1. Chapter 10 Decision Making by Individuals and Groups
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2. Nonprogrammed Decision
Types of Decisions
Programmed Decision
a simple, routine matter for which a manager has an established decision rule
Nonprogrammed Decision
a new, complex decision that requires a creative solution 2

3. Decision-Making Process
Recognize the problem and the need for a decision
Identify the objective of the decision
Gather and evaluate data and diagnose the situation
List and evaluate alternatives, select the best course of action, and implement the decision
Gather feedback and follow up

4. Models of Decision Making
Rational Model
Outcome will be completely rational
Decision makers are consistent when choosing the best alternative
Decision makers are aware of all alternatives
Decision makers can calculate the probability of success for each alternative
Bounded Rationality
Managers select the first alternative that is satisfactory
Managers recognize that their conception of the world is simple
Managers are comfortable making decisions without determining all the alternatives
Managers make decisions by rules of thumb or heuristics
Managers satisfice

5. Beyond the Book: Garbage Can Model
A theory that contends that decisions in organizations are random and unsystematic
Problems
Participants
Solutions
Choice
opportunities
SOURCE: From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative Science Quarterly 17 (March 1972) Reprinted by permission of the Administrative Science Quarterly 8

6. 10.2 The Z Problem-Solving Model

7. Factors Influencing Decision Making
Risk aversion: Choosing options with fewer risks and less uncertainty
Depends on individual tendencies and organizational factors
Comfort with risk
Individual’s preference for gathering information and evaluating alternatives
Cognitive style
Influence decision making
Personality, attitudes, and values
Enables development of new perspectives
Intuition
Results in novel and useful ideas, products, or both
Influenced by individual and organizational factors
Creativity

8. Escalation of Commitment
the tendency to continue to commit resources to a failing course of action

9. Escalation of Commitment
Why it occurs
people dislike inconsistency
overly optimistic
illusion of control
sunk costs
How to deal with it
split responsibility for decisions
closely monitor decision makers
provide individuals with a graceful exit
have groups make the initial decision 10

10. Group Decision Making Synergy Social decision schemes Advantages
Positive force that stimulates new solutions to problems through mutual influence and encouragement within the group
Synergy
Rules that determine final group decisions
Social decision schemes
More knowledge and information through the pooling of group member resources
Increased acceptance of and commitment to the decision
Greater understanding of the decision
Advantages
Pressure within the group to conform and fit in
Domination of the group by one forceful member
Amount of time required to make a decision
Disadvantages

11. Limits of Group Decision Making
Groupthink – a deterioration of mental efficiency, reality testing, and moral judgment resulting from in-group pressures
Group Polarization – the tendency for group discussion to produce shifts toward more extreme attitudes among members

12. Antecedents of Groupthink
High cohesiveness
Directive leadership
High stress
Insulation of the group
Lack of methodological procedures for developing and evaluating alternatives
Consequential decisions
Time constraints

13. Symptoms of Groupthink
Illusions of invulnerability: members feel above criticism
Illusions of unanimity: members believe there is unanimous agreement. Silence is misconstrued as consent
Rationalization: viable alternatives not considered, unwillingness to reconsider assumptions
Self-censorship: members do not express doubts or concerns for fear of effect of dissent on cohesion
Illusions of group morality: members believe they are above reproach

14. Symptoms of Groupthink (cont.)
Stereotyping the enemy: Competitors are stereotyped as evil or stupid. This leads the group to underestimate its opposition.
Peer pressure: Any members who express doubts or concerns are pressured by other group members to question their loyalty.
Mindguards: some members of the group take it upon themselves to protect the group from negative feedback. Group members are thus shielded from information that might lead them to question their actions

15. Preventing Groupthink
Ask each group member to act as critical evaluator
Have the leader avoid stating his opinion prior to the group decision
Create several groups to work simultaneously
Appoint a devil’s advocate
Evaluate the competition carefully
After consensus, encourage rethinking the position
From Janis, Irving L., Groupthink: Psychological Studies of Policy Decisions and Fiascoes, Second Edition. Copyright
© 1982 by Houghton Mifflin Company.

16. Refer to the article about pre-war intelligence and look at conclusions #3 and #5. What is the significance that formalized IC mechanisms established to challenge assumptions and group think were not utilized?

17. Group Decision Techniques
Generating multiple ideas on a given subject while suspending evaluation until all the ideas have been suggested
Brainstorming
Structured approach to group decision making that focuses on generating alternatives and choosing one
Nominal group technique (NGT)
A group or individual is given the role of critic during decision making, helps prevent groupthink
Devil’s advocacy
Debate between two opposing sets of recommendations
Dialectical inquiry

18. Special Decision Making Groups
Small group of employees who work voluntarily on company time, to address work-related problems
Quality circle
Part of an organization’s structure
Empowered to act on its decisions
Quality team
Make decisions that were once reserved for managers
Lead to higher productivity, lower turnover among employees, and flatter organization structure
Self-managed teams

19. Participative Decision Making
Individuals affected by decisions influence the decision making-process
Buffers employees from the negative experiences of organizational politics
Increases employee creativity, job satisfaction, and productivity

20. Foundations for Participation and Empowerment
Supportive organizational culture and a team-oriented work design
Organizational prerequisites
Capability to become psychologically involved in participative activities
Motivation to act autonomously
Capacity to see the relevance of participation for one’s own well-being
Individual prerequisites

21. Evidence-Based Management
What is evidence-based management?
What are six substitutes that managers often use for the best evidence?
According to the evidence, should companies adopt forced ranking? Why or why not?
What are the four things leaders can do to create a new-mindset of evidence-based management?
What is the nasty side effect for leaders that practice evidence-based management?

22. Good to Great or Just Good
What did Collins do wrong?
Business managers are lead to believe that applying the 5 principles will move them toward greatness. What are the two alternative explanations?
Hedgehog problem
What are the odds that 11 selected firms share five attributes given that they have outstanding stock returns?