Organizational Behaviour Canadian Edition Schermerhorn, Hunt, Osborn, Currie Prepared by: Joan Condie

Chapter 17 Decision-Making

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Questions  How are decisions made in organizations?  What are the useful decision-making models?  How do intuition, judgement, and creativity affect decision-making?  How can the decision-making process be managed?  How do technology, culture, and ethics influence decision-making?

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Decision-Making Process  Decision-making = the process of choosing a course of action to deal with a problem or opportunity  Five steps: 1. Recognize & define problem or opportunity 2. Identify & analyze alternative courses of action 3. Choose preferred course of action 4. Implement 5. Evaluate results and follow up (Above order sometimes changed successfully)

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Decision Environments 1. Certain environment  Enough info to predict expected results of decision-making alternatives  Uncommon decision-making environment 2. Risk environment  No complete certainty about outcomes but can identify probabilities of expected results associated with various actions  Common decision environment

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Decision Environments 3. Uncertain environment  So little info that cannot even assign probabilities to predict outcomes  Most difficult decision environment  Requires creativity in problem-solving  E.g., organized anarchy: a division or firm in transition and characterized by rapid change and no legitimate hierarchy  Organizations can use systematic process to assess degree of risk in various aspects of operations and environments, then develop contingency plans

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Types of Decisions  Programmed decisions  Standard responses to routine problems, based on past experience  Non-programmed decisions  Create unique solutions for non-routine problems  Focus of most higher level managers’ decision- making  Associative choices  Decisions loosely linked to nagging, chronic problems but not specifically developed to solve that problem

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Decision-Making Model: Classical Decision theory  Views decision-makers as acting in a world of complete certainty with:  Clearly defined problem, knowledge of all alternatives and their consequences, choosing optimum solution  Used as model for ideal decision-making  Limited usefulness, but suitable for many decisions at bottom of firm

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Decision-Making Model: Behavioural Decision theory  Views decision-makers as acting only according to what they perceive in the specific situation  Sees decision-maker as typically acting in uncertain conditions and with limited info (cognitive limitations and bounded rationality): Problem not clearly defined, limited knowledge of alternatives and their consequences, satisficing rather than optimizing in choice of solution Problem not clearly defined, limited knowledge of alternatives and their consequences, satisficing rather than optimizing in choice of solution

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Decision-Making Model: Garbage Can Model  Views main components of decision process (problems, solutions, participants, choice situations) as all mixed up together in the garbage can of the organization  Dynamic situation means often more acting than thinking, solutions used even if can’t be linked to particular problem, many problems going unsolved  Highlights fact that often decision and implementation done by different people

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Decision-Making Realities and the Models  Availability of info is key in influencing whether a manager can make an optimum decision as opposed to a satisfying decision  Organizational reality not usually as chaotic as suggested by garbage can model, but often not as rational as behavioural view, and rarely as rational as classical view

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Intuition  Ability to quickly know or recognize the possibilities of a situation  Intuition is key in decision-making under risk and uncertainty  Systematic approach difficult when managers often collect info through verbal exchange, deal in impressions, work fast, doing a variety of things and are frequently interrupted  Chaotic environments seem to demand intuitive approach

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Judgemental Heuristics  Simplifying strategies or “rules of thumb” used to make decisions  Help deal with uncertainty but can lead to systematic errors:  Availability heuristic  Representativeness heuristic  Anchoring and adjustment heuristic  Confirmation trap  Hindsight trap

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Creativity in Decision-Making  Generating unique and novel responses to problems and opportunities  Important for non-routine problems  Stages:  Preparation, concentration, incubation, illumination, certification  Can be enhanced by:  Group decision methods, encouraging environment  Can be limited by:  Judgemental heuristics, discouraging environment

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Managing the Decision-Making Process  Which “problem” to work on  Who to involve in the decision and how  When to quit

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Choosing Problems to Address  Answering the following questions will help:  Is the problem easy to deal with?  Might the problem resolve itself?  Is this my decision to make?  Is this a solvable problem within the context of the organization?  Watch out for:  Shortcuts, e.g., copying others’ choices  Too much focus on problem, not enough on desired outcome and best tactics

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Deciding Who Should Participate  Types: Authority decisions Authority decisions Consultative decisions Consultative decisions Group decisions Group decisions  When to use each?  Vroom & Yetton emphasize matching method to needs of situation; consider: Impact of method on quality of decision Impact of method on quality of decision Availability and location of info Availability and location of info Commitments needed for implementation Commitments needed for implementation Time available Time available

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Knowing When to Quit  Danger of escalating commitment, i.e., tendency to continue and renew efforts on a previously chosen course of action, even though it is not working  Need for self-discipline to admit mistakes and change direction

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Workplace Trends Influencing Decision Circumstances  Shrinking business units (more outsourcing, fewer full-time employees)  Traditional pyramid structure being replaced by newer, more flexible forms  Multifunctional understanding expected  Demand for both technical and team skills  Nature of work changing

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. IT and Decision-Making  Decision-making influenced by artificial intelligence, e.g.,  Expert systems  Fuzzy logic  Neural networks  Group decision software  Benefits:  Efficiency, handles geographical dispersion, focus on objective, avoid interpersonal conflict  Cons:  Impersonal decisions may generate less commitment, use of IT for decision-making accepted more by some than others

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Cultural Factors and Decision-Making  North Americans stress decisiveness, speed, individual selection of alternatives, more focus on choice than on implementation  Others place more emphasis on workable implementation than individual choice  E.g. Japanese ringi system  Culture influence what “problems” are identified  E.g., “old” procedure more suspect in North America

Schermerhorn, Hunt, Osborn, Currie Organizational Behaviour, Canadian Edition Copyright 2005 John Wiley & Sons Canada, Ltd. Ethical Issues and Decision-Making  Ethical dilemma = a situation in which a person must decide whether or not to do something that, although it would benefit the person or organization, may be considered unethical or illegal  Often associated with non-routine problems  Morals influence decision choice, who participates, alternative evaluation and selection  How to resolve? Answer:  Is my action legal? Is it right? Is it beneficial?  How would I feel if my family found out?... if my decision was printed in the newspaper?

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