1. 1 B300 Chapter 5, 6

2. 2 Decision makingStrategy Policy Organisation Business behaviour in a changing world B300: Overview

3. 3 THIS TUTORIAL…. CHAPTER 5 Decision Making as a Political Process by Andrew M Pettigrew. CHAPTER 6 The irrationality of Action and Action Rationality: Decisions, Ideologies, and Organisational Actions by Nils Brusson.

4. 4 CHAPTER 5 Decision Making as a Political Process by Andrew M Pettigrew. First read the introduction to Section 2 on pages 93-95 of the Decision Making text book.

5. 5 This chapter… Relates closely to the first four chapters. The theme of Pettigrew’s analysis of decision making is that if conflict and politics are normal, then so is co-operation, and at the heart of them all is power.

6. 6 Introduction (2 slides) 1.Dimock (1952) states: “an executive is a tactician and a philosopher who must live by his wits, his competitive instincts, his understanding of social forces and his ability as a leader” 2.Strauss (1962) showed that office politics and bureaucratic gamesmanship is part of the everyday power practice in every organisation.

7. 7 3.Organisations are political systems striving for resources and working towards their objectives, lobbying to get support for their demands. 4.If an organisation rewards its units or individuals according to a certain measure, this measure will be a motivator to those who seek resources. Innovation may threaten the status of some existing units, where there is resistance and the existing power distribution may be endangered.

8. 8 Power and Organisational decision making (3 slides) 1.Authority is an expression of the legitimate position of an individual or group. Therefore, it is the code within which power is used in the organisation. Power is the capacity to establish collective commitment to performance toward a collective goal. 2.Power is based on consensus between power holders and subordinates. Conflict will take place either to gain or to hold onto power.

9. 9 3.Authority is twofold: position and personal (leadership). The superior controls and is controlled. Subordinates may question problems and bargain, and sometimes even question the legitimacy of the distribution of power, or experience conflict and discontent. Leaders’ interest in group members and their activity is related to team members’ willingness to have the leader continue as leader. 4.Dependency of subordinates on their leader. This leader’s power is based upon resources, opportunities, acts, and objects that he/she can use to affect the behaviour of his subordinates. Sometimes compromise may occur - exchanging power with co-operation.

10. 10 5.The expert position in the organisation and the communication structure will affect his power to control and direct others. Leaders may balance this with their power to hire and fire, depending on others in the leadership group.

11. 11 Theoretical bearing 1.Political analysis of decision making is explained by reference to both power and authority in the decision process. 2.Individuals can play apart in the social system according to their ability to exert power on others through the control of resources, manipulation and also dependency. 3.As far as all demands can be met no conflict will rise. The final decision will evolve out of the process of mobilisation of power being attempted by each party in support of its own demands.

12. 12 Summary The factors emphasised by Pettigrew in his chapter could well underlie the analysis offered by Janis. Some of the comments in this chapter can be seen as a commentary on Janis’s position. In practice, separating the political approach from the process approach is often impossible.

13. 13 CHAPTER 6 The irrationality of Action and Action Rationality: Decisions, Ideologies, and Organisational Actions by Nils Brusson

14. 14 This chapter… A decision is a choice between at least two alternatives. Decision making is explained by economists, political researchers as well as psychologists and sociologists. Some individuals decide and others carry out the decisions. Researchers elaborated in the direction of rationality, whilst other evidence shows that the process does not comply with rationality specially in strategic major issues.

15. 15 Why people are sometimes irrational in decision making a)People are not wise enough to behave rationally. Decision makers should be carefully selected. b)Irrationality is inherited in humans and this cannot be changed by training. c)Decision makers don’t have enough information on the many variables involved. (Information systems may help to improve the process.)

16. 16 Why people can be irrational in decision making An action perspective to explain the process is more acceptable. Leaders don’t just take decisions, but they also act on them, and encourage others to act on them. Since managers act whilst making decisions, the rationality of decisions take in consideration of practical internal and external norms.

17. 17 Decisions as initiators of action Actions are often preceded by group activities called decision making steps. Starting with objectives and evaluation to selection of actions. The process has three aspects: a)Cognitive: e.g. expectations that certain actions will take place and responsibilities will follow b)Motivational: for decisions to become actions motivations should exist in order to overcome obstacles and enhance commitment. b)Committal: commitment is needed wherever a great number of people are involved

18. 18 Irrationality as a base of organisational actions (3 slides) 1.Searching for alternatives:The rational model assumes evaluation of all of the possible alternatives. Reality considers a minimum members normally 2 and most likely one. This is since many alternatives evoke uncertainty and consequently reduce motivation and commitment. Commitment is more active when an acceptable alternative is endorsed and the “unacceptable” options are rejected.

19. 19 2.Estimating Consequences: The rational model assumes evaluating positive and negative consequences of alternatives. But this evokes uncertainty and disagreement among decision makers. Reality goes in the direction of looking for positive consequences to support an acceptable alternative and suppress negative consequences. This search enhances commitment and motivation. 3.Evaluating Alternatives: The rational model assumes that alternatives are evaluated against objectives. But reality this creates inconsistency in defining objectives among decision makers and then criteria and assessment will be difficult and the data needed could be impossible to find. Alternatively, is to start from consequences to invent objectives. Then alternative objectives are used as argument to support the chosen alternative rather than criteria to evaluate it.

20. 20 4.Choosing: It is not a choice of a specific alternative. It is also a commitment for specific action. 5.Making Rational Use of Irrationality: Decision irrationality can be justified by the valuable motivational and commitment it initiates. This was clear in the case of the “Bay of Pigs” in Chapter One. Rationality is applicable whenever commitment and motivation are not required. This happens only in short term and much less complex decisions. As important decisions need motivation and commitment it will be difficult to change direction once actions are proved to be wrong.

21. 21 Conclusion Deviations from the rational model are functional, encouraging managers’ commitment, motivation and enthusiasm.

22. 22 WEEK 3 ACTIVITIES Please select from the following activities which could be undertaken by students at this stage: Activity Four (page 33 of the Decision Making Study Guide) Activity Five (page 35 of the Decision Making Study Guide) Activity Six (page 35 of the Decision Making Study Guide)

23. 23 READING TO BE COMPLETED BY NEXT WEEK Please read pages 31-36 of the Decision Making Study Guide to refresh your study of Chapters five and six. Please read pages 117- 140 (Chapters 7 and 8) of Decision Making for Business Text Book. If you have time, read pages 36-41 of the Decision Making Study Guide to prepare you for next week. There is less reading this week to help you to have time to tackle TMA01.