Chapter 10

Decision Making by Individuals &

Groups
1. Identify the steps in the decision-making process.
Learning Outcomes

2. Describe various models of decision making.

3. Discuss the individual influences that affect decision making.

4. Explain how groups make decisions.

5. Describe the role culture plays in decision making.

6. Explain how organizations can improve the quality of decisions

through participation.

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1 Learning Outcome

Identify the steps in the decision-

making process.

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 Types of Decisions

Programmed Nonprogrammed
Decision Decision
a simple, routine a new, complex decision
matter for which a that requires a creative
manager has an solution
established decision
rule

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 Recognize the problem and
Decision the need for a 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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 Select the best
Decision
course of action
Making
Process
Implement
the decision

Gather feedback

Follow up

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2 Learning Outcome

Describe various models of

decision making.

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Rationality
a logical, step-by-step approach to

decision making, with a thorough

analysis of alternatives and their

consequences

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 Models of Decision Making

Effective a timely decision that meets a

desired objective and is acceptable
Decision to those individuals affected by it

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 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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Bounded Rationality
a theory that suggests that there are

constraints that force a decision

maker to be less than completely

rational

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 Bounded Rationality
Model

1. Managers select the first alternative that

is satisfactory
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

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 Bounded Rationality
Model

Assumes that managers satisfice select

the first alternative that is good enough

Assumes that managers develop heuristics,

short cuts, to make decisions in order to
make decisions to save mental activity.

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 Beyond the Book:
Solutions

Choice
Problems opportunities
Garbage Can Model
a theory that contends Participants
that decisions in
organizations are
random and
unsystematic

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Z Problem-Solving Model

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Escalation of Commitment
the tendency to continue to commit

resources to a failing course of action

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 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
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3 Learning Outcome

Discuss the individual influences

that affect decision making.

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Cognitive Style
an individuals preference for

gathering information and evaluating

alternatives

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Risk Aversion
the tendency to choose options

that entail fewer risks and less

uncertainty

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 Risk and the Manager

Many decisions involve some element of

risk.
Individuals differ in terms of risk aversion.
Risk aversion is determined by individual
tendencies and organizational factors.
To encourage risk taking, must view
failure as enlightened trial and error.

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Personality, Attitudes, and Values

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 Influences on
Decision Making

Intuition fast, Creativity a

positive force in process
decision making influenced by
utilized at a level individual and
organizational
below factors that
consciousness, results in the
involves learned production of
patterns of novel and useful
information ideas, products,
or both

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 Influences on Creativity
Individual:
Cognitive Processes
Divergent Thinking
Associational Abilities
Unconscious Processes Creative performance is
Personality Factors highest when there is a
breadth of interests match or fit between the
individual and
high energy organizational influences.
self-confidence
Organizational:
Flexible organization structure
Participative decision making
Quality, supportive relationships with supervisors
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 Beyond the Book:
Mapping Changes in the Industry

GPS devices and freely-available online maps are forcing the

mapping industry to change how it does business.

Map companies are incorporating digital services into their

business model, capitalizing on the benefits of paper maps,
expanding into related fields like astronomy and planetary
mapping, or simply scaling back their businesses.

Faced with a challenge, map industry professionals are

charting a variety of courses--which decisions will succeed?

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Four Types of Creativity

Responsive Proactive

Expected Contributory

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 Beyond the Book:
Be Creative!
Can you think of new solutions to these common
organizational problems?
Employees productivity declines sharply the day
after the Super Bowl.
Your organization has been in deficit for three
consecutive quarters. Where do you make cuts in the
budget?
You learn that the company can no longer afford to
provide lunch to employees. How would you maintain
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4 Learning Outcome

Explain how groups make

decisions.

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 Group Decision Making

Synergy occurs when group members stimulate

new solutions to problems through the process of
mutual influence and encouragement within the
group.
Social decision schemes simple rules used to
determine final group decisions

Truth Wins Majority Wins

Two-thirds Majority
First-shift
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 Group Decision Making
1. more knowledge through pooling of
group resources
Advantages 2. increased acceptance and
commitment due to voice in
decisions
3. greater understanding due to
involvement in decision stages

1. pressure in groups to conform

2. domination by one forceful member
Disadvantages or dominant clique
3. amount of time required, because
group is slower than individual to
make a decision
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 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

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 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 devils 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.

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 Group Decision Techniques
Self-Managed
Teams Dialectical
Inquiry
Brainstorming

Nominal
Group
Technique Delphi
Technique

Quality Circles Devils Advocacy

and Quality Teams
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 Special Decision-Making
Groups

Quality circles small groups that meet voluntarily

to address work-related problems.

Quality teams a team that is part of an

organization, empowered to act on its decisions
regarding quality

Self-managed teams more broadly focused than

above two types
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5 Learning Outcome

Describe the role culture plays in

decision making.

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 Hofstedes Dimensions
Styles of decision
making vary by
culture

Many of
Hofstedes
dimensions have
implication for
how people deploy
the decision-
making process

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 Beyond the Book:
Decisions in Japan

Teamwork and Collaboration look much

different in Japan than in the United States. In
Japanese firms, workers (especially lower
level) tend to remain silent during meetings,
avoid sitting next to upper management, and
rigorously avoid using their boss first name.
Upper management, meanwhile, steer clears
of direct feedback or delivering the hard
truth. At all levels, harmony and restraint,
rather than independence and risk-taking, are
prized values.

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 Decision Making in the Virtual
Workplace
Beyond the Book

Group Decision
Support Systems

Tools
for
Virtual Teams
Desktop
Internet/Intranet
Videoconferencing
Systems
Systems
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6 Learning Outcome

Explain how organizations can

improve the quality of decisions
through participation.

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 Participative Decision Making

Occurs when individuals who are affected

by decisions influence decision-making

Organizational Individual
Foundation Foundation

Supportive organizational culture People must be psychologically

Team-oriented work design equipped
Motivation to act autonomously
Employees must be able to see benefit

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 Beyond the Book:
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 winwin relationships
How will it make me feel about myself

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 Beyond the Book:
Can I Use Another Computer?
Workers face a growing problem the computers,
applications and phones they use at work are ancient
compared to what they use personally. For example, some
chafe at having to use email systems with limited storage
when free webmail options provide gigabytes of space.
Others are frustrated that their company still uses an
operating system released in 2001.

How would you resolve this issue? How would you

provide cutting-edge technology while maintaining
costs? How would you deal with employees who
are not tech savvy?
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 1. Does The Bird Problem present
Kit and Ace with a programmed
or nonprogrammed decision? What
features of their decision problem
led to your choice?

2. Review the earlier section

describing the decision-making
Failure to process. Which steps in that process
appear in The Bird Problem? Note
Launch the examples of each step that you
see.

3. Assess the degree of certainty,

uncertainty, and risk that Kit and Ace
face in this decision problem. What
factors set the degree of certainty,
uncertainty, and risk?

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