1 Managing Effective Decision-Making Processes Chapter 17 People behave and communicate as individuals and as members as groups within organizational structures to make decisions
2 Types of DecisionsProgrammed decisions – specific procedures developed for repetitive and routine problemsNon-programmed decisions – unstructured; there are no established procedures for handling the problem either because it has not arisen in exactly the same manner as before or because it is complex and extremely important.
3 Models of Decision Making The Rational Model - Consists of a structured four-step sequence * identifying the problem * generating alternative solutions * selecting a solution * implementing and evaluating the solutionSimon’s Normative Model (Bounded Rationality) - Based on premise that decision making is not rational - Decision making is characterized by * limited information processing * use of rules of thumb or shortcuts * satisficing
4 Models of Decision Making (continued) The Garbage Can ModelBased on belief that decision making is a sloppy and haphazard processDecisions result from an interaction between four independent streams of events * problems * solutions * participants * choice opportunities
5 A Contingency Model for Selecting a Solution Characteristics of Decision Task: The decision problem * Unfamiliarity * Complexity *Instability The decision environment *Irreversibility * Significance*Accountability * Time and/or money constraintsCharacteristics of Decision Maker * Knowledge * Ability* MotivationGeneratingalternativesStrategies to select a solution* Aided analytic * Unaided-analytic * Nonanalytic
6 Decision Making Styles HighAnalyticalConceptualTolerance for AmbiguityDirectiveBehavioralLowTasks and Technical ConcernsPeople and Social ConcernsValue Orientation
7 Decision-Making Process See Model on page 429Establishing specific goals and objectives and measuring resultsIdentifying problemsA necessary condition for a decision is a problem. The existence of a problem is indicated by a gap between the organization’s goals and objectives and the levels of actual performance.
8 Identifying problemsPerceptual problems – individual perceptions may protect or defend us from unpleasant facts. Negative information may be selectively perceived to distort its true meaning or completely ignored.Defining problems in terms of solutions – must be able to identify the real cause of problems and not jump to conclusionsIdentifying symptoms as problems – a decrease in sales volume may only be a symptom of the true problem.
9 Decision-Making Process Developing alternatives – search process for relevant internal and external information. Positive relationship between the number of alternatives considered and the speed with which decisions can be reached.Evaluating alternatives – select the alternative that will produce the most favorable outcomes and the least unfavorable outcomes.Certainty – knowing the outcomesUncertainty – no knowledge of the probability of the outcomesRisk – some estimate of the outcome likelihood of each alternative
10 Decision-Making Process Choosing an alternative – purpose of selecting an alternative is to solve a problem to achieve a predetermined objective.Implementing the decision – decisions must be effectively implemented to achieve the objective for which it was madeControl and evaluation – periodic measurements of results. Adjustments are made – if the original objective is changed, the decision-making process begins again.
11 Behavioral Decision-Making Judgmental Heuristics – rules of thumb to reduce information processing needs – use without conscious awareness; used to reduce uncertainty. Based on knowledge gained on past experiences they help to evaluate current problems – but can also lead to systematic errors.Availability Heuristic: A decision maker’s tendency to base decisions on information that is readily available in memory.Representativeness Heuristic: The tendency to assess the likelihood of an event occurring based on one’s impressions about similar occurrences.
12 Behavioral Influences in Individual Decision-Making Values – guidelines a person uses when confronted with a situation in which a choice must be made. Values influence each step of the decision-making process. Legal and economic responsibilities as well as ethical responsibilities are considered.Personality – decision-makers are influenced by psychological forces, both conscious and unconscious. Personalities of the decision-makers influence choices.Personality variables – attitudes, beliefs, and needs of the individualSituational variables – external, observable situations in which individuals find themselvesInteractional variables – individual’s momentary state that results from the interaction of a specific situation with characteristics of the individual’s personality
13 Behavioral Influences in Individual Decision-Making Propensity for risk – decision-maker with low propensity for risk establishes different objectives, evaluates alternatives differently, and selects alternatives than a decision-maker with high propensity for risk.Potential for dissonance – begin to look at what happens after a decision has been made (post-decision anxiety). Cognitive dissonance or regret theory – often a lack of consistency among an individual’s various cognitions after a decision has been made. The decision-maker has doubts and second thoughts about the choice.
14 Behavioral Influences in Individual Decision-Making Potential for dissonance (continued) – Anxiety is likely to be greater when:Decision is psychologically and/or financially importantNumber of foregone alternativesForgone alternatives have favorable outcomesMotivated to reduce dissonance and achieve consonance.Seek information that supports decisionSelective perceive (or distort) information in a way that supports the decisionAdopt a less favorable view of the foregone alternativesMinimize the importance of the negative aspects and exaggerate the importance of the positive aspects
15 Group Decision-Making Group meetings as well as collaboration (process of joint decision-making among key stakeholders of a problem)
16 Advantages and Disadvantages of Group-Aided Decision Making Advantages Disadvantages1. Greater pool of knowledge 1. Social pressure2. Different perspectives 2. Minority domination3. Greater comprehension 3. Logrolling4. Increased acceptance 4. Goal displacement5. Training ground 5. “Groupthink”Contingency Based Recommendations - Use groups when consistency is important. - Let the most competent individual make the decision given time constraints. - Groups make poorer decisions when faced with environmental threats and potential serious impacts of a decision.
17 Group Problem-Solving Techniques Brainstorming: Process to generate a quantity of ideas - Freewheeling is encouraged - Criticism is discouraged - Quantity of ideas is pursued - Combining and piggybacking on ideas is encouragedNominal Group Technique: Process to generate ideas and evaluate solutions - This technique reduces roadblocks to group decision making by * separating brainstorming from evaluation * promoting balanced participation * incorporating mathematical voting techniquesThe Delphi Technique: Process to generate ideas from physically dispersed expertsComputer-Aided Decision Making: Computers are used to reduce consensus roadblocks while collecting more information faster