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Chapter 15: Decision Making and Organizational Learning
Understanding And Managing Organizational Behavior 4th Edition Chapter 15: Decision Making and Organizational Learning JENNIFER GEORGE & GARETH JONES
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Chapter Objectives Differentiate between nonprogrammed and programmed decisions and explain why nonprogrammed decision making is a complex, uncertain process Explain the difference between the two main models of decision making and describe which is the most realistic Discuss the main sources of error in decision making
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Chapter Objectives Describe the advantages and disadvantages of group decision making and explain the techniques that can be used to improve it Understand how organization learning can improve decision making and explain the steps involved in creating a learning organization
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Opening Case: A Big Turnaround in Nike’s Decision Making
In what ways has decision-making at Nike changed? Decisions originating from design team Market changes Alternative sports shoes Shoes for urban wear New competition Shift to team-based decision-making
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What is Decision Making?
The process by which members of an organization choose a specific course of action to respond to the opportunities and problems that confront them
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Basic Types of Organizational Decisions
Nonprogrammed Novel opportunities or problems Requires extra information Uncertainty Programmed Recurring opportunities or problems Based on performance program
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The Decision-Making Process
Classical Administrative
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Classical Decision-Making Model
Prescriptive Assumptions People have access to all necessary information People choose the best possible solution
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Steps in the Classical Model
List all alternatives List consequences of each alternative Rank sets from most preferred to least preferred based on personal preference Select alternative that results in most preferred set of consequences
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Problems with the Classical Model
All necessary information for optimal decision Unable to use some information Cognitive abilities Information overload
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Administrative Decision-Making Model
Descriptive Assumptions Approximations of situation used Not all information considered Satisficing
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Bounded Rationality Ability to reason that is limited by the limitations of the human mind itself Lack of cognitive abilities Subjective definitions of situation Satisfice rather than optimize
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Sources of Error in Decision Making
Shortcuts Escalation of commitment
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Figure 15.2 Heuristics and Resulting Biases
Availability Representativeness Anchoring and Adjustment
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Availability Heuristic
Reflects tendency to determine the frequency of an event and its causes by how easy these events and causes are to remember Biases Overestimation of frequency of vivid events recent events
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Representativeness Heuristic
Reflects the tendency to predict the likelihood of an event occurring from the extent to which the event is typical of similar kinds of past events Biases Failure to consider base rate Overestimating likelihood of rare event
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Anchoring and Adjustment Heuristic
Reflects tendency to make decisions based on adjustments from some initial amount Biases Inappropriate decisions when initial amounts are too high or too low
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Escalation of Commitment
Tendency of decision makers to invest additional time, money, or effort into poor decisions Reconfirm correctness of original decision Desire to recoup losses Sunk costs Risky behaviors increased by negative situation
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Enterprise Resource Planning System (ERP)
Company-wide Intranet based on multi-module software Reduces errors in decision making Reduces biases Generates more useful information Links and coordinates functional activities
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Group Decision Making Advantages
Availability/ diversity of members’ skills, knowledge, expertise Enhanced memory Greater ability to correct errors Greater decision acceptance Disadvantages Time to make a decision Group conflict Potential for groupthink
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Use Individual Decision Making When…
An individual has all capabilities necessary to make a good decision An individual can gather and assess all necessary information Acceptance of decision is unnecessary or likely to occur anyway
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Figure 15.5 Symptoms of Groupthink
Illusion of invulnerability Belief in inherent mortality of group Collective rationalizations Stereotypes of other groups Self-censorship Illusions of unanimity Direct pressure on dissenters Emergence of self-appointed mind guards
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Steps for Minimizing Groupthink
Group leader encourages thoughtfulness/ criticism Group leader refrains from expressing own opinion and views until group has considered all alternatives Group leader encourages group members to gather information from outside people Group leader assigns devil’s advocate Group leader holds second meeting for important decisions
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Other Consequences of Group Decision Making
Diffusion of Responsibility Group Polarization Potential for Conflict
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Group Decision Making Techniques
Brainstorming Nominal Group Technique Delphi Technique
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Brainstorming Problems
Suppression of Ideas Production Blocking
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Group Decision Making Techniques for TQM
Benchmarking Selecting a high-performing group or organization Using this group as a model Improving to reach standard of model Empowerment Giving employees authority to make decisions Giving employees responsibility for those decisions
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Organizational Learning
Process managers seek out to improve decision making ability of employees and enhance organizational efficiency and effectiveness Exploration Exploitation
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Figure 15.6 Principles of Organizational Learning
Personal Mastery Systems Thinking Shared Vision Team Learning Complex Mental Models
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