Individual & Group Decision Making Chapter Seven Individual & Group Decision Making

Decision Making Defined Decision: is a choice made from among available alternatives. Decision Making: is the process of identifying and choosing alternative courses of action. Types of Decisions Programmed Decisions: are repetitive and routine. Nonprogrammed Decisions: are those that occur under nonroutine, unfamiliar circumstances. Decision Making Style Decision Making Style: reflects the combination of how an individual perceives and responds to information. Rational Decisions Rational Model of Decision Making: also called the classical model explains how managers should make decisions; it assumes managers will make logical decisions that will be optimum in furthering the organization’s best interests. The Rational Model is based on unrealistic assumptions: Complete information, no uncertainty Logical, unemotional analysis, Best Decision for the organization Nonrational Decision Making Nonrational models of decision making: explain how managers do make decisions; they assume the decision making is nearly always uncertain and risky, making it difficult for managers to make the optimum decisions. Nonrational Models are: Satisficing Incremental McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Decision Making Styles Analytical Conceptual Directive Behavioral High Tolerance for ambiguity Low Task & technical concerns People & social concerns Value Orientation McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

The Four Steps in Rational Decision Making Stage 2 Think up alternative solutions Stage 3 Evaluate alternatives & select a solution Stage 4 Implement & evaluate the solution chosen Stage 1 Identify the problem or opportunity McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Disadvantages Advantages Making Better Decisions Through Knowledge Management Explicit Knowledge: information that can be easily put into words. Tacit knowledge: individual based, intuitive, acquired through considerable experience, and hard to express and to share. Advantages & Disadvantages of Group Decision Making Disadvantages Advantages A few people dominate or intimidate Greater pool of knowledge Groupthink Different perspectives Satisficing Intellectual stimulation Better understanding of decision rationale Goal displacement Deeper commitment to the decision McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

The Ethical Decision Tree Is the proposed action legal? Does it maximize shareholder value? Don’t do it. Is it ethical? Would it be ethical not to take action? Do it. Yes No McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

What Managers Need to know about Groups & Decision Making They are less efficient Their size affects decision quality They may be too confident Knowledge countsWhen a Group Can Help in Decision Making When it can increase quality When it can increase acceptance When it can increase development Participative Management Participative Management: the process of involving employees in setting goals, making decisions, solving problems, and making changes in the organization. Factors that Can Help Participative Management Work Top management is continually involved Middle and supervisory managers are supportive Employees trust managers Employees are ready Employees don’t work in interdependent jobs PM is implemented with TQM More Group Problem Solving Techniques Interacting group Nominal group Delphi group Computer aided decision making

How Do Individuals Respond to a Decision Situation? Effective Responses: Importance Credibility Urgency Ineffective Responses: Relaxed avoidance Relaxed change Defensive avoidance Panic Decision Making Biases Availability bias Representativeness bias Anchoring and adjustment bias