© 2003 McGraw-Hill Ryerson Ltd. Chapter Six Decision Making and Ethics

© 2003 McGraw-Hill Ryerson Ltd. Chapter Six Outline Models of Decision Making The Rational Model Bounded Rationality Model Dynamics of Decision Making Selecting Solutions: A Contingency Perspective Personal Decision-Making Styles Escalation of Commitment Creativity

© 2003 McGraw-Hill Ryerson Ltd. Group Decision Making Advantages and Disadvantages of Group-Aided Decision Making Participative Management When to Have Groups Participate in Decision Making: The Vroom/Yetton/Jago Model Fostering Ethical Organizational Behaviour Group Problem-Solving Techniques How to Improve the Organization’s Ethical Climate Chapter Six Outline (cont’d)

© 2003 McGraw-Hill Ryerson Ltd. Consists of a structured four-step sequence Consists of a structured four-step sequence * identifying the problem * generating alternative solutions * selecting a solution * implementing and evaluating the solution The Rational Model of Decision Making

© 2003 McGraw-Hill Ryerson Ltd. Based on premise that decision making is not rational Based on premise that decision making is not rational Decision making is characterized by Decision making is characterized by * limited information processing * use of judgmental heuristics * satisficing  choosing a solution that meets a minimum standard of acceptance Bounded Rationality Model of Decision Making

© 2003 McGraw-Hill Ryerson Ltd. Availability Heuristic: Availability Heuristic: A decision maker’s tendency to base decisions on information that is readily available in memory. Representativeness Heuristic:. Representativeness Heuristic: The tendency to assess the likelihood of an event occurring based on one’s impressions about similar occurrences. Judgmental Heuristics

© 2003 McGraw-Hill Ryerson Ltd. Strategies to select a solution * Aided analytic * Unaided-analytic * Nonanalytic Characteristics of Decision Task: The decision problem The decision environment Characteristics of Decision Task: The decision problem * Unfamiliarity * Ambiguity * Complexity *Instability The decision environment *Irreversibility * Significance *Accountability * Time and/or money constraints Characteristics of Decision Maker Characteristics of Decision Maker * Knowledge * Ability * Motivation * Risk Propensity * Decision Making Style Generatingalternatives A Contingency Model for Selecting a Solution

© 2003 McGraw-Hill Ryerson Ltd. 1.Analytic strategies 1.Analytic strategies are used when the decision problem is unfamiliar, ambiguous, complex, or unstable 2.Nonanalytic methods 2.Nonanalytic methods are employed when the problem is familiar, straightforward, or stable. analytic approaches 3.Assuming there are no monetary or time constraints, analytic approaches are used when the solution is irreversible and significant and when the decision maker is accountable. 4.Nonanalytic strategies 4.Nonanalytic strategies are used when the decision can be reversed and is not very significant or when the decision maker is not held accountable. Contingency Relationships in Decision Making

© 2003 McGraw-Hill Ryerson Ltd. analytic strategies 5.As the probability of making a correct decision goes down, analytic strategies are used. nonanalytic strategies 6.As the probability of making a correct decision goes up, nonanalytic strategies are employed. 7.Time and money constraints automatically exclude some strategies from being used. 8.Analytic strategies 8.Analytic strategies are more frequently used by experienced and educated decision makers. 9.Nonanalytic approaches 9.Nonanalytic approaches are used when the decision maker lacks knowledge, ability, or motivation to make a good decision. Contingency Relationships in Decision Making (cont’d)

© 2003 McGraw-Hill Ryerson Ltd. AnalyticalConceptual DirectiveBehavioural Tasks and Technical Concerns People and Social Concerns Value Orientation LowHigh Tolerance for Ambiguity Personal Decision Making Styles

© 2003 McGraw-Hill Ryerson Ltd. 1.Set minimum targets for performance, and have decision makers compare their performance with these targets. 2.Have different individuals make the initial and subsequent decisions about a project. 3.Encourage decision makers to become less ego- involved with a project. 4.Provide more frequent feedback about project completion and costs. 5.Reduce the risk of penalties of failure. 6.Make decision makers aware of the costs of persistence. Recommendations to Reduce Escalation of Commitment

© 2003 McGraw-Hill Ryerson Ltd. 1.Preparation: 1.Preparation: Reflects the notion that creativity starts from a base of knowledge. 2.Concentration: 2.Concentration: Where an individual concentrates on the problem at hand. 3.Incubation: 3.Incubation: Done unconsciously. During this stage, people engage in daily activities while their minds simultaneously mull over information and make remote associations. 4.Illumination: 4.Illumination: Remote associations from the incubation stage are ultimately generated. 5.Verification: 5.Verification: Entails going through the entire process to verify, modify, or try out the new idea. Stages Underlying the Creative Process

© 2003 McGraw-Hill Ryerson Ltd. Advantages Disadvantages 1. Greater pool of knowledge1. Social pressure 2. Different perspectives2. Minority domination 3. Greater comprehension3. Logrolling 4. Increased acceptance4. Goal displacement 5. Training ground5. Groupthink Advantages and Disadvantages of Group-Aided Decision Making

© 2003 McGraw-Hill Ryerson Ltd. 1. Illusion of invulnerability 2. Belief in inherent morality of the group 3. Rationalization 4. Stereotyped view of opposition 5. Self-censorship 6. Illusion of unanimity 7. Peer pressure 8. Mindguards Symptoms of Groupthink

© 2003 McGraw-Hill Ryerson Ltd. 1. Assign each member of the group the role of critical evaluator, to voice objections and doubts. 2. Top level executives should not use policy commitment to rubber-stamp decisions that have already been made 3. Different groups with different leaders should explore the same policy questions 4. Subgroup debates and outside experts should be used to introduce fresh perspectives 5. Someone should be given the role of devil’s advocate when discussing major alternatives. 6. Once a consensus has been reached, everyone should rethink their position to check for flaws. How to Prevent Groupthink

© 2003 McGraw-Hill Ryerson Ltd. AI AI –The manager solves the problem or make the decision him or herself, using information available to him or her at that time. AII AII –The manager obtains the necessary information from his or her subordinate(s), then decides on the solution to the problem alone. CI CI –The manager shares the problem with relevant subordinates individually, getting their ideas and suggestions without bringing them together as a group. Then he or she makes the decision that may or may not reflect the subordinates’ influence. CII CII –The manager shares the problem with subordinates as a group, collectively obtaining their ideas and suggestions. Then the manager make the decision that may or may not reflect subordinates’ influence. GII GII –The manager shares a problem with subordinates as a group. Together they generate and evaluate alternatives and attempt to reach agreement (consensus) on a solution. Management Decision Styles in the Vroom-Yetton-Yago Model

© 2003 McGraw-Hill Ryerson Ltd. QR State the Proble m CR CP Low High CR LI No Yes ST CP High Yes No Yes No GC Yes CO Yes No CO Yes SI AI GII CII GII CII AII CI CII AI GII Yes No Yes No Yes No Yes No Yes Low No Yes LI QR CR LI ST CP GC CO SI Quality Requirement Commitment Requirement Leader’s Information Problem Structure Commitment Probability Goal Congruence Subordinate Conflict Subordinate Information Vroom and Jago’s Decision- Making Model

© 2003 McGraw-Hill Ryerson Ltd. Cultural Influences - Family - Education -Religion - Media/entertainment Organizational Influences - Ethical codes - Organizational culture - Role models - Perceived pressure for results - Rewards/punishment system Individua Individual - Personality - Values - Moral principles - History of reinforcement - Gender Political/legal/economicinfluences Ethical behaviour Role Expectations A Model of Ethical Behaviour in the Workplace

© 2003 McGraw-Hill Ryerson Ltd. Behave ethically yourself Screen potential employees Develop a meaningful code of ethics  Distributed to every employee  Firmly supported by top management  Refer to dilemmas likely to be encountered  Evenly enforced Provide ethics training Reinforce ethical behaviour Create specific positions in the organization to deal with ethics How to Improve an Organization’s Ethical Climate