1. Copyright © 2016 Pearson Canada Inc.
CHAPTER 12
Decision Making, Creativity, and Ethics
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2. How Should Decisions Be Made?
Decision: Choice made from two or more alternatives
Rational: Choices that are consistent and value-maximizing within specified constraints
Rational Decision-Making
Six step decision-making process
Describes how individuals should behave in order to maximize some outcome
LO1; Material pertinent to this discussion is found under “How Should Decisions Be Made?”
It’s likely that decision makers identify and select problems that are visible to people in power in organizations, and for which they will receive some acknowledgment and reward for having done work on solving problems.
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3. Exhibit 12-1 Steps in the Rational Decision-Making Model
LO1; Material pertinent to this discussion is found under “How Should Decisions Be Made?”
This model assumes that the problem is clear and unambiguous, that the decision maker has complete information; that the decision maker can identify all relevant criteria; that there will be clear and constant preferences among the criteria and alternatives, that there are no time or cost constraints; and that the rational decision maker will choose the alternative with maximum payoff.
A brief discussion with students will lead them to realize that these conditions are rarely, if ever, fully met! You might want to get them to consider how they chose their college major, or what school to attend after high school.
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4. Assumptions of the Rational Decision-Making Model
Complete information
The problem is clear and unambiguous.
Known options
The decision maker is able to identify all relevant options in an unbiased manner.
Chooses the option with the highest utility
LO1; Material pertinent to this discussion is found under “How Should Decisions Be Made?”
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5. How Do Individuals Actually Make Decisions?
Bounded Rationality
Limitations on one’s ability to interpret, process, and act on information.
Satisficing
Identifying a solution that is “good enough.”
The first acceptable option rather than the optimal one
Intuition
A non-conscious process created from distilled experience that results in quick decisions
Relies on holistic associations
Affectively charged – engaging the emotions
LO1; Material pertinent to this discussion is found under “How Do Individuals Actually Make Decisions?”
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Judgment Shortcuts
Overconfidence Bias
Believing too much in our own ability to make good decisions – especially when outside of own expertise
Anchoring Bias
Using early, first received information as the basis for making subsequent judgments
Confirmation Bias
Selecting and using only facts that support our decision
Availability Bias
Emphasizing information that is most readily at hand
Recent
Vivid
LO2; Material pertinent to this discussion is found under “How Do Individuals Actually Make Decisions?”
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Judgment Shortcuts
Escalation of Commitment
Increasing commitment to a decision in spite of evidence that it is wrong – especially if responsible for the decision!
Randomness Error
Creating meaning out of random events - superstitions
Risk Aversion
tendency to prefer a sure thing over a risky outcome
Hindsight Bias
After an outcome is already known, believing it could have been accurately predicted beforehand
LO2; Material pertinent to this discussion is found under “How Do Individuals Actually Make Decisions?”
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8. Strengths of Group Decision Making Weaknesses of Group Decision Making
More complete information and knowledge.
Increased diversity of views.
Generates higher-quality decisions.
Leads to increased acceptance of a solution.
Weaknesses of Group Decision Making
More time consuming.
Conformity pressures in groups.
Discussion can be dominated by one or a few members.
Decisions suffer from ambiguous responsibility.
LO3; Material pertinent to this discussion is found under “Group Decision Making.”
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9. Effectiveness and Efficiency
Measures of Effectiveness
Accuracy
Speed
Creativity
Acceptance
Efficiency
groups almost always stack up as a poor second to the individual decision maker
With few exceptions, group decision making consumes more work hours than if an individual were to tackle the same problem alone.
LO3; Material pertinent to this discussion is found under “Group Decision Making.”
Accuracy: group decisions are generally more accurate than the decisions of the average individual in a group, but they are less accurate than the judgments of the most accurate group member.
Speed; individuals are superior.
Creativity: groups tend to be more effective than individuals.
Acceptance: the nod again goes to the group.
But effectiveness cannot be considered without also assessing efficiency.
In terms of efficiency, groups almost always stack up as a poor second to the individual decision maker. With few exceptions, group decision making consumes more work hours than if an individual were to tackle the same problem alone. The exceptions tend to be the instances in which, to achieve comparable quantities of diverse input, the single decision maker must spend a great deal of time reviewing files and talking to people. Because groups can include members from diverse areas, the time spent searching for information can be reduced. However, as we noted, these advantages in efficiency tend to be the exception.
Groups are generally less efficient than individuals. In deciding whether to use groups, then, consideration should be given to assessing whether increases in effectiveness are more than enough to offset the reductions in efficiency.
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10. Groupthink and Groupshift
Phenomenon in which the norm for conformity prevents the group from critically appraising unusual, minority, or unpopular views
Groupshift
Phenomenon in which the initial positions of individual members of a group are exaggerated because of the interactions of the group
LO3; Material pertinent to this discussion is found under “Group Decision Making.” This slide just introduces the topics of Groupthink and Groupshift. Slides that follow provide more detail on each concept.
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11. Symptoms of Groupthink
Illusion of invulnerability
Assumption of morality
Rationalized resistance
Peer pressure
Minimized doubts
Illusion of unanimity
LO3; Material pertinent to this discussion is found under “Group Decision Making.”
Rationalized Resistance: Group members rationalize any resistance to the assumptions they have made. No matter how strongly the evidence may contradict their basic assumptions, members behave so as to reinforce those assumptions continually.
Peer Pressure: Members apply direct pressures on those who momentarily express doubts about any of the group’s shared views or who question the validity of arguments supporting the alternative favoured by the majority.
Minimized Doubts: Those members who have doubts or hold differing points of view seek to avoid deviating from what appears to be group consensus by keeping silent about misgivings and even minimizing to themselves the importance of their doubts.
Illusion of Unanimity: There appears to be an illusion of unanimity. If someone doesn’t speak, it’s assumed that he or she is in full accord. In other words, abstention becomes viewed as a “Yes” vote.
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12. Minimizing Groupthink
Monitor group size
Encourage group leaders to play an impartial role.
Appoint one group member to play the role of devil’s advocate.
Stimulate active discussion of diverse alternatives to encourage dissenting views and more objective evaluations
LO3; Material pertinent to this discussion is found under “Group Decision Making.”
Encourage group leaders to play an impartial role. Leaders should actively seek input from all members and avoid expressing their own opinions, especially in the early stages of deliberation.
Appoint one group member to play the role of devil’s advocate. This member’s role is to overtly challenge the majority position and offer divergent perspectives.
Stimulate active discussion of diverse alternatives to encourage dissenting views and more objective evaluations.
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13. What Causes Groupshift?
Discussion creates familiarization among group members.
Group discussion motivates individuals to take risks.
Group diffuses responsibility.
LO3; Material pertinent to this discussion is found under “Group Decision Making.”
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Summary
Individuals often short-cut the decision-making process and do not consider all options.
Intuition leads to better results when supplemented with evidence and good judgment.
Material pertinent to this discussion is found at the end of the chapter.
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15. Copyright © 2016 Pearson Canada Inc.
OB at Work: For Review
1. What is the rational model of decision making? How is it different from bounded rationality and intuition?
2. What are some common decision biases or errors people make?
3. What are the strengths and weaknesses of group (versus individual) decision making?
Material pertinent to this discussion is found at the end of the chapter.
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