1. Chapter Ten Making Decisions McGraw-Hill/Irwin
Copyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved.

2. After reading the material in this chapter, you should be able to:
Compare and contrast the rational model of decision making, Simon’s normative model, and the garbage can model
Identify common decision-making biases.
Discuss knowledge management techniques used by companies to increase knowledge sharing.
Describe the model of decision-making styles, the role of intuition in decision-making and the stages of the creative process.
Summarize the pros and cons of involving groups in the decision-making process.
Contrast brainstorming, the nominal group technique, the Delphi technique, and computer-aided decision making.

3. Models of Decision Making
identifying and choosing solutions that lead to a desired result

4. Models of Decision Making
The Rational Model
proposes that managers use a logical four-step approach to decision making.
Identifying the problem
Generating alternative solutions
Selecting a solution
Implementing and evaluating the solution

5. Rational Model Identifying the Problem Generating Solutions
Problem – exists when the actual situation and the desired situation differ
Generating Solutions
For routine decisions alternatives are readily available through decision rules

6. Methods for Identifying Problems
Assume the recent past is the best estimate of the future
Use projections or scenarios
Rely on the perceptions of others

7. Rational Model Selecting a Solution
Want to maximize the expected utility of an outcome
People vary in their preferences for safety or risk
Ethics should be considered

8. Rational Model Selecting a Solution
Evaluating alternatives assume they can be judged according to some criteria
Assumes valid criteria exists
Each alternative can be compared to these criteria
Decision maker actually uses the criteria

9. Rational Model Implementing and Evaluating the Solution
After solution is implemented, the evaluation phase is used to evaluate its effectiveness
Optimizing – choosing the best possible solution

10. Question?
Gloria is never happy with "good enough" solutions. She is determined to find the best possible solution in solving her problems. What Gloria is doing is described as
Optimizing
Brainstorming
Rationalizing
Satisfying
The correct answer is “A” – Optimizing.
AACSB:  Group-individual dynamics Bloom's Taxonomy:  Application
Difficulty:  Hard Page:  252

11. Nonrational Models of Decision Making
decision models that explain how decisions are actually made
Decision making is uncertain
Decision makers do not possess complete information
Difficult for managers to make optimal decisions

12. Simon’s Normative Model
Bounded rationality
constraints that restrict rational decision making
Satisficing
choosing a solution that meets a minimum standard of acceptance

13. Simon’s Normative Model
Most frequent causes of poor decision making
Poorly defined processes and practices
Unclear company vision, mission, and goals
Unwillingness of leaders to take responsibility
Lack of reliable, timely information

14. Garbage Can Model Garbage Can Model
decision making is sloppy and haphazard
decisions result from complex interaction of four streams of events: problems, solutions, participants and choice opportunities

15. Implications of the Garbage Can Model
Many decisions are made by oversight
Political motives frequently influence decision makers
Decision making process is difficult to load
Important decisions are more likely to be solved

16. Decision-Making Biases
Judgmental heuristics
rules of thumb or shortcuts that people use to reduce information processing demands.

17. Decision-Making Biases
Availability heuristic
Representativeness heuristic
Confirmation bias
Anchoring bias
Overconfidence bias
Hindsight bias
Framing bias
Escalation bias
Availability heuristic - tendency to base decisions on information readily available in memory.
Representativeness heuristic - tendency to assess the likelihood of an event occurring based on impressions about similar occurrences.

18. Question?
From January to October, Jamie's work performance was at best mediocre. In November and December, he significantly picked up his performance and did an excellent job. His supervisor evaluated him as outstanding performer. This can be explained partially due to the
Escalation of commitment effect.
Representativeness heuristic
Nominal group effect.
Availability heuristic.
The correct answer is “D” – availability heuristic.
AACSB:  Group-individual dynamics Bloom's Taxonomy:  Application
Difficulty:  Hard Page:  252

19. Dynamics of Decision Making
Knowledge management
implementing systems and practices that increase the sharing of knowledge and information throughout an organization
Read an article on Knowledge Management

20. Knowledge Management Tacit knowledge Explicit knowledge
information gained through experience that is difficult to express and formalize.
Explicit knowledge
information that can be easily put into words and shared with others.

21. Question?
Mike has been a top salesman for 20+ years. He has developed a reputation as one who can close a deal, but has been unable to teach new trainees how to be as successful. This is called ________ knowledge.
Implicit
Explicit
Tacit
Unstated
The correct answer is “C” – tacit. See previous slide.

22. General Decision Making Styles
Value orientation
reflects the extent to which an individual focuses on either task and technical concerns or people and social concerns when making decisions
Tolerance for ambiguity
extent to which a person has a high need for structure or control in his life
Decision making styles – combination of how individuals perceive and respond to information

23. Decision Making Styles
Figure 10-1

24. Intuition in Decision Making
a capacity for attaining direct knowledge without the apparent intrusion of rational thought or logical interference

25. A Model of Intuition Holistic hunch Automated experiences
judgment that is based on a subconscious integration of information stored in memory
Automated experiences
choice based on a familiar situation and a partially subconscious application of previously learned information related to that situation

26. A Model of Intuition
Figure 10-2

27. Creativity Creativity
process of using intelligence, imagination, and skill to develop a new or novel product, object, process, or thought

28. Question?
Dominick has a low tolerance for ambiguity and is generally oriented towards task and technical concerns when making decisions. Dominick can be described as having which decision-making style?
Directive
Analytical
Conceptual
Behavioral
The correct answer is “A” AACSB:  Group-individual dynamics Bloom's Taxonomy:  Application Difficulty:  Medium Page:  254

29. Group Involvement Minority dissent
extent to which group members feel comfortable disagreeing with other group members, and a group’s level of participation in decision making

30. Advantages and Disadvantages of Group-Aided Decision Making

31. Question?
Jeanie has many good ideas for her work group, but is unwilling to bring them up for group consideration. She is more concerned about conforming to group norms and not “rocking the boat”. This is due to ___________.
Different perspectives
Social pressure
Groupthink
Increased acceptance
The correct answer is “B” – social pressure. See previous slide

32. Group Problem Solving Techniques
Consensus
presenting opinions and gaining agreement to support a decision
Brainstorming
process to generate a quantity of ideas

33. Rules for Brainstorming
Defer judgment
Build on the ideas of others
Encourage wild ideas
Go for quantity over quality
Be visual
Stay focused on the topic
One conversation at a time

34. Group Problem Solving Techniques
Nominal Group Technique
process to generate ideas and evaluate solutions.
Delphi technique
process to generate ideas from physically dispersed experts

35. Question?
Dana has project employees working in New York, South Carolina, Texas, and California. She wants to get them together as a group to discuss ways to improve the work process. She will probably use ___________.
Delphi technique
Nominal group technique
Garbage can technique
Ostensible group technique
The correct answer is “A” – Delphi technique.

36. Group Problem Solving Techniques
Computer-aided decision making
reduces consensus roadblocks while collecting more information in a shorter period of time

37. Computer-aided Decision Making
Chauffeur-driven systems
ask participants to answer predetermined questions on electronic keypads
Group-driven meetings
conducted in special facilities equipped with individual workstations that are networked to each other

38. Supplemental Slides
Slides contain extra non-text examples to integrate and enhance instructor lectures
Slide 40-41: Making Tough Calls
Slide 42: Garbage Can Model of Organizational Decision-Making
Slide 43: Decision Making Pitfalls
Slide 44-45: Video discussion slides

39. Making Tough Calls
Jim Collins – studied the inner workings of organizations to understand how they became great
People decisions are most important
Making the right choices on who to can adapt to a changing environment has more long term impact than decisions about strategy.
Taken from Fortune, June 27th, 2005 “Jim Collins on Tough Calls”
Jim Collins is the author of Good to Great. He describes organizations who have moved into greatness and examines how they got there. This interview focused on his take on decision making and leadership.
Jim Collin’s responses to answers about decision-making processes:
People decisions are most important
Making the right choices on who to can adapt to a changing environment has more long term impact than decisions about strategy.

40. Making Tough Calls
Once good people are in place, how do you make good decisions?
Strive for conflict, challenging assumptions and ways of thinking
Consensus is not necessary
Once an issue has been debated the leader needs to make the decision
Having the right people in place means they’ll get behind a decision even if there is still some disagreement
Taken from Fortune, June 27th, 2005 “Jim Collins on Tough Calls”
Once good people are in place, how do you make good decisions?
Strive for conflict, challenging assumptions and ways of thinking
Consensus is not necessary
Once an issue has been debated the leader needs to make the decision
Having the right people in place means they’ll get behind a decision even if there is still some disagreement

41. Garbage Can Model of Organizational Decision-Making
Problems
Solutions
Participants
Choice opportunities
Problems
Solutions
Participants
Choice opportunities
Notes:
Topic Covered: Organizational Decision-Making
Garbage Can Model
Holds that decision making is sloppy and hazardous.
According to the Garbage Can Model, decisions result from a complex interaction between four independent streams of event: problems, solutions, participants, and choice opportunities.
A similar type of process occurs in your kitchen garbage can: we randomly discard our trash and it gets mashed together based on chance interactions.
The garbage can model assumes that the decision maker does not follow an orderly set of events but instead attractive solutions get matched up with whatever handy problems exist at a given point I time or people get assigned to projects because their work load is low at that moment.
Streams of Events
Problems represent a gap between an actual situation and a desired condition. Problems are independent from alternatives and solutions. The problem may or may not lead to a solution
Solutions are answers looking for questions. They represent ideas constantly flowing through the organization. Solutions are used to formulate problems rather than vice versa. Predicted to occur because managers often do not know what they want until they have some idea of what they can get
Participants are the organizational members who come and go throughout the organization. They bring different values, attitudes, and experiences to a decision-making situation. Time pressures limit the extent to which participants are involved in decision making.
Choice opportunities occasion where an organization is expected to make a decision. While some opportunities such as hiring and promoting employees occur regularly, others do not because they result from some type of crisis or unique situation.
Interactions among the Streams of Events
Because of the independent nature of streams of events, they interact in a random fashion. This implies that decision making is more a function of chance encounters than a rational process.
Thus the organization is a “garbage can” in which problems, solutions, participants, and choice opportunities are all mixed together.
Only when the four streams happen to connect (such as point A in the slide above) is a decision made.
Because these connections randomly occur among countless combinations of streams of events, decision quality generally depends on timing.
Good decisions are made when these streams of events interact at the proper time.
Why some problems do not necessarily relate to solutions (point B) and why solutions do not always solve problems.
Source: R Kreitner and A Kinicki Organizational Behavior 5th ed. (Burr Ridge, IL: Irwin/McGraw-Hill, 2001) pp
Problems
Solutions
Participants
Choice opportunities B

42. Decision Making Pitfalls
Pitfall: Analysis paralysis
Device: the 70% solution
Pitfall: Sunk-cost syndrome
Device: Burn the boat
Pitfall: Yes-man echoes
Device: Voice questions, not opinions
Taken from Fortune, June 27, 2005 Great Escapes, by Michael Useem and Jerry Useem
Pitfall: Analysis paralysis
Device: the 70% solution
You’ll never have perfect information needed to make a decision. If you have 70% o the information , have done 760% of the analysis and feel 70% confident, then move. A less than ideal action stands a chance of success whereas no action stands no chance.
Pitfall: Sunk-cost syndrome
Device: Burn the boat
It is hard to rip apart something you’ve build or created but sometimes you need to do just that to stay on the competitive edge. “Ford used to tell his assembly staff that they should be ready to revise any system, scrap any method and abandon any theory if the success of the job demands it. He didn’t live up to his own advice when presented with a new design to succeed his Model T. Because he didn’t act swiftly, General Motors had stolen his lead.”
Pitfall: Yes-man echoes
Device: Voice questions, not opinions
As a leader of a group or person with authority you can affect others decision and thought process by infusing your opinions. Leaders who want to ensure well-thought out decisions are made voice questions to their team rather than opinions.

43. Video: Leadership: Making Decisions During Hurricane Katrina
What roadblocks to using a rational decision making model were placed before the Sister’s in this case? Could anything have been done to make their decisions easier?
Identify how intuition and creativity helped the Sisters in the decisions they had to make.
Without the ability to communicate or have the resources they normally had at their disposal, what did the Sister’s rely on in making the decisions they needed to make?
Why was timely decision making so essential in this case?
The list of roadblocks set before the Sisters of Holy Angels are virtually endless. The primary issues they had to face was a lack of time to investigate options. With an impending natural disasters, life and death decisions had to made and made effectively. Other issues they faced included a lack of information (both through present-time communication as well as the loss of records of all types). In this instance, given the nature of the situation there is likely not much that could have been to remove those roadblocks - no one knew the storm would hit the area the way it did.
Intuition and creativity were two of the major resources the Sisters did have at their disposal. A great example of intuition is shown through the story told by Sylvia Thibodeaux - she just “knew” the Superdome facility was not going to be safe and decided to force the situation and move on… Creativity can be seen in all of the stories told in this case in that the Sisters were forced to come up with decision options to very unfamiliar situations.
The Sister’s relied on the “resources within” to make it through this experience. These resources would primarily be intuition, creativity and tenacity.
Timely decision making was essential in this case because there was an impending life-threatening natural disaster. Not making decisions quickly could result in life-threatening peril. The decisions being made in this case not only needed to be timely, but needed to be well informed (as best as possible) and accurate.

44. Video Case: Columbia Space Shuttle Disaster
What has seemed to be the major problem facing NASA? Apply your knowledge of group dynamics to identify the problem.
What must NASA accomplish to ensure the vitality of the space program? Has groupthink accounted for some of NASA’s problems? If so, what symptoms can you identify?
What challenges has NASA faced in changing its culture? How can many different groups be brought together to work toward a common goal?
One of the major problems facing NASA is a corporate culture that discourages voicing dissenting opinions or safety related information. A drastic change in corporate culture is necessary to ensure the vitality of the program. Groupthink has certainly accounted for some of these problems. Groupthink occurs when members of a cohesive group strive for unanimity and allow this goal to override their motivation to realistically appraise alternative courses of actions. Symptoms of groupthink evident at NASA include self-censorship (which stifles critical debate) and the illusion of unanimity whereby silence is interpreted to mean consent. Peer pressure (where loyalty of dissenters is questioned) may also be a factor. The inclusion of group problem-solving techniques such as the nominal group technique or the Delphi technique may help change the decision-making process.