in Making Ethical Choices Utilitarianism Rights Justice

© 2005 Prentice-Hall 6-23 Implications for Managers Five suggestions to improve decision making: 1)Analyze the situation and adjust to the national culture and criteria of organization 2)Be aware of biases 3)Combine rational analysis with intuition 4)Do not assume your specific decision style is appropriate for every job 5)Use creativity-stimulation techniques

© 2005 Prentice-Hall )Explained the six-step rational decision- making model and its assumptions 2)Identified the key components in the three-component model of creativity 3)Described actions of the boundedly rational decision maker 4)Identified six common decision errors or biases Summary

© 2005 Prentice-Hall )Explained when intuition can enhance the quality of a decision 6)Identified four decision-making styles 7)Described how organizational constraints affect decision making 8)Explained the implications of stages of moral development to decision making Summary