Chapter 9 Nelson & Quick Decision Making by Individuals & Groups Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.

The Decision-Making Process 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

The Decision- Making Process Recognize the problem and the need for a decision Identify the objective of the decision Gather and evaluate data and diagnose the situation List and evaluate alternatives

The Decision- Making Process Select the best course of action Implement the decision Gather feedback Follow up

Models of Decision Making Effective Decision a timely decision that meets a desired objective and is acceptable to those individuals affected by it Garbage Can Model Bounded Rationality Model Rational Model

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 Rationality - a logical, step- by-step approach to decision making, with a thorough analysis of alternatives and their consequences Rational Model

1. Managers suggest the first satisfactory alternative Bounded Rationality - a theory that suggests that there are limits upon how rational a decision maker can actually be Bounded Rationality Model Satisfice – to select the first alternative that is “good enough,” because the costs in time and effort are too great to optimize

1. Managers suggest the first satisfactory alternative 2. Managers recognize that their conception of the world is simple Bounded Rationality - a theory that suggests that there are limits upon how rational a decision maker can actually be Bounded Rationality Model 3. Managers are comfortable making decisions without determining all the alternatives 4. Managers make decisions by rules of thumb or heuristics Heuristics – shortcuts in decision making that save mental activity

Garbage Can Model - a theory that contends that decisions in organizations are random and unsystematic Problems Solutions Choice opportunities Participants From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative Science Quarterly 17 (March 1972) Reprinted by permission of the Administrative Science Quarterly Garbage Can Model

Risk and the Manager Risk Aversion - the tendency to choose options that entail fewer risks and less uncertainty Risk takers accept greater potential for loss tolerate greater uncertainty more likely to make risky decisions Evidence: Successful Managers Take Risks

Escalation of Commitment  Why it occurs humans dislike inconsistency optimism control sunk costs  How to deal with it split responsibility for decisions provide individuals with a graceful exit have groups make the initial decision The tendency to continue to commit resources to a failing course of action

Cognitive Style Cognitive Style - an individual’s preference for gathering information and evaluating alternatives Jungian theory offers a way of understanding and appreciating differences among individuals.

Jung’s Cognitive Style Style Sensing/thinking Sensing/feeling Intuiting/thinking Intuiting/feeling Ideal Organization Facts/ Impersonal Analysis Facts & Org. Relationships Broad Issues/Impersonal & Ideal Serve Humankind/General Values ST SF NT NF

Z Problem-Solving Model Look at the facts and details Can it be analyzed objectively? What alternatives do the facts suggest? What impact will it have on those involved? Sensing Intuition Thinking Feeling Figure from Type Talk at Work by Otto Kroeger and Janet M. Thuesen. Copyright © 1992 by Otto Kroeger and Janet M. Thuesen. Used by permission of Dell Publishing, a division of Random House. Inc.

Two Brains, Two Cognitive Styles Left HemisphereRight Hemisphere Verbal Sequential, temporal, digital Logical, analytic Rational Western thought Nonverbal, visuospatial Simultaneous, spatial, analogical Gestalt, synthetic Intuitive Eastern thought Ideal = “brain-lateralized” making use of either or both sides, depending on situation From Left Brain, Right Brain by Springer and Deutsch © 1989, 1985, 1981 by Sally Springer and Georg Deutsch. Used with permission by W.H. Freeman and Company

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

Four Stages of Creative Process Verification thinking, sharing, testing the decision Illumination insight into solving a problem Incubation reflective, often unconscious thought Preparation experience/ opportunity to build knowledge base

Influences on Creativity  Individual examples Cognitive Processes Divergent Thinking Associational Abilities Unconscious Processes Personality Factors breadth of interests high energy self-confidence  Organizational examples Flexible organization structure Participative decision making Quality, supportive relationships with supervisors

Organizations Can Facilitate Creative Decision Making  Reward creativity  Allow employees to fail  Make work more fun  Provide creativity training  Vary work groups (internal/external)  Encourage creative stimuli (music, art, etc.)

Participative Decision Making  Organizational Foundations Participative, supportive organizational culture Team-oriented work design  Individual Prerequisites Capability to become psychologically involved in participative activities Motivation to act autonomously Capacity to see the relevance of participation for one’s own well-being Individuals who are affected by decisions influence the making of those decisions

Group Decision Making  Role of synergy - a positive force that occurs in groups when group members stimulate new solutions to problems through the process of mutual influence and encouragement in the group  Role of social decision schemes - simple rules used to determine final group decisions (prediction 80% correct) Majority Wins Truth Wins Two-thirds Majority First shift

Group Decision Making 1) more knowledge through pooling of group resources 2) Increased acceptance & commit- ment 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

Group Phenomenon 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

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.

Self-Managed Teams Dialectical Inquiry Brainstorming Devil’s Advocacy Delphi Technique Nominal Group Technique Quality Circles & Quality Teams Group Decision Techniques

Technological Aids to Decision Making Expert Systems - a programmed decision tool set up using decision rules Decision Support Systems - computer and communication systems that process incoming data and synthesize pertinent information for managers to use Group Decision Support Systems - systems that use computer software and communication facilities to support group decision-making processes in either face-to-face meetings or dispersed meetings

Virtual Teams - groups of geographically dispersed coworkers who work together using a combination of telecommunications and information technologies to accomplish a task Desktop Videoconferencing Systems Internet/Intranet Systems Tools for Virtual Teams Group Decision Support Systems

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