Nine

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Chapter
Nine
DECISION MAKING IN ORGANIZATIONS
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1. Identify the steps in the analytical model of
decision making. 2. Distinguish programmed from
nonprogrammed decisions certain from uncertain
decisions and top-down from empowered
decisions. 3. Distinguish the various individual
decision styles. 4. Describe the trade-offs
involved in group vs. individual decision
making. 5. Identify the various organizational
and cultural factors that influence the
decision-making process. 6. Distinguish between
three approaches to decision making the
rational-economic model the administrative
model and image theory.
7. Identify the various types of framing effects
and heuristics that potentially limit the
effectiveness of decisions. 8. Describe how the
bias toward implicit favorites and the escalation
of commitment lead to imperfect
decisions. 9. Compare the conditions in which
groups make superior decisions with those in
which individuals make superior decisions. 10.
Describe the various techniques for enhancing the
quality of individual as well as group decisions.
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Decision Making - the process of choosing among
several alternatives
Analytical Model of the Decision-Making Process -
general model that describes the formulation and
implementation of decisions Formulation -
process of understanding a problem and making a
decision about it Implementation - process of
carrying out that decision
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Eight Steps in the Analytical Model - a general
model and many decisions do not conform to
it Problem identification - difficult because
people do not always perceive a social
situation accurately
Define the objectives to be met in solving the
problem - conceive problems so that it is
possible to identify solutions
Make a predecision - decide how to make the final
decision Decision support systems (DSS) -
computer programs that present information
about organizational behavior to decision
makers in a manner that helps them to structure
their responses to decisions
Alternative generation - identify possible
solutions
Evaluate alternative solutions - examine
feasibility and effectiveness of each
alternative solution
Choose an alternative - optimality of choice
varies
Implement the chosen alternative - perform the
chosen alternative
Follow up - monitor the effectiveness of the
decision
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Broad Spectrum of Organizational Decisions -
three dimensions of decisions Routineness of the
decision Programmed - highly routine decisions
made according to pre-established
organizational routines and procedures
Nonprogrammed decisions - decisions about
highly novel problems for which no ready-made
actions exist Strategic decisions - typically
made by high-level managers regarding the
direction the organization should take to
achieve its mission
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Broad Spectrum of Organizational Decisions (cont.)
Riskiness of the decision - risk defined by the
probability of obtaining the desired
outcome Objective probability - uses concrete
and verifiable data Subjective probability -
uses personal beliefs or hunches - uncertainty
may be reduced by - establishing linkages with
other organizations - acquiring knowledge about
the past and present
Figure 9.2
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Broad Spectrum of Organizational Decisions (cont.)
Level of the organization at which decision is
made Top-down - decision making power vested in
superiors as opposed to their lower-level
employees - most organizations operate in this
fashion Empowered decision making - decision
making power vested in the employees -
rationale - workers who know the job best make
the the decisions - workers more
likely to be committed to actions based on
their own decisions - work teams also may be
empowered
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Decision Style - meaningful differences between
people in their orientation toward decisions -
four predominant styles - most managers may have
one predominant style but often use different
styles

• Conceptual
• Socially oriented
• Humanistic and
• artistic approach
• Solve problems
• creatively
• Enjoy new ideas

• Behavioral
• Concern for their
• organization
• Interest in helping
• others
• Open to
• suggestions
• Rely on meetings

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Group Influences Potential benefits of
decision-making groups Pooling of resources -
provides more information Specialization of
labor - people perform tasks they do
best Greater acceptance of decisions
Potential problems of decision-making
groups Waste of time Group conflict - may
result from disagreements over issues Intimidatio
n by group leaders - hinders honest discussion
Groupthink - tendency for members of highly
cohesive groups to conform so strongly to group
pressures regarding a certain decision that they
fail to think critically and reject the
potentially correcting influences of
outsiders - strategies for avoiding
groupthink Promote open inquiry Use
subgroups Admit shortcomings Hold
second-chance meetings
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Organizational Influences on Decisions - also
interfere with rational decision making Time
constraints - often do not permit exhaustive
decision making Political face-saving pressure
- people make decisions that help them to look
good to others even though the resulting
decision might not be in the best interest of
their organization
Cultural Differences in Decision Making -
widespread differences exist in the way people
from various cultures make decisions - people
from different cultures may not perceive the same
situations as presenting problems -
decision-making unit differs - individualist
cultures foster individual decision making -
collectivist cultures foster group decision
making - cultures differ in their expectations
about who is expected to make decisions -
cultures differ in their expectations about the
amount of time that ought to be devoted to
making a decision
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Rational-Economic Model - decision maker presumed
to consider all possible alternatives before
selecting the optimal solution - assumes that
decision maker has complete information and
can process it accurately and without bias -
does not appreciate human fallibility - is a
normative or prescriptive approach Rational
decisions - maximize the chance of attaining an
individuals groups or organizations goals
Administrative Model - recognizes that decision
makers may have a limited view of the problems
confronting them which hinders making rational
decisions - is a descriptive or proscriptive
approach Satisficing decisions - decisions made
by selecting the first minimally acceptable
alternative that becomes available Bounded
rationality - organizational social and human
limitations assumed to promote satisficing
rather than optimal decisions Bounded discretion
- limits decision alternatives to those
falling within the bounds of current moral and
ethical standards
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Image Theory - recognizes that decisions are made
in an automatic intuitive fashion - people
adopt courses of action that best fit their
individual principles current goals and
future plans - deals primarily with decisions
about adopting a certain course of action or
changing a current course of action
- decision making is a two-step
process Compatibility test - comparison of the
degree to which a particular course of action
is consistent with various images (e.g.
individual principles or current
plans) Profitability test - people consider the
extent to which various alternatives fit with
their values goals and plans - these tests
made within a decision frame - e.g. past
experience may provide context for the
decision
- decision making is both rapid and simple - not
necessary to ponder decisions - rather use
intuitive process
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Figure 9.6 Image Theory A Summary and Example
Decision to adopt a course of action (e.g. Which
job should I accept)
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Framing Effects - tendency for people to make
different decisions based on how the problem is
presented - illustrates that people are not
completely rational decision makers - are
influenced by cognitive distortions based on
simple differences in how situations are
presented
Risky choice frames - tendency for people to
avoid risks when situations are presented in a
way that emphasizes positive gains and to take
risks when presented in a way that emphasizes
potential losses - involves making decisions
about courses of action
Attribute framing - tendency for people to
evaluate a characteristic more positively when
it is presented in positive terms than in
negative terms - involves evaluations
Goal framing - tendency for people to be
persuaded more strongly by information framed
in negative terms than by information framed in
positive terms - involves taking behavioral
action
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Figure 9.7 Three Types of Framing Effects
Type of Framing Negative Frame
Positive Frame
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Reliance on Heuristics - simple decision rules
used to make quick decisions about complex
problems - rules of thumb may be useful for
simplifying complex decisions - also represent
potential impediments to decision making - may
discourage the collection and processing of
enough information to make a superior decision

Availability heuristic - the tendency for people
to base judgments on readily available though
potentially inaccurate information - may
adversely affect the quality of the decision
Representative heuristic - tendency to perceive
others in stereotypical ways if they appear to
be typical representatives of the category to
which they belong
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Bias Toward Implicit Favorites - inclination to
choose ones preferred decision alternative
which is selected even before all the options
have been considered - people often make
decisions early in the process - options other
than the preferred alternative are not given
serious consideration - rather used to
convince oneself that the implicit favorite
is the best choice Confirmation candidate -
decision alternative considered only to
convince oneself of the wisdom of
selecting the implicit favorite
Escalation of Commitment - tendency for
individuals to continue supporting previously
unsuccessful courses of action because -
previous ineffective decisions have resulted in
sunk costs - refusal to back previous decisions
viewed as an admission of failure Self-justifica
tion - people may refrain from escalating
commitment under several conditions
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Figure 9.8 Escalation of Commitment
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When Are Groups Superior to Individuals -
depends on the type of task Complex decision
tasks - groups are superior when they are a
hetero- geneous collection of experts with
complementary skills who can contribute to
their groups product freely and openly Simple
decision tasks - to attain a group benefit from a
pooling of resources there must be some
resources to pool
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When Are Individuals Superior to Groups -
individuals perform better on poorly
structured creative tasks Brainstorming -
technique to foster group productivity
by encouraging interacting members to express
their ideas noncritically - four main
rules - avoid criticizing others ideas -
share even far-out suggestions - offer as many
comments as possible - build on others ideas
to create your own - individuals using
brainstorming rules for idea generation
perform better than brainstorming groups
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Individual Techniques - make individuals better
decision makers Training individuals - people
make better decisions just by considering the
following errors
Hypervigilance - an individual frantically
searches for quick solutions and goes from idea
to idea from desperation that one is not working
and another must be considered before time runs
out
Unconflicted adherence - tendency to stick with
the first idea that comes to mind without more
deeply evaluating the consequences
Unconflicted change - tendency for people to
change their minds quickly and to adopt the
first new idea that comes along
Defensive avoidance - tendency for decision
makers to fail to solve problems because they
avoid working on them
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Individual Techniques (cont.)
Making ethical decisions - answer the following
questions about contemplated decisions to avoid
rationalizing unethical acts Does it violate the
obvious shall nots Will anyone get hurt How
would you feel if the newspaper reported
your decision on the front page What if you
did it 100 times How would you feel if someone
did it to you What is your gut feeling
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Group Techniques - structure the group to take
advantage of its strengths
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Figure 9.12 TheNominal Group
1. A small group gathers around a table
and receives instructions problem is identified.
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Figure 9.14 The Stepladder Technique