1. ORGANIZATIONAL BEHAVIOR
Ace Institute of Management
M-B-A-e Term IV, Spring Trimester 2011
Module 3: The Group
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PowerPoint Presentation by Charlie Cook

2. Defined as choosing between alternatives.
Decision Making
Defined as choosing between alternatives.
Closely related to all the traditional management functions.
Classical theorists, Fayol & Urwick: Decision making process affects delegation & authority.
Beginning of a meaningful analysis of decision-making process.
Chester Barnard - “The Functions of the Executive”, states ‘The processes of decision… are largely techniques for narrowing choice.’

3. Stages of Decision Making (Mintzberg & his colleagues)
Phase 1: IDENTIFICATION
Recognition and Diagnosis of a problem or opportunity.
Phase 2: DEVELOPMENT
Search for existing solutions or design of a new solution.
Phase 3: SELECTION
Judgment of the decision maker
(experience or intuition than logical analysis)
Analysis of alternatives
on logical, systematic basis
Bargaining when the selection involves a group of decision makers
Authorization
(formally accepted)

4. Therefore, Decision making is a dynamic process.
There are many feedback loops in each of the phases.
Because of:
timing,
politics,
disagreement among managers,
inability to identify and appropriate alternations,
turnover of managers, etc.

5. I. Behavioral Decision Making
Developed outside the mainstream of O-B theory & research.
By cognitive psychologists & decision theorists in economics & information science.
Classical decision theory operated under the assumption of rationality & certainty.
New behavioral decision theory argue that
individuals have cognitive limitations,
they must act in situations where uncertainty prevails &
in which information is often ambiguous & incomplete

6. Rationality in decision making is:
Decision Rationality
Rationality in decision making is:
it is a means to an end
If appropriate means are chosen to reach desired ends,
the decision is said to be rational
However,
often there is a contradiction among the means selected to attend the objectives

7. Assumptions of the Rational Decision-Making Model
Problem clarity
Known options
Clear preferences
Constant preferences
No time or cost constraints
Maximum payoff
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8. Steps in the Rational Decision-Making Model
5-3
E X H I B I T
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9. Models of Behavioral Decision making
Describe theoretically & realistically how practicing managers make decisions
The models range from complete rationality to complete irrationality

10. 1. The Economic Rationality Model
Comes from the classical economics model.
Decision maker is completely rational in every way.
Complete & consistent system of preferences that allows a choice among the alternatives.
Decision maker always strives to maximize outcomes.
Where marginal cost equal marginal revenue (MC=MR).

11. 2. New Rationality Technique
ABC (Activity-based Costing)
Traditionally, cost according to category of expense (E.g. salary, supplies, etc.).
Determines cost according to what is paid for different tasks employees perform.
Provides more accurate breakdown of the cost data.
E.g. Hewlett-Packard, GE, etc.

12. B. EVA (Finance Technique of Economic Value Added)
True cost of all capital is determined.
E.g. What a firm spends on research & development or employee training traditionally is an expense,
but under EVA
is capital investments & is added into the cost of capital.
Results in earnings higher than the cost of capital.
EVA is determined by
subtracting the total cost of capital from the after-tax operating profit.

13. C. MVA (Market Value Added) The difference between total market value
(the amount that investors can take out of the company)
and
the invested capital
(the total amount that investors have put into the company)
is MVA.
A positive MVA shows how much wealth has been created.
A negative balance shows how much capital has been wasted.

14. 3. Herbert Simon's Bounded Rationality Model
Choosing between alternatives, managers attempt to satisfice (look for the one that is satisfactory or 'good enough’).
So, they make their choices without first determining all possible behavior alternatives.
able to make decisions with relatively simple rules or tricks of the trade.
do not make impossible demands on their capacity for thought.
In comparison with the economic rationality model,
Simon's model is also rational & maximizing,
but it is bounded.

15. 3. Herbert Simon's (...Cont’d)
Decision makers end up satisficing because they do not have the ability to maximize
Many economic, social & organizational variables influence the degree to which satisficing becomes maximizing
E.g. market structure as an economic variable, the more competitive the market, the more the decisions may be maximized

16. 4. Judgmental Heuristics and Biases Model
Drawn mostly from Kahneman & Tversky, cognitive decision theorists.
Suggested that decision makers rely on heuristics (judgmental shortcuts in decision making).
Reduce the information demands on the decision maker & realistically help in the following ways:
a. Summarize the past experiences & provide an easy method to evaluate the present.
b. Substitute simple rules of thumb for complex information collection & calculation.
c. Save considerable mental activity & cognitive processing.

17. Project characteristics.
5. The Social Model
Psychological influences have a significant impact on decision-making behavior.
Social pressures & influences may cause managers to make irrational decisions.
Staw & Ross have identified 4 major reasons why escalation of commitment might happen:
Project characteristics.
Problems of the project may lead the decision maker to stick with or increase the commitment to a wrong course of action.
Psychological determinants.
Once the decision goes bad, ego-defensive mechanisms begin & defensive shields are set up.

18. 5. The Social Model (...Cont’d)
Social forces.
Considerable peer pressure on decision makers.
Organizational determinants.
Breakdown in communication, dysfunctional politics & resistance to change.
Some management behavior is irrational but still very realistic.

19. Decision Making Habits & Leadership Styles
1. Directive Style.
Efficient, logical, pragmatic & systematic in their approach to problem solving.
Focus on facts and getting things done quickly.
They like to exercise power, want to be in control and display on autocratic leadership style.
2. Analytical Style.
Like to analyze situations, evaluate more information & alternatives than directive decision makers.
Take a long time to make decisions, but respond to uncertain situations.
They have an autocratic leadership style.
3. Conceptual Style.
Like to consider many options & future possibilities.
Gather a great deal of information, rely on intuition, willing to take risks, discover creative solutions to problems.
4. Behavioral Style.
Tend to work well with others.
Opinions are openly exchanged, receptive to suggestions, supportive, warm prefer verbal to written information.
Avoid conflict, concerned with keeping everyone happy.

20. II. Participative Decision-Making Techniques
Participation involves individuals or groups in the process.
Individual participation techniques.
An employee affects the decision making of a manager.
Group Process.
Consultative & democratic technique.
Consultative technique.
Managers ask for & receive involvement from their employees, but managers have the right to make the decision.
Democratic form.
There is total participation & the group makes the final decision by consensus.

21. It can be formal or informal.
It entails intellectual, emotional or physical involvement.
The more experience & the more open and unstructured the task, the more participation.
However, participative decision making may be difficult because of leadership style, personality or the parties involved; situational, environmental & contextual factors, etc.
It is time consuming as well.

22. III. Creativity and Group Decision Making
Creative decisions are a major challenge facing modern management.
A key challenge facing organizations in today’s highly competitive environment is to be more creative & innovative.
Creativity involves combining responses or ideas of individuals or groups in novel ways.
It draws on observation, experience, knowledge & the indefinable ability each person has to arrange common elements into new patterns.

23. But, creative people are not necessarily more intelligent.
Two widely recognized dimensions that helps in identifying creative process:
Divergent thinking:
Ability to generate novel, appropriate, responses to questions & problems.
Cognitive thinking:
Person’s use of & preference for elaborate, intricate, complex stimuli & thinking patterns.
Are interested in philosophical or abstract problems.
But, creative people are not necessarily more intelligent.

24. Expertise consists of knowledge:
Teresa Amabile, creativity researcher proposes that creativity is a function of 3 major components:
Expertise consists of knowledge:
technical, procedural & intellectual
Creative-thinking skills determine how
flexibly & imaginatively people can deal with problems & make effective decisions
Motivation is the inner passion to solve the problem at hand
Creativity results in people looking at things differently
Are more intuitive &
Takes advantage of good ideas & are able to break old ways of thinking

25. The Three Components of Creativity
5-4
E X H I B I T
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26. Group Decision Making

27. The Delphi Technique A popular group decision-making technique today.
For long-range forecasting.
Has been named after the oracle at Delphi in ancient Greece.
A group of experts & non-experts is deliberately formed who make anonymous predictions into the problem decision the group is charged with.
The members do not come face to face.
Each member then receives feedback from what the others have inputted.
On the basis of the feedback, another round of anonymous inputs is made until the multiple feedback remains the same.
A major key to the success of the technique lies in the anonymity.
Delphi can be applied to a variety of program planning & decision problems in any type of organization.
Criticisms: time consumption, cost, Ouija-board effect (much like the parlor game of that name, Delphi can claim no scientific support.)

28. The Nominal Group Technique
Has been used by social psychologists in their research for many years.
It is simply a ‘paper group’.
It is a group in name only as no verbal exchange is allowed between members.
In terms of number of ideas, uniqueness of ideas & quality of ideas, research has found nominal groups to be superior to real groups.
NGT consists the following steps:
Silent generation of ideas in writing.
Round-robin feedback from group members, who record each idea in a short phrase or a flip chart or blackboard.
Discussion of each recorded idea for clarification & evaluation.
- Individual voting or priority ideas, with the group decision being mathematically derived through rank ordering or rating.

29. How Are Decisions Actually Made in Organizations
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30. How Are Decisions Actually Made in Organizations (…Cont’d)
How/Why problems are identified
Visibility over importance of problem
Attention-catching, high profile problems
Desire to “solve problems”
Self-interest (if problem concerns decision maker)
Alternative Development
Satisficing: seeking the first alternative that solves problem.
Engaging in incremental rather than unique problem solving through successive limited comparison of alternatives to the current alternative in effect.
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31. Making Choices
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32. Making Choices
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33. Decision-Style Model 5-5
E X H I B I T
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34. Organizational Constraints on Decision Makers
Performance Evaluation
Evaluation criteria influence the choice of actions.
Reward Systems
Decision makers make action choices that are favored by the organization.
Formal Regulations
Organizational rules and policies limit the alternative choices of decision makers.
System-imposed Time Constraints
Organizations require decisions by specific deadlines.
Historical Precedents
Past decisions influence current decisions.
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35. Cultural Differences in Decision Making
Problems selected
Time orientation
Importance of logic and rationality
Belief in the ability of people to solve problems
Preference for collect decision making
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36. Ethics in Decision Making
Ethical Decision Criteria
Utilitarianism
Seeking the greatest good for the greatest number.
Rights
Respecting and protecting basic rights of individuals.
Justice
Imposing and enforcing rules fairly and impartially.
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37. Ethics in Decision Making
Ethics and National Culture
There are no global ethical standards.
The ethical principles of global organizations that reflect and respect local cultural norms are necessary for high standards and consistent practices.
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38. ORGANIZATIONAL BEHAVIOR
Ace Institute of Management
M-B-A-e Term IV, Spring Trimester 2011
Module 3: The Group
PowerPoint Compilation by Course Moderator Satish Jung Shahi
Module 3: Organizational Behaviour & Leadership - – Ace Institute of Management

39. Simulation 4: “The Rope Game”
There is a rope lying on the ground touching the feet of some members of the group. Your task as a group is to form a perfect square of the rope with all the four sides being equal in size and corners with ninety degrees each.
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40. Simulation 4: “The Rope Game” (cont’d)
Please analyze the result of “The Rope Game” keeping in mind the key attributes of “Role Allocation”, “Responsibility”, and “Information Sharing”:
Team Building.
Problem Solving.
Verbal Communication.
Evaluation of each option.
Mid-course correction.
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41. What Is Leadership?
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42. A) Trait Theories Leadership Traits: Ambition and energy
The desire to lead
Honesty and integrity
Self-confidence
Intelligence
Job-relevant knowledge
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43. A) Trait Theories (cont’d)
Limitations:
No universal traits that predict leadership in all situations.
Traits predict behavior better in “weak” than “strong” situations.
Unclear evidence of the cause and effect of relationship of leadership and traits.
Better predictor of the appearance of leadership than distinguishing effective and ineffective leaders.
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44. B) Behavioral Theories
Trait theory: Leaders are born, not made.
Behavioral theory: Leadership traits can be taught.
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45. B) i. Ohio State Studies
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46. B) ii. University of Michigan Studies
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47. B) iii. The Managerial Grid
11-1
E X H I B I T
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48. B) iii. The Managerial Grid (cont’d)
The extreme five managerial behaviors are as follows:
1, 1 - Improvised management, i.e. manager exhibiting minimum concern for both production & people.
9, 1 – Authority-compliance, i.e. manager highly concerned for production but little concern for people.
1, 9 – Country club management/lassiez-faire type, i.e. opposite to 9, 1.
5, 5 – Middle of the road, i.e. manager maintaining adequate concern for both people & production.
9, 9 – Team management, i.e. manager that exhibits maximum concern for both people & production for the best style of managerial behavior.
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49. B) iv. Scandinavian Studies
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50. Case 2: Pratap Mehta Case 2, “The Answer to Pratap Mehta”
Please read the following case and answer as specified.
(Case 2 is one of the seven cases you will be dealing throughout the Organizational Behaviour & Leadership module. Out of seven, the top five will be considered for final grading. Each case will carry 6/100 marks on your internal assessment)
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51. ORGANIZATIONAL BEHAVIOR
Ace Institute of Management
M-B-A-e Term IV, Spring Trimester 2011
Module 3: The Group
PowerPoint Compilation by Course Moderator Satish Jung Shahi
Module 3 : Organizational Behaviour & Leadership – Ace Institute of Management

52. C) i. Contingency Theories: Fiedler’s Model
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53. C) i. Fiedler’s Model: Defining the Situation (cont’d)
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54. C) i. Findings from Fiedler Model (cont’d)
11-2
E X H I B I T
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55. C) ii. Cognitive Resource Theory
Research Support:
Less intelligent individuals perform better in leadership roles under high stress than do more intelligent individuals.
Less experienced people perform better in leadership roles under low stress than do more experienced people.
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56. C) iii. Hersey and Blanchard’s Situational Leadership Theory
Follower readiness: ability and willingness
Leader: decreasing need for support and supervision
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57. C) iii. Hersey and Blanchard’s Situational Leadership Theory (cont’d)
Maturity (M) or Readiness Level (R):
Readiness Level One (R1/M1): Unable and unwilling or insecure -- Tell
Readiness Level Two (R2/M2): Unable but willing or confident -- Sell
Readiness Level Three (R3/M3): Able but unwilling or insecure -- Participate
Readiness Level Four (R4/M4): Able and willing or confident – Delegate
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58. C) iii. Hersey and Blanchard’s Situational Leadership Theory (cont’d)
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59. C) iv. Leader–Member Exchange Theory
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60. C) iv. Leader-Member Exchange Theory (cont’d)
11-3
E X H I B I T
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61. C) v. Path-Goal Theory
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62. C) v. The Path-Goal Theory (cont’d)
11-4
E X H I B I T
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63. C) vi. Leader-Participation Model
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64. C) vi. Contingency Variables in the Revised Leader-Participation Model (cont’d)
11-5
E X H I B I T
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65. D) Transactional Leaders
Contingent Reward.
Management by Exception.
Laissez-Faire.
Traditional Style of Leadership.
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66. E) Charismatic Leaders
Self-confidence.
Vision.
Ability to articulate the vision.
Strong convictions about the vision.
Behavior that is often out of the ordinary.
Perceived as being a change agent.
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67. F) Transformational Leadership
Charisma.
Inspiration.
Vision.
Intellectual Stimulation.
Individualized Consideration.
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68. Transactional Versus Transformational
Transactional leaders guide or motivate their followers in the direction of established goals by clarifying role and task requirements.
Transformational leaders provide individualized consideration, intellectual stimulation, and possess charisma.
Transformational leadership builds on top of transactional leadership.
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69. Home Assignment: “The Great Unifier”
You have to read “The Great Unifier” and answer at least two questions given at the end of the case.
Your submission deadline is the next M-B-A-e O-B & L Class. Please meet your deadline!
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