Managing Effective Decision-Making Processes Chapter 17 People behave and communicate as individuals and as members as groups within organizational structures to make decisions

Types of Decisions Programmed decisions – specific procedures developed for repetitive and routine problems Non-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.

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 solution Simon’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

Models of Decision Making (continued) The Garbage Can Model Based on belief that decision making is a sloppy and haphazard process Decisions result from an interaction between four independent streams of events * problems * solutions * participants * choice opportunities

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 constraints Characteristics of Decision Maker * Knowledge * Ability * Motivation Generating alternatives Strategies to select a solution * Aided analytic * Unaided-analytic * Nonanalytic

Decision Making Styles High Analytical Conceptual Tolerance for Ambiguity Directive Behavioral Low Tasks and Technical Concerns People and Social Concerns Value Orientation

Decision-Making Process See Model on page 429 Establishing specific goals and objectives and measuring results Identifying problems A 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.

Identifying problems Perceptual 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 conclusions Identifying symptoms as problems – a decrease in sales volume may only be a symptom of the true problem.

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 outcomes Uncertainty – no knowledge of the probability of the outcomes Risk – some estimate of the outcome likelihood of each alternative

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 made Control and evaluation – periodic measurements of results. Adjustments are made – if the original objective is changed, the decision-making process begins again.

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.

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 individual Situational variables – external, observable situations in which individuals find themselves Interactional variables – individual’s momentary state that results from the interaction of a specific situation with characteristics of the individual’s personality

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.

Behavioral Influences in Individual Decision-Making Potential for dissonance (continued) – Anxiety is likely to be greater when: Decision is psychologically and/or financially important Number of foregone alternatives Forgone alternatives have favorable outcomes Motivated to reduce dissonance and achieve consonance. Seek information that supports decision Selective perceive (or distort) information in a way that supports the decision Adopt a less favorable view of the foregone alternatives Minimize the importance of the negative aspects and exaggerate the importance of the positive aspects

Group Decision-Making Group meetings as well as collaboration (process of joint decision-making among key stakeholders of a problem)

Advantages and Disadvantages of Group-Aided Decision Making Advantages Disadvantages 1. Greater pool of knowledge 1. Social pressure 2. Different perspectives 2. Minority domination 3. Greater comprehension 3. Logrolling 4. Increased acceptance 4. Goal displacement 5. 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.

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 encouraged Nominal 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 techniques The Delphi Technique: Process to generate ideas from physically dispersed experts Computer-Aided Decision Making: Computers are used to reduce consensus roadblocks while collecting more information faster