1. Organizational Behavior: An Introduction to Your Life in Organizations
Chapter 3
Decision Making
©2007 Prentice Hall

2. Preview
When considering how to make a decision, what principles should guide your thinking?
When you are designing a decision making process, what three major factors should you weigh?
How can you use experts effectively?
How can you use technology to improve decision making?
How can you implement decisions successfully?
©2007 Prentice Hall

3. Rational-economic model
Assumes that a person making a decision has complete and perfect information and is able to process this information accurately and without bias
Assumes that individuals, households, and organizations always make rational (reasonable and logical) choices based on their economic self-interest
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4. Problems with the rational-economic model
Ignores other factors that influence decision making, such as:
people’s values
emotions, and
the social context in which the decision is made
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5. Herbert Simon’s model Based on bounded rationality
The administrative model of decision making states that decision-makers:
process only limited, manageable amounts of information rather than identifying all alternatives
use shortcuts and rules of thumb when processing information
choose solutions that seem adequate but are actually less than optimal, a process known as satisficing
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6. Complications to the rational process
The stages of rational problem-solving may happen simultaneously
The stages of rational problem-solving may happen in different sequences
Sometimes managers skip a stage entirely
Each stage in the process can be quite complex
Escalation of commitment: the tendency to continue on a course of action once money has been spent or effort has been invested, despite signals that a project is failing
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7. Factors in designing a decision making process
The type of problem to be solved
The nature of the individuals who will make the decision
The potential impact of the social context of the decision
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8. What type of problem are you solving?
Assess:
Whether your organization’s decision-makers will be primarily choosing between alternatives, or primarily creating new ideas
Whether the decision is programmed or non-programmed
Whether the decision will be made under conditions of uncertainty
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9. Type of thinking required
Convergent thinking:
the ability to apply logic and knowledge to narrow down the number of possible solutions to a problem
Divergent thinking:
the ability to think along many paths to generate many solutions to a problem
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10. Does a ready-made solution for the problem already exist?
Programmed decisions
individuals follow explicit decision rules
Non-programmed decisions
no identifiable rules for developing solutions
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11. Will the decision be made under conditions of uncertainty?
Risky decisions: those made under conditions of uncertainty
Loss aversion: when faced with an equal probability of gaining or losing, a person will often choose not losing as the preferred outcome
Gambler’s fallacy: people tend to believe that random events will correct themselves
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12. What are the attributes, strengths and weaknesses of the individuals who will make the decision?
Consider:
Personalities
Problem-solving styles
Other attributes
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13. Recognize individual personalities
Big Five personality variables of conscientiousness and openness
Risk propensity: the tendency to take risks
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14. Assess creative problem-solving abilities
Two basic capabilities: divergent-thinking ability and insight
Creativity is limited if you:
closely supervise the decision making process
set constraints on how the work will be done
foster competition among the creators
focus on how the product will be evaluated
emphasize extrinsic rewards
©2007 Prentice Hall

15. Understand the value and limitations of intuition
Intuition is a decision making process that integrates experience, goals and values without using direct reasoning
Image theory: how a decision-maker manages and coordinates images is the essence of the intuitive decision making process
The higher up the corporate ladder, the more prevalent is the use of intuition
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16. Anticipate emotional influences
Depending on their own emotional patterns, managers’ judgment may be biased toward more pessimistic or more optimistic evaluations of a situation
When individuals postpone or avoid making choices, emotional influences may be at work
Under stress, individuals sometimes regress to more paranoid and infantile modes of thinking
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17. How might the social context affect the decision?
Consider factors such as:
a person’s need to feel accepted
their belief in the group’s superior judgment
the impact of participation
issues of fairness, bias, ethics, and culture
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18. Acknowledge social influences
Under some circumstances individuals will literally deny their own perceptions in order to agree with the other members of their group, even when the group consists of strangers
Sometimes people conform because of social pressure or belief that all the others could not be wrong
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19. Decide who should be involved in the decision
Autocratic: You alone decide; may obtain information from others
Consultative: Share the problem with others and get their ideas and suggestions but you make the decision
Group: Share the problem and group reaches a consensus about what to do
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20. Make a fair decision
Procedural justice (also called procedural fairness): using formal decision making procedures that are fair
Interactional justice: being treated respectfully when formal organizational procedures are carried out
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21. Monitor biases in yourself and others
Collect data that reveal your own and others’ prejudice
Ask yourself whether your environment is reinforcing harmful stereotypes
Before relying on your intuition to make a decision, try to put yourself into the shoes of the people who will be affected
When choosing people to consider for any special opportunity or benefit, start with a list of names of all employees who have relevant qualifications
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22. Foster individual and organizational ethics
Bentley College Center for Business Ethics:
Is it right?
Is it fair?
How does it “smell”? (What is your instinctive reaction to it?)
Who gets hurt?
Would you be comfortable if the details of your decision were reported on the front page of your local newspaper?
What would you tell your child to do?
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23. Account for cultural influences
How employees view participative decision making depends on forces outside of the decision making process, including sociopolitical, legal, historical, and sociocultural factors
The impact of culture on decision making is likely to be related to whether a culture is individualistic or more group oriented, and whether it has a high or low emphasis on hierarchical relationships
©2007 Prentice Hall

24. How can you use experts effectively?
Naturalistic decision making is decision making that occurs in real-world settings, often under time pressure
Experts ignore conventional methods in favor of intuition, mental simulation, metaphor, and storytelling
When confronted with a truly novel situation, experts are bound by their experience
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25. How can you use technology to improve decision making?
Provides information to decision makers
Expert systems: computer programs that mirror some aspects of human decision making processes
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26. How can you implement decisions successfully?
Implementation: putting a solution into effect using a definite plan or procedure
Implementation abilities include:
interpersonal skills, such as avoiding hubris and arrogance
the ability to fit into a company’s culture
communication skills, including the ability to convey complex ideas clearly and succinctly
©2007 Prentice Hall

27. Apply what you have learned
World Class Company: Google, Inc.
Advice from the Pro’s
Gain Experience
Can you solve this manager’s problem?
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28. Summary – When considering how to make a decision, what principles should guide your thinking?
Organizational decision making is both rational and psychological.
Rational problem-solving is more complicated than it looks.
Problems occur both when making a decision and when implementing a decision.
A common problem is escalation of commitment, the tendency to continue on a course of action because so many resources have already been expended
©2007 Prentice Hall

29. Summary – Major factors in designing a decision making process
the type of problem you are solving
the attributes, strengths and weaknesses of the individuals who will make the decision
the social context of the decision
©2007 Prentice Hall

30. Summary – How can you use experts effectively?
Recognize experts’ strengths and weaknesses.
Compared with beginners, they are good at solving problems that require knowledge based on experience.
In truly novel situations, they may see what they have learned to see, or, they may approach the problem like anyone else would
©2007 Prentice Hall

31. Summary – How can you use technology to improve decision making?
Likely to find different organizational levels using different technologies.
Information technology and expert systems are both useful aids to human decision making.
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32. Summary – How can you implement decisions successfully?
Ensure:
the roles that must be played to implement the decision are assigned
those to whom they are assigned know they will be held accountable
©2007 Prentice Hall