Individual and Group Decision Making Chapter 11 Individual and Group Decision Making Models of Decision Making Dynamics of Decision Making Group Decision Making

Models of Decision Making 11-2 Models of Decision Making Rational Model logical four-step approach to decision making Identifying the problem Problem – deviation between current and desired situations Opportunity – deviation between current expectations and recognition of potentially better situation Generating alternative solutions Selecting solution Implementing and evaluating the solution McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Assumptions of Rational Decision Making 11-3 Figure 11-1 Assumptions of Rational Decision Making Problem is clear and unambiguous Single and well-defined goal can be identified Alternatives (and consequences are all known) Preferences and needs are clear, recognized, and unchanging Time and resources are abundant and accessible Decision will be implemented willingly and supported by all McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Simon’s Normative Model of Decision Making 11-4 Simon’s Normative Model of Decision Making Based on premise that decision making is not rational Decision makers are guided by bounded rationality Bounded rationality constraints that restrict decision making Decision making is characterized by Limited information processing Use of judgmental heuristic Satisficing McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Judgmental Heuristics 11-5 Judgmental Heuristics Judgmental Heuristics rules of thumb or shortcuts that people use to reduce information-processing demands McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Types of Judgmental Heuristics 11-6 Types of Judgmental Heuristics 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. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

11-7 Knowledge Management Knowledge Management implementing systems and practices that increase the sharing of knowledge and information throughout the organization McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

11-8 Forms of Knowledge Tacit 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 McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Decision Making Styles 11-9 Figure 11-2 Decision Making Styles Analytical Conceptual High Directive Behavioral Tolerance for Ambiguity Low Tasks and Technical Concerns People and Social Concerns Value Orientation McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Escalation of Commitment 11-10 Figure 11-3 Escalation of Commitment Psychological and Social Determinants Organizational Determinants Escalation of commitment Poor results or outcomes Project Characteristics Contextual Determinants McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Advantages and Disadvantages of Group-Aided Decision Making 11-14 Table 11-2 Advantages and Disadvantages of Group-Aided Decision Making Advantages Greater pool of knowledge Different perspectives Greater comprehension Increased acceptance Training ground Disadvantages Social pressure Domination by a vocal few Goal displacement “Groupthink” McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Research and group decisions Groups are less efficient decisions makers Groups are more confident in their decisions Decision quality is negatively related to group size Homogeneity brings less conflict Heterogeneity brings less efficiency Groups tend to polarize in decision making

Group Problem Solving Techniques 11-17 Group Problem Solving Techniques Brainstorming process to generate a quantity of ideas Nominal Group Technique process to generate ideas and evaluate solutions Delphi Technique process to generate ideas from physically dispersed experts Computer-Aided Decision Making McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Creativity Creativity process of developing something new or unique 11-19 Creativity Creativity process of developing something new or unique McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.