Beyond Rational Decision Making Brian Whitworth

1. Introduction Rational Decision Making: U U tility theory: selecting options with best payoffs G G ame theory: multiple participants in conflict M M ulti-criteria decision analysis (MCDA): multiple, and conflicting criteria B B ayesian Analysis: probabilistic information

Why do group managers usually ignore decision modelling ? Group Answer A: People are stubborn, stupid and resist advances Answer B: Such models leave out some important factors 1. Introduction

Decision software tools exist: Personal Decision Explorer 1. Introduction

Group 1. Introduction Individual Success stories : Paris metro renovation Chemical plant site location HR: appointing chair of department Failure or even catastrophe: scarce resource allocations Chernobyl nuclear experiment New Jersey DMV testing fiasco Social

1. Introduction Identify the assumptions of rational decision making Understand how socio-psychological processes allow managers to operate beyond these boundaries Develop groupware that allows computer-mediated groups to make decisions in realistic business settings Aim : Design communication and data structures to support these processes Define those which commonly fail in a business setting

2. Assumptions: Elements Alternatives (X i.. X j ) Behavioral choices leading to expected outcomes Criteria ( C m.. C n )Outcome evaluation measures Model (M):A predictive logic, given information Information ( I A.. )Information relevant to criterion outcomes Analysis (A)Method of evaluating expected outcomes by the criteria Decider (D)Entity making the decision The elements of rational decision making : x f = R (X, C, M, I, A, D)

Figure 1. RATIONAL ANALYSIS Decision IA IB IC ACTION OUTCOME A B C e.g. to open an overseas branch? Information MODELALTERNATIVESDECIDER CRITERIA

Alternatives assumed to be 1. Given. Where the alternatives are not known or not well defined the problem is undefined. Rational decision making fails. 2. Not a factor in the outcome. Where the decision action is a factor in the decision, the problem is recursive. Rational decision making may become undefined. 2.1 Assumptions

Criteria assumed to be 1. Given. Where the criteria are not known or not well defined the problem is equivocal. Rational decision making fails. 2.2 Assumptions

Predictive model assumed to be 1. Valid. Where the model is invalid, or ignores relevant information, the problem is misunderstood. Rational decision making may fail, especially in sensitive situations. 2.3 Assumptions

Information assumed to be 1. Available. Where the required information cannot be obtained, the decider is uninformed. Rational decision making may fail if the information fed into it is incomplete. 2. Valid. Where the required information is invalid, the decider is misinformed. Invalid decisions may arise if the information fed into the process is invalid. 3. Gatherable without altering the situation. Where other people may judge gathering of information, which may change the situation, it can be said to be political. 2.4 Assumptions

Analysis is assumed to be 1. Timely. Where the situation changes significantly during the time taken for analysis, the problem is mobile. 2.5 Assumptions

Decider is assumed to be 1. Unitary. Where the decider is not unitary, as in any group decision, there may be conflicting views of the decision criteria, choice alternatives, predictive models, and information. Situations where the decision entity is not unitary, and in conflict regarding the elements of rational analysis, can be called decider conflicted. E.g. US Steel. In this case rational analysis becomes undefined. 2.6 Assumptions

Problems which fall beyond rational analysis 1. Undefined. Alternatives not defined 2. Recursive. Decision action is an outcome factor 3. Equivocal. No defined criteria. 4. Mobile. Changes in the time taken for decision. 5. Misunderstood. Predictive model is invalid. 6. Uninformed. Relevant information not available. 7. Misinformed. Available information not valid. 8. Political. Gathering information changes the situation 9. Conflicted. Decision entity is not unitary. 3.1 Summary of Assumptions

Problems common in business 6. Uninformed. Relevant information not available. 7. Misinformed. Available information not valid. 8. Political. Gathering information changes the situation 9. Conflicted. Decision entity is not unitary. 3.1 Summary of Assumptions

Problem causes 1. People. People are the primary sources and transmitters of information. 2. Groups. Most decisions are made in or for groups. 3.2 C3P Model It makes sense for decision makers to have processes that deal with people and groups (as now suggested by the C3P model)

RATIONAL ANALYSIS ACTION PHYSICAL OUTCOME DECISION ENTITY Group Outcome INFORMATION SOURCES Interpersonal Outcome Task Outcome Interpersonal Process Group Process

Cognitive Model Resolve task information : Informational influence (individual) Relating to others : Personal influence (dyadic) Representing the group : Normative influence (group)

Resolve task information Individual level Values reasons and truth One-way, one-to-many Factual information Anonymous is ok Resolve logic problems Work setting

Relate to others Dyadic level Values relationships Two-way, one-to-one Sender information Anonymous not ok Build friendships Informal setting

Represent the group Group level Values unity and agreement Two-way, many-to-many Group position information Anonymous ok Enacts agreement Group action

Identity - the idea of “self” (a cognition) Behavior conforms to identity Groups form a group identity Group members take the group identity into their own identity Common identity gives common behavior We identify with groups, not the people in them Social identity theory

Why managers don’t use rational decision making A human judgement based imperfectly on all three processes is better than a perfect implementation of one process alone. 3.2

Groupware support Level ISupport rational task analysis and information exchange Level IISupport I, plus personal relationships Level IIISupport II, plus groups, norms & social structures I I III

The Tragedy of the Commons INDIVIDUAL CHOICES Graze: Some benefit Not graze: No benefit The commons is destroyed and all lose GROUP CHOICES All graze: Resource destroyed! None graze: Excess growth Some graze: Managed The commons is preserved and all benefit Changing the decision entity changes the decision!

Recommend Design groupware to encourage individuals to change the decision entity Group feedback within parties Providing an area for agreed statements Rules for items accepted into agreed area Methods for getting items into agreed area Recognition that agreed area represents the only area of production in negotiations.

Conclusions Despite evidence of human biases, Business use of rational decision tools is minimal, As most problems contradict their assumptions People and groups cause the major contradictions Social processes are designed to deal with them Managers apply three processes simultaneously Groupware should do likewise Tragedy of commons due to individual rationality Only forming a group solves the problem It is irrational for the group to destroy its commons