1. Supervision in Organizations
Chapter 7
Solving Problems & Making Decisions

2. Learning Outcomes After reading this chapter, I will be able to:
Describe the steps in the decision-making process.
Explain the four types of decision styles.
Identify and explain the common decision-making errors.
Compare and contrast group decision making and individual decision making.
List and describe three techniques for improving group decision making.
Explain three different ethical viewpoints.

3. Decision-making Decision-making process Problem Decision criteria
A set of seven steps that includes identifying a problem, selecting a solution, and evaluating the effectiveness of the solution
Problem
A discrepancy between an existing and a desired state of affairs
Decision criteria
Factors that are relevant in a decision
Decision making is a process rather than a simple act of choosing among alternatives. The decision-making process consists of eight steps which starts with identifying the problem, moves through selecting an alternative that can alleviate the problem, and concludes with evaluating the decision’s effectiveness

4. Examples of Planning-Function Decisions
What are the organization’s long-term objectives?
What strategies will best achieve those objectives?
What should the organization’s short-term objectives be?
What is the most efficient means of completing tasks?
What might the competition be considering?
What budgets are needed to complete department tasks?
How difficult should individual goals be?
Exhibit 4.1

5. The Decision-Making Process
The decision-making process begins when a problem is identified (step 1). Problem identification can be challenging. Most problems do not come with neon identification signs. Furthermore, the manager who identifies and solves the wrong problem is no better than the manager who identifies a problem and does nothing.
Making a comparison between their current state of affairs and some standard, such as past performance or previously set goals, helps managers identify problems in the workplace.

6. Step 1: Identifying the Problem
“A discrepancy between an existing and a desired state of affairs” (p. 186)
Ask the question, Why?
Determine the reason
Separating the symptoms from problems
Example:
A physician must identify reasons for a fever. Once the cause is identified, the problem has been determined

7. Step 2: Collect Relevant Information
Gather facts & information relevant to the problem:
Ask questions:
When did the problem start appearing?
Why is appearing now?
What are the affects of the problem?
What are the costs associated with the problem?

8. Step 3: Develop Alternatives
Generate a full range of alternatives for solving the problem
Creativity is critical
The more alternatives generated, the greater likelihood the best choice is among the possibilities

9. Step 4: Evaluate Each Alternative
Evaluation of all the strengths and weaknesses of each alternative
Guard against biases
Estimate the cost of each alternative
Estimate the implementation time of each alternative
Identify the strengths and weaknesses of each alternative
Approximate the expected outcome of each alternative
Favorable & Unfavorable

10. Step 5: Select the Best Alternative
Selection of the best alternative will depend on:
Comprehensiveness and accuracy of information gathered
Creativeness of alternatives
Quality of analysis

11. Step 6: Implement the Decision
Establish a plan:
When will the decision be implemented?
Who will be involved?
What will be involved?
What changes will take place?
How will they occur?
Convey the decision to those affected
Assign responsibilities
Allocate necessary resources
Identify and clarify deadlines
Get commitment from those involved in the implementation

12. Step 7: Follow Up & Evaluate
Continually monitor outcomes
Did your choice accomplish the desired result?
Did it correct the identified problem

13. Decision Tools
Supervisors face three possible conditions when making decisions:
Certainty
The implication that the outcome of every possible alternative is known.
Risk
The probability that a particular outcome will result from a given decision. Must rely on personal experiences, secondary information, and historical data.
Uncertainty
A condition under which there is not full knowledge of the problem and reasonable probabilities for alternative outcomes cannot be determined.

14. Decision Tools What is the Expected Value Analysis?
“A procedure that permits decision makers to place monetary value on various consequences likely to result from the selection of a particular course of action” (p. 190)

15. Decision Tools cont… How are Decision Trees Helpful? Decision Tree
“A diagram that analyzes hiring, marketing, investment, equipment purchases
Encompass expected value analysis by assigning probabilities to each possible outcome and calculating payoffs for each decision path

16. Decision Tools cont… Marginal Analysis:
“A decision method that helps decision makers optimize returns or minimize costs by dealing with the additional cost in a particular decision, than the average cost” (p. 192)
Example: Taking on a new customer
What additional revenue would be generated by the new customer
What additional costs would be generated by the new customer
If the increased revenue exceeds the increased costs, total profits would be increased by accepting the new customer

17. Decision Making: Styles
Directive style
Characterizes the low tolerance for ambiguity and a rational way of thinking of individuals who are logical and efficient and typically make fast decisions that focus on the short term.
Analytic style
Characterizes the high tolerance for ambiguity combined with a rational way of thinking of individuals who prefer to have complete information before making a decision.
Careful decision makers with the ability to adapt or cope with new situations
Example: Supervisors, business students, & top executives
Personality and individual differences affect our decisions. Two of these variables are particularly relevant to organizational decisions: the individual’s decision-making style and level of moral development.
The decision-styles model above identifies four approaches to decision making. The model illustrates that people differ along two dimensions: in their thinking styles (some are logical and rational, others intuitive and creative); in their tolerance for ambiguity.
People using the directive style dislike ambiguity and prefer rationality.
Those using the analytic style confront ambiguity by demanding more alternatives.

18. Decision Making: Styles (cont’d)
Conceptual style
Individuals who tend to be very broad in outlook, to look at many alternatives, and to focus on the long run and often look for creative solutions.
Behavioral style
Individuals who think intuitively but have a low tolerance for uncertainty; they work well with others, are open to suggestions, and are concerned about the individuals who work for them.
Individuals using the conceptual style consider the “big picture” and seek multiple alternative.
Those using a behavioral style work well with others and are receptive to suggestions.

19. Decision-Making Styles

20. Common Decision-making Errors
Heuristics: Using judgmental shortcuts
Availability heuristic
The tendency to base judgments on information that is readily available.
Representative heuristic
The tendency to base judgments of probability on things (objects or events) that are familiar
Example: Not hiring certain types of people based upon previous performance of similar person
Escalation of commitment (Blackjack Strategy)
An increased commitment to a previous decision despite negative information about the decision’s present outcomes.
To cope with information overload, we rely on two heuristics, or judgmental shortcuts, when we make decisions: availability and representativeness. Both types create biases in a decision maker’s judgment. Another bias is the tendency to escalate commitment to a failing course of action.
Availability Heuristic. Using the availability heuristic, people tend to base their judgments on information that is readily available.
Representative Heuristic. People often assess the likelihood of an occurrence by drawing analogies and seeing identical situations where they do not exist.
Escalation of Commitment. In spite of negative feedback, some managers escalate commitment to a failing enterprise, “throw good money after bad,” if they believe that they are responsible for the failure. They do so to avoid admitting they made a poor decision and to appear behaviorally consistent. In contrast, effective managers differentiate between situations where persistence will or will not pay off.

21. How Do Problems Differ? Well-structured problems
Straightforward, familiar, easily defined problems (use programmed decision to solve)
Ill-structured problems
New problems in which information is ambiguous or incomplete
(hire consultants to solve problem)
Programmed decision
A repetitive decision that can be handled by a routine approach
Nonprogrammed decisions
Decisions that must be custom-made to solve unique and nonrecurring problems
New laws
New organizational/departmental strategy
Well-structured problems are straightforward, familiar, and easily defined.
In contrast, ill-structured (poorly structured) problems are so new that pertinent information is either ambiguous or incomplete.
Repetitive, programmed decisions that can be handled routinely are the most efficient way to handle well-structured problems. Programmed decisions rely heavily on previous solutions. In many cases, such decisions are made according to some systematic procedure, rule, or policy.
When problems are ill-structured, however, managers must develop unique solutions by using nonprogrammed decision making techniques. Such decisions are unique and nonrecurring. When a manager confronts an ill-structured problem, there is no cut-and-dried solution. A custom-made, nonprogrammed response is needed.

22. Group Decision Making Advantages Disadvantages
Make more accurate decisions
Provides more complete information
Offers a greater diversity of experiences and perspectives
Generates more alternatives
Increases acceptance of a solution
Increases the legitimacy of a decision.
Disadvantages
Is more time-consuming and less efficient
Minority domination can influence decision process
Increased pressures to conform to the group’s mindset (groupthink)
Ambiguous responsibility for the outcomes of decisions
There are several advantages to group decision making. Group decisions provide more complete information than do individual ones. A group will bring a diversity of experience and perspectives to the decision process that an individual, acting alone, cannot. Groups also generate more alternatives, because of a greater quantity and diversity of information. Group decision making increases acceptance of a solution. If those who will be affected by a solution and who must implement it can participate in making it, they will be more likely to accept the solution. Since group decision-making is consistent with democratic ideals, decisions made by groups are perceived as being more legitimate than decisions made by a single person.
There are several disadvantages to group decision making. Group decisions are time consuming, and groups almost always take more time to make a decision than an individual would take. There may also be minority group domination, because group members will differ in many ways: for example, status in the organization, experience, verbal skills, or assertiveness. A minority group that dominates the group decision-making process will have an undue influence on the final decision. Another problem focuses on the pressures to conform in groups. This pressure can result in groupthink—group members withhold deviant, minority, or unpopular views in order to give the appearance of agreement . Finally, there is ambiguous responsibility. Since group members share responsibility, who is actually responsible for the final outcome?

23. When Are Groups Most Effective?
Creativity
Groups tend to be more creative than individuals.
Acceptance of the final solution
Groups help increase the acceptance of decisions.
Effectiveness of group decision making
Groups of five to seven members are optimal for decision process speed and quality.

24. Improving Group Decision Making
Brainstorming
An idea-generating process that encourages alternatives while withholding criticism.
Nominal group technique
A decision-making technique in which group members are physically present but operate independently.
Electronic meeting
A type of nominal group technique in which participants are linked by computer.
Group decision making can be improved by using the following techniques: brainstorming, nominal groups, and electronic meetings.
To overcome conformity pressures that can stifle creative problem solving, managers can use brainstorming: an idea-generating process that specifically encourages all alternatives by withholding any criticism of those alternatives.
The nominal group technique requires that group members must be present during the meeting, but they must operate independently. This technique obtains input from all group members but it does not restrict independent thinking.
An electronic meeting is a type of nominal group technique in which participants are linked by computer. Electronic meetings have several advantages: anonymity, honesty, and speed. But, several drawbacks also exist: those who type well outshine those who are eloquent but lack keyboarding skills; those with the best ideas do not get credit for them; and the process lacks the informational richness of face-to-face communication. But, this technology is in its infancy. For example, real-time video conferencing is reinventing electronic meetings.

25. Ethics and Business Ethics Code of ethics
A set of rules or principles that defines right and wrong conduct
Code of ethics
A formal document that states an organization’s primary values and the ethical rules it expects managers and operatives to follow

26. Three Views of Ethics Utilitarian view of ethics Rights view of ethics
Making decisions solely on the basis of their outcomes or consequences.
“Providing the greatest good for the greatest number”
Rights view of ethics
Respecting and protecting individual liberties and privileges
“Decision consistent with Bill of Rights”
Theory of justice view of ethics
Fairly and impartially imposing and enforcing rules.
“Union – pay is equal, seniority decides layoff, etc…
Behaviors that were once considered reprehensible (lying, misrepresenting, covering up mistakes) have become, for many, either acceptable or necessary practices. Concern over this decline in ethical standards is being addressed at two levels:
1. Ethics education is being widely expanded in college curriculums
2. Organizations are creating codes of ethics and introducing ethics training programs.
Ethics commonly refers to the rules or principles that define right and wrong conduct. However, one’s definition of ethical conduct will be influenced by how he or she views the concept of ethics. An individual who has a utilitarian view of ethics will make decisions solely on the basis of their outcomes or consequences. The person who espouses a rights view of ethics will respect and protect individual liberties and privileges. One who upholds the theory of justice view of ethics will impose rules fairly and impartially.
A number of factors will determine whether a manager acts ethically or not: for example, the individual’s values, morality, personality, and experiences; the organization’s culture; and the issue that is being questioned. In most situations which involve questions of ethics, ambiguity can be a problem for managers. A code of ethics can reduce ambiguity. Such a code is a formal document that states an organization’s primary values and the ethical rules it expects managers and operatives to follow.