1. Decision Making by Individuals and Groups
Chapter 10 Organizational Behavior: Foundations, Realities, & Challenges Nelson & Quick, 5th edition
Decision Making
by Individuals
and Groups

2. The Decision-Making Process
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. The Decision- Making Process
Recognize the problem and
the need for a decision
The Decision- Making Process
Identify the objective of
the decision
Gather and evaluate data
and diagnose the situation
List and evaluate
alternatives
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4. The Decision- Making Process
Select the best
course of action
The Decision- Making Process
Implement
the decision
Gather feedback
Follow up
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5. Models of Decision Making
Effective Decision
a timely decision that meets a desired objective and is acceptable to those individuals affected by it
Rational Model
Bounded Rationality
Model
Garbage Can Model 5

6. 1. The outcome will be completely rational
Rationality – a logical, step-
by-step approach to decision making, with a thorough analysis of alternatives and their
consequences
Rational Model
1. The outcome will be completely rational
2. The decision maker uses a consistent system of preferences to choose the best alternative
3. The decision maker is aware of all alternatives
4. The decision maker can calculate the probability of success for each alternative
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7. Bounded Rationality Model Bounded Rationality – a
theory that suggests that
there are limits upon how
rational a decision maker
can actually be
Bounded Rationality
Model
1. Managers suggest the first satisfactory alternative
Satisfice – to select the first alternative that is “good
enough,” because the costs in time and effort are too great to optimize
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8. Bounded Rationality Model Bounded Rationality – a
theory that suggests that
there are limits upon how
rational a decision maker
can actually be
Bounded Rationality
Model
1. Managers suggest the first satisfactory alternative
2. Managers recognize that their conception of the world is simple
3. Managers are comfortable making decisions without determining all the alternatives
4. Managers make decisions by rules of thumb or heuristics
Heuristics – shortcuts in decision
making that save mental activity
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9. Garbage Can Model Garbage Can Model –
Solutions
Choice
opportunities
Problems
Participants
Garbage Can Model –
a theory that contends that decisions in organizations are random and unsystematic
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From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative Science Quarterly 17 (March 1972) 1.25.
Reprinted by permission of the Administrative Science Quarterly 8

10. Implicit Favorite Model
You already know (either consciously or sub-consciously) what your decision is
You go through the steps just to justify it to others (and possibly yourself)
From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative Science Quarterly 17 (March 1972) 1.25.
Reprinted by permission of the Administrative Science Quarterly 8

11. Risk and the Manager
Risk Aversion – the tendency to choose options that entail fewer risks and less uncertainty
Risk takers
accept greater potential for loss
tolerate greater uncertainty
more likely to make risky decisions
Evidence: Successful Managers Take Risks 9

12. Escalation of Commitment
The tendency to continue to commit resources to a failing course of action
Why it occurs
humans dislike inconsistency
optimism
control
sunk costs
How to deal with it
split responsibility for decisions
provide individuals with a graceful exit
have groups make the initial decision 10

13. Influences on Decision Making
Intuition – fast, positive force in decision making utilized at a level below consciousness, involves learned patterns of information
Creativity – a process influenced by individual and organizational factors that results in the production of novel and useful ideas, products, or both

14. Four Stages of Creative Process
Preparation
experience/
opportunity
to build
knowledge
base
Incubation
reflective,
often
unconscious
thought
Illumination
insight into
solving
a problem
Verification
thinking,
sharing,
testing the
decision
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15. Influences on Creativity
Individual examples
Cognitive Processes
Divergent Thinking
Associational Abilities
Unconscious Processes
Personality Factors
breadth of interests
high energy
self-confidence
Organizational examples
Flexible organization structure
Participative decision making
Quality, supportive relationships with supervisors

16. Participative Decision Making
Individuals who are affected by decisions influence the making of those decisions
Participative Decision Making
Organizational Foundations
Participative, supportive organizational culture
Team-oriented work design
Individual 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

17. Group Decision Making
Role of synergy – a positive force that occurs in groups when group members stimulate new solutions to problems through the process of mutual influence and encouragement in the group
Role of social decision schemes – simple rules used to determine final group decisions
(prediction 80% correct)
Majority Wins
Truth Wins
Two-thirds Majority
First-shift

18. Group Decision Making Advantages Disadvantages
1. more knowledge through pooling of group resources
2. increased acceptance and commitment due to voice in decisions
3. greater understanding due to
involvement in decision stages
Disadvantages
1. pressure in groups to conform
2. domination by one forceful member or dominant clique
3. amount of time required, because group is slower than individual to make a decision
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19. Group Phenomenon
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

20. 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.

21. by South-Western, a division of Thomson Learning.
Brainstorming
Nominal
Group
Technique
Self-Managed
Teams
Group
Decision
Techniques
Dialectical
Inquiry
Delphi
Technique
Devil’s Advocacy
Quality Circles
and Quality Teams
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22. Technological Aids to Decision Making
Expert Systems – a programmed decision tool set up using decision rules
Decision Support Systems – computer and communication systems that process incoming data and synthesize pertinent information for managers to use
Group Decision Support Systems – systems that use computer software and communication facilities to support group decision-making processes in either face-to-face meetings or dispersed meetings

23. Ethics Check √ Is it legal? Does it violate law Does it violate
company policy
Is it balanced?
Is it fair to all
Does it promote win–win relationships
How will it make me feel about myself