1. © 2011 Cengage Learning. All rights reserved. Chapter 10 Decision Making by Individuals & Groups Learning Outcomes 1.Identify the steps in the decision-making process. 2.Describe various models of decision making. 3.Discuss the individual influences that affect decision making. 4.Explain how groups make decisions. 5.Describe the role culture plays in decision making. 6.Explain how organizations can improve the quality of decisions through participation.

2. © 2011 Cengage Learning. All rights reserved. Learning Outcome Identify the steps in the decision- making process. 1

3. © 2011 Cengage Learning. All rights reserved. Types of Decisions Programmed Decision a simple, routine matter for which a manager has an established decision rule Nonprogrammed Decision a new, complex decision that requires a creative solution

4. Recognize the problem and the need for a decision Gather and evaluate data and diagnose the situation Identify the objective of the decision List and evaluate alternatives Decision Making Process © 2011 Cengage Learning. All rights reserved.

5. Select the best course of action Gather feedback Implement the decision Follow up Decision Making Process © 2011 Cengage Learning. All rights reserved.

6. Learning Outcome Describe various models of decision making. 2

7. © 2011 Cengage Learning. All rights reserved. Rationality a logical, step-by-step approach to decision making, with a thorough analysis of alternatives and their consequences

8. © 2011 Cengage Learning. All rights reserved. Models of Decision Making Effective Decision a timely decision that meets a desired objective and is acceptable to those individuals affected by it

9. 1. The outcome will be completely rational 2. The decision maker uses a consistent system of preferences to choose the best alternative 3. The decision maker is aware of all alternatives 4. The decision maker can calculate the probability of success for each alternative Rational Model © 2011 Cengage Learning. All rights reserved.

10. Bounded Rationality a theory that suggests that there are constraints that force a decision maker to be less than completely rational

11. 1.Managers select the first alternative that is satisfactory 2.Managers recognize that their conception of the world is simple 3.Managers are comfortable making decisions without determining all the alternatives 4.Managers make decisions by rules of thumb or heuristics Bounded Rationality Model © 2011 Cengage Learning. All rights reserved.

12. Assumes that managers satisfice – select the first alternative that is “good enough” Assumes that managers develop heuristics, short cuts, to make decisions in order to make decisions to save mental activity. Bounded Rationality Model © 2011 Cengage Learning. All rights reserved.

13. Garbage Can Model a theory that contends that decisions in organizations are random and unsystematic Problems Participants Solutions Choice opportunities Beyond the Book:

14. Z Problem-Solving Model © 2011 Cengage Learning. All rights reserved.

15. Escalation of Commitment the tendency to continue to commit resources to a failing course of action

16. © 2011 Cengage Learning. All rights reserved. Escalation of Commitment Why it occurs –people dislike inconsistency –overly optimistic –illusion of control –sunk costs How to deal with it –split responsibility for decisions –closely monitor decision makers –provide individuals with a graceful exit –have groups make the initial decision

17. © 2011 Cengage Learning. All rights reserved. Learning Outcome Discuss the individual influences that affect decision making. 3

18. © 2011 Cengage Learning. All rights reserved. Cognitive Style an individual’s preference for gathering information and evaluating alternatives

19. © 2011 Cengage Learning. All rights reserved. Risk Aversion the tendency to choose options that entail fewer risks and less uncertainty

20. © 2011 Cengage Learning. All rights reserved. Risk and the Manager Many decisions involve some element of risk. Individuals differ in terms of risk aversion. Risk aversion is determined by individual tendencies and organizational factors. To encourage risk taking, must view failure as “enlightened trial and error.”

21. © 2011 Cengage Learning. All rights reserved. Personality, Attitudes, and Values

22. © 2011 Cengage Learning. All rights reserved. Influences on Decision Making Intuition – fast, positive force in decision making utilized at a level below consciousness, involves learned patterns of information Creativity – a process influenced by individual and organizational factors that results in the production of novel and useful ideas, products, or both

23. © 2011 Cengage Learning. All rights reserved. Influences on Creativity Individual: –Cognitive Processes Divergent Thinking Associational Abilities Unconscious Processes –Personality Factors breadth of interests high energy self-confidence Organizational: –Flexible organization structure –Participative decision making –Quality, supportive relationships with supervisors Creative performance is highest when there is a match or fit between the individual and organizational influences.

24. © 2011 Cengage Learning. All rights reserved. GPS devices and freely-available online maps are forcing the mapping industry to change how it does business. Map companies are incorporating digital services into their business model, capitalizing on the benefits of paper maps, expanding into related fields like astronomy and planetary mapping, or simply scaling back their businesses. Faced with a challenge, map industry professionals are charting a variety of courses--which decisions will succeed? Beyond the Book: Mapping Changes in the Industry

25. © 2011 Cengage Learning. All rights reserved. Four Types of Creativity Responsive ExpectedContributory Proactive

26. © 2011 Cengage Learning. All rights reserved. Can you think of new solutions to these common organizational problems? Employees’ productivity declines sharply the day after the Super Bowl. Your organization has been in deficit for three consecutive quarters. Where do you make cuts in the budget? You learn that the company can no longer afford to provide lunch to employees. How would you maintain morale? Beyond the Book: Be Creative!

27. © 2011 Cengage Learning. All rights reserved. Learning Outcome Explain how groups make decisions. 4

28. © 2011 Cengage Learning. All rights reserved. Group Decision Making Synergy – occurs when group members stimulate new solutions to problems through the process of mutual influence and encouragement within the group. Social decision schemes – simple rules used to determine final group decisions Majority Wins Truth Wins Two-thirds Majority First-shift

29. Group Decision Making 1. more knowledge through pooling of group resources 2. increased acceptance and commitment due to voice in decisions 3. greater understanding due to involvement in decision stages Advantages 1. pressure in groups to conform 2. domination by one forceful member or dominant clique 3. amount of time required, because group is slower than individual to make a decision Disadvantages © 2011 Cengage Learning. All rights reserved.

30. Limits of Group Decision Making Groupthink – a deterioration of mental efficiency, reality testing, and moral judgment resulting from in-group pressures Group Polarization – the tendency for group discussion to produce shifts toward more extreme attitudes among members

31. © 2011 Cengage Learning. All rights reserved. Preventing Groupthink Ask each group member to act as critical evaluator Have the leader avoid stating his opinion prior to the group decision Create several groups to work simultaneously Appoint a devil’s advocate Evaluate the competition carefully After consensus, encourage rethinking the position From Janis, Irving L., Groupthink: Psychological Studies of Policy Decisions and Fiascoes, Second Edition. Copyright © 1982 by Houghton Mifflin Company.

32. Self-Managed Teams Dialectical Inquiry Brainstorming Devil’s Advocacy Delphi Technique Nominal Group Technique Quality Circles and Quality Teams Group Decision Techniques © 2011 Cengage Learning. All rights reserved.

33. Special Decision-Making Groups Quality circles – small groups that meet voluntarily to address work-related problems. Quality teams – a team that is part of an organization, empowered to act on its decisions regarding quality Self-managed teams – more broadly focused than above two types

34. © 2011 Cengage Learning. All rights reserved. Learning Outcome Describe the role culture plays in decision making. 5

35. © 2011 Cengage Learning. All rights reserved. Hofstede’s Dimensions Styles of decision making vary by culture Many of Hofstede’s dimensions have implication for how people deploy the decision- making process

36. © 2011 Cengage Learning. All rights reserved. Beyond the Book: Decisions in Japan “Teamwork” and “Collaboration” look much different in Japan than in the United States. In Japanese firms, workers (especially lower level) tend to remain silent during meetings, avoid sitting next to upper management, and rigorously avoid using their boss’ first name. Upper management, meanwhile, steer clears of direct feedback or delivering the “hard truth.” At all levels, harmony and restraint, rather than independence and risk-taking, are prized values.

37. © 2011 Cengage Learning. All rights reserved. Decision Making in the Virtual Workplace Desktop Videoconferencing Systems Internet/Intranet Systems Tools for Virtual Teams Group Decision Support Systems Beyond the Book

38. © 2011 Cengage Learning. All rights reserved. Learning Outcome Explain how organizations can improve the quality of decisions through participation. 6

39. © 2011 Cengage Learning. All rights reserved. Participative Decision Making Occurs when individuals who are affected by decisions influence decision-making Supportive organizational culture Team-oriented work design People must be psychologically equipped Motivation to act autonomously Employees must be able to see benefit Organizational Foundation Individual Foundation

40. © 2011 Cengage Learning. All rights reserved. Beyond the Book: Ethics Check Is it legal? –Does it violate law –Does it violate company policy Is it balanced? –Is it fair to all –Does it promote win–win relationships How will it make me feel about myself

41. © 2011 Cengage Learning. All rights reserved. Workers face a growing problem – the computers, applications and phones they use at work are ancient compared to what they use personally. For example, some chafe at having to use email systems with limited storage when free webmail options provide gigabytes of space. Others are frustrated that their company still uses an operating system released in 2001. How would you resolve this issue? How would you provide cutting-edge technology while maintaining costs? How would you deal with employees who are not tech savvy? Beyond the Book: Can I Use Another Computer?

42. © 2011 Cengage Learning. All rights reserved. Failure to Launch 1. Does “The Bird Problem” present Kit and Ace with a programmed or nonprogrammed decision? What features of their decision problem led to your choice? 2. Review the earlier section describing the decision-making process. Which steps in that process appear in “The Bird Problem?” Note the examples of each step that you see. 3. Assess the degree of certainty, uncertainty, and risk that Kit and Ace face in this decision problem. What factors set the degree of certainty, uncertainty, and risk?