1. SWH1 Decision Making  Study questions. – How are decisions made in organizations? – What are the useful decision making models? – How do intuition, judgment, and creativity affect decision making? – How can the decision-making process be managed? – How do technology, culture, and ethics influence decision making? Arif Altaf

2. SWH2 How are decisions made in organizations?  Decision making. – The process of choosing a course of action for dealing with a problem or opportunity. Arif Altaf

3. SWH3 How are decisions made in organizations?  Steps in systematic decision making. – Recognize and define the problem or opportunity. – Identify and analyze alternative courses of action, and estimate their effects on the problem or opportunity. – Choose a preferred course of action. – Implement the preferred course of action. – Evaluate the results and follow up as necessary. Arif Altaf

4. SWH4 How are decisions made in organizations?  The systematic decision-making process may not be followed where substantial change occurs and many new technologies prevail.  Novel decision techniques may yield superior performance in certain situations.  Ethical consequences of decision making must be considered. Arif Altaf

5. SWH5 How are decisions made in organizations?  Decision environments include: – Certain environments. – Risk environments. – Uncertain environments. Arif Altaf

6. SWH6 How are decisions made in organizations?  Certain environments. – Exist when information is sufficient to predict the results of each alternative in advance of implementation. – Certainty is the ideal problem solving and decision making environment. Arif Altaf

7. SWH7 How are decisions made in organizations?  Risk environments. – Exist when decision makers lack complete certainty regarding the outcomes of various courses of action, but they can assign probabilities of occurrence. – Probabilities can be assigned through objective statistical procedures or personal intuition. Arif Altaf

8. SWH8 How are decisions made in organizations?  Uncertain environments. – Exist when managers have so little information that they cannot even assign probabilities to various alternatives and possible outcomes. – Uncertainty forces decision makers to rely on individual and group creativity to succeed in problem solving. Arif Altaf

9. SWH9 How are decisions made in organizations?  Uncertain environments — cont. – Also characterized by rapidly changing: External conditions. Information technology requirements. Personnel influencing problem and choice definitions. – These rapid changes are also called organized anarchy. Arif Altaf

10. SWH10 How are decisions made in organizations?  Types of decisions. – Programmed decisions. Involve routine problems that arise regularly and can be addressed through standard responses. – Nonprogrammed decisions. Involve nonroutine problems that require solutions specifically tailored to the situation at hand Arif Altaf

11. SWH11 What are the useful decision making models?  Classical decision theory. – Views the decision maker as acting in a world of complete certainty.  Behavioral decision theory. – Accepts a world with bounded rationality and views the decision maker as acting only in terms of what he/she perceives about a given situation. Arif Altaf

12. SWH12 What are the useful decision making models?  Classical decision theory. – The classical decision maker: Faces a clearly defined problem. Knows all possible action alternatives and their consequences. Chooses the optimum alternative. – Is often used as a model of how managers should make decisions. Arif Altaf

13. SWH13 What are the useful decision making models?  Behavioral decision theory. – Recognizes that human beings operate with: Cognitive limitations. Bounded rationality. – The behavioral decision maker: Faces a problem that is not clearly defined. Has limited knowledge of possible action alternatives and their consequences. Chooses a satisfactory alternative. Arif Altaf

14. SWH14 What are the useful decision making models?  Classical decision theory: – May not fit well in a chaotic world. – Can be used toward the bottom of many firms, even most high-tech firms.  Behavioral decision theory: – Fits with a chaotic world of uncertain conditions and limited information. – Encourages satisficing decision making. Arif Altaf

15. SWH15 What are the useful decision making models?  The garbage can model. – A model of decision making that views problems, solutions, participants, and choice situations as mixed together in the “garbage can” of the organization. In stable settings, behavioral decision theory may be more appropriate. In dynamic settings, the garbage model may be more appropriate. Arif Altaf

16. SWH16 What are the useful decision making models?  Implications of the garbage can model. – Choice making and implementation may be done by different individuals. Because of interpretation, there is a risk that the actual implementation does not exactly match the choice. – Many problems go unsolved. Arif Altaf

17. SWH17 What are the useful decision making models?  Decision making realities. – Managers face complex choice processes. – Decision making information may not be available. – Bounded rationality and cognitive limitations affect the way people define problems, identify alternatives, and choose preferred solutions. Arif Altaf

18. SWH18 What are the useful decision making models?  Decision making realities — cont. – Most decision making in organizations goes beyond step-by-step rational choice. – Most decision making in organizations falls somewhere between the highly rational and the highly chaotic. – Decisions must be made under risk and uncertainty. Arif Altaf

19. SWH19 What are the useful decision making models?  Decision making realities — cont. – Decisions must be made to solve nonroutine problems. – Decisions must must be made under time pressures and information limitations. – Decisions should be ethical. Arif Altaf

20. SWH20 How do intuition, judgment, and creativity affect decision making?  Intuition. – The ability to know or recognize quickly and readily the possibilities of a given situation. – A key element of decision making under risk and uncertainty. Arif Altaf

21. SWH21 How do intuition, judgment, and creativity affect decision making?  Judgmental heuristics. – Simplifying strategies or “rules of thumb” used to make decisions. – Makes it easier to to deal with uncertainty and limited information. – Can lead to systematic errors that affect the quality and/or ethics of decisions. Arif Altaf

22. SWH22 How do intuition, judgment, and creativity affect decision making?  Types of heuristics. – Availability heuristic — bases a decision on recent events relating to the situation at hand. – Representativeness heuristic — bases a decision on similarities between the situation at hand and stereotypes of similar occurrences. – Anchoring and adjustment heuristic — bases a decision on incremental adjustments to an initial value determined by historical precedent or some reference point. Arif Altaf

23. SWH23 How do intuition, judgment, and creativity affect decision making?  General judgmental biases in decision making. – Confirmation trap. The tendency to seek confirmation for what is already thought to be true and to not search for disconfirming information. – Hindsight trap. The tendency to overestimate the degree to which an event that has already taken place could have been predicted. Arif Altaf

24. SWH24 How do intuition, judgment, and creativity affect decision making?  Creativity factors. – Creativity in decision making involves the development of unique and novel responses to problems and opportunities. – Creativity is especially important in a dynamic environment full of nonroutine problems. Arif Altaf

25. SWH25 How do intuition, judgment, and creativity affect decision making?  Stages in the creative thinking process. – Preparation. – Concentration. – Incubation. – Illumination – Verification. Arif Altaf

26. SWH26 How can the decision-making process be managed?  Choosing problems to address. – Ask and answer the following questions: Is the problem easy to deal with? Might the problem resolve itself? Is this my decision to make? Is this a solvable problem within the context of the organization? Arif Altaf

27. SWH27 How can the decision-making process be managed?  Reasons for decision making failure. – Managers too often copy others’ choices and try to sell them to subordinates. – Managers tend to emphasize problems and solutions rather than successful implementation. – Managers use participation too infrequently. Arif Altaf

28. SWH28 How can the decision-making process be managed?  Deciding who should participate. – Authority decisions. Made by the manager or team leader without involving other people and by using information that he/she possesses. – Consultative decisions. Made by one individual after seeking input from group members. – Group decisions. Made by all members of the group. Arif Altaf

29. SWH29 How can the decision-making process be managed?  Vroom, Yetton, and Jago decision making framework. – Decision-making method used should fit the problem. – In choosing among individual, consultative, or group methods, managers should analyze: Quality requirements. Availability and location of relevant information. Commitments required to implement decision. Available time. Arif Altaf

30. SWH30 How can the decision-making process be managed?  Knowing when to quit — eliminating escalating commitments – Escalating commitment reflects the continuation and renewed efforts on a previously chosen course of action even when feedback suggests that it is failing. – Eliminating escalating commitment requires self-discipline to admit mistakes and change direction. Arif Altaf

31. SWH31 How do technology, culture, and ethics influence decision making?  Increasingly complex problems and opportunities face decision makers in organizations due to various workplace trends.  These workplace trends are changing the who, when, where, and how of decision making. Arif Altaf

32. SWH32 How do technology, culture, and ethics influence decision making?  Information technology and decision making. – Artificial intelligence. The study of how computers can be programmed to think like human beings. Will allow computers to displace many decision makers. – Expert systems that support decision making by following “either-or” rules to make deductions. Arif Altaf

33. SWH33 How do technology, culture, and ethics influence decision making?  Information technology and decision making — cont. – Fuzzy logic and neural networks that reason inductively. – Computer support for decision making. The Internet. Company intranets. Decision support software to facilitate virtual teamwork. Arif Altaf

34. SWH34 How do technology, culture, and ethics influence decision making?  Information technology and decision making — cont. – Information technology does not deal with issues raised by the garbage can model. Arif Altaf

35. SWH35 How do technology, culture, and ethics influence decision making?  Cultural factors and decision making. – Culture is “the way in which a group of people solves problems.” – North American culture stresses decisiveness, speed, and the individual selection of alternatives. – Other cultures place less emphasis on individual choice than on developing implementations that work. – The most important impact of culture on decision making concerns which issues are elevated to the status of problems solvable with the firm. Arif Altaf

36. SWH36 How do technology, culture, and ethics influence decision making?  Ethical issues and decision making. – Ethical dilemma. A situation in which a person must decide whether or not to do something that, although personally or organizationally beneficial, may be considered unethical and perhaps illegal. – Ethical dilemmas are often associated with: Risk and uncertainty. Nonroutine problem situations. Arif Altaf

37. SWH37 How do technology, culture, and ethics influence decision making?  Ethical decision-making checklist. – Is my action legal? – Is it right? – Is it beneficial? – How would I feel if my family found out about this? – How would I feel if my decision were printed in the local newspaper? Arif Altaf

38. SWH38 How do technology, culture, and ethics influence decision making?  Suggestions for integrating ethical decision making into the firm. – Develop a code of ethics and follow it. – Establish procedures for reporting violations. – Involve employees in identifying ethical issues. – Monitor ethical performance. – Reward ethical behavior. – Publicize ethical efforts. Arif Altaf

39. SWH39 How do technology, culture, and ethics influence decision making?  Implications of ethics for decision making. – Morality is involved in: Choosing problems. Deciding who should be involved in making decisions. Estimating the impacts of decision alternatives. Selecting an alternative for implementation. – Moral conduct does not arise from after-the- fact embarrassment. Arif Altaf