1 Chapter Eleven Decision-Making Processes

2 Today’s Business Environment New strategies ReengineeringRestructuringMergers/AcquisitionsDownsizing New product/market development... Etc.

3 Decisions Made Within the Organization Complex, emotionally charged issues More rapid decisions Less certain environment Less clarity about means/outcomes Requires more cooperation

4 A New Decision-Making Process Required because no one person has enough info to make all major decisions no one person has enough info to make all major decisions No one person has enough time and credibility to convince many No one person has enough time and credibility to convince many Relies less on hard data Guided by powerful coalition Permits trial and error approach

5 INDIVIDUAL DECISION MAKING Steps in the Rational Approach to Decision-Making Monitor Decision Environment Implement Chosen Alternative Define Decision Problem Specify Decision Objectives Diagnose Problem Develop Alternative Solutions Evaluate Alternatives Choose Best Alternative

6 Organizational Decisional making Models Management Science Approach (The SABRE Group) Management Science Approach (The SABRE Group) Carnegie Model (Encyclopedia Britannica) Carnegie Model (Encyclopedia Britannica) Incremental Decision Process Model (Gillette) Incremental Decision Process Model (Gillette) Learning Organization Garbage Can Model (Casablanca) Garbage Can Model (Casablanca) Contingency Decision-Making Framework Group Activity

7 Choice Processes in the Carnegie Model Hold joint discussion and interpret goals and problems Share opinions Establish problem priorities Obtain social support for problem, solution Adopt the first alternative that is acceptable to the coalition Conduct a simple, local search Use established procedures if appropriate Create a solution if needed Managers have diverse goals, opinions, values, experience Information is limited Managers have many constraints UncertaintyCoalition FormationSearch Satisficing Conflict

8 The Incremental Decision Process Model Every step characterized by decision interrupts Identification Phase Recognition Recognition Diagnosis Diagnosis Development Phase Search Search Screen Screen Design Design Selection Phase Judgment (evaluation – choice) Judgment (evaluation – choice) Analysis (evaluation) Analysis (evaluation) Bargaining (evaluation – choice) Bargaining (evaluation – choice) Authorization Authorization

9 Learning Organization Decision Process When Problem Identification and Problem Solution Are Uncertain When problem identification is Uncertain, Carnegie model applies Political and social process is Needed Build coalition, seek agreement, And resolve conflict about goals And problem priorities When problem solution is uncertain, Incremental process model applies Incremental, trial-and-error Process Is needed Solve big problems in little steps Recycle and try again when blocked PROBLEM IDENTIFICATIONPROBLEM SOLUTION

10 CertainUncertain Contingency Framework for Using Decision Models Problem Consensus Individual: Rational Approach Computation Organization: Management Science Individual: Bargaining, Coalition Formation Organization: Carnegie Model Individual: Judgment Trial-and-error Organization: Incremental Decision Process Model Individual: Bargaining and Judgment Inspiration and Imitation Organization: Carnegie and Incremental Decision Process Models, evolving to Garbage Can Solution Knowledge Certain Uncertain

11 Special Decision Circumstances High-Velocity Environments Decision Mistakes and Learning Escalating Commitment