Chapter 10

Decision Making by
?
Individuals & Groups
 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
The Recognize the problem and
the need for a decision
Decision-
Making
Identify the objective of
Process the decision

Gather and evaluate data

and diagnose the situation

List and evaluate

alternatives
The Select the best
course of action
Decision-
Making
Implement
Process the decision

Gather
feedback

Follow up
 Models of Decision-Making
Effective decision

a timely decision Rational Model

that meets a desired
objective and is Bounded Rationality
acceptable to those Model
individuals affected
by it
Garbage Can Model
 Rationality - a logical,
step-by-step approach
Rational Model
to decision making, with a
thorough analysis of
alternatives and their
consequences

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
 Bounded Rationality - a
Bounded Rationality theory that suggests that
Model there are limits upon how
rational a decision maker
can actually be

1. Managers suggest the first satisfactory alternative

2. Managers recognize that their conception of the world is
simple
3. Managers are comforable making decisions without
determining all the alternatives
4. Managers make decisions by rules of thumb or heuristics
 Garbage Can Model
Solutions

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

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
The Quality, Timeliness, Acceptance, and Ethical
Appropriateness of a Decision Influence its
Effectiveness

Ethical
Quality + Timeliness + Acceptance + Appropriateness
 A Manager’s Decision-Making Styles Will
Influence the Way She Attacks Problems
Right-brain thinkers tend
Left-brain thinkers tend to value to value
technical/task issues people/social issues

ANALYTIC CONCEPTUAL
High Cognitive A problem solver who analyzes A socially oriented person
Complexity alternatives and innovates who sees the big picture

DIRECTIVE BEHAVIORAL
Low Cognitive A rapid decision maker who A person who needs
Complexity expects results and relies on rules affiliation and wants to help
others
Managers Take Six Steps in Making an Effective Decision
Using the Rational Decision-Making Process
ANALYZE THE SITUATION
•What are the key elements in the situation?
•What constraints affect the decision?
•What resources are available?

SET OBJECTIVES
•Is the problem stated clearly?
•Do people understand what they will work on?
•By what criteria will decision making be judged?

SEARCH FOR ALTERNATIVES

•Do people involved in the problem make the decision?
•Have they sought complete information?
•Do those with information make the decision?
•Do they use diversity to generate ideas?
•Are all ideas encouraged?
 Six Steps (Cont.)
EVALUATE THE ALTERNATIVES
•Do participants know that they are evaluating?
•Are criteria for assessment clear and understood?
•Are differences of opinion included in evaluation?
•Are some alternatives pilot tested?

MAKE THE DECISION

•Do employees know that they are making the decision?
•Are they aware if they are satisficing or optimizing?
•Do action plans fit with the decision?
•Are they committed to the decision?

EVALUATE THE DECISION

•Are responsibilities for data collection, analysis, and reporting clear?
•Is there a comprehensive evaluation plan?
•Is there an evaluation schedule?
 Managers Can Ask These Questions When
Evaluating Objectives
Criteria Questions to Ask
Relevance Do the objectives relate to and support the basic purpose of
the organization?

Practicality Do the objectives recognize obvious constraints?

Challenge Do the objectives provide a challenge for managers at all

levels in the organization?

Measurability Can managers quantify the objectives?

Schedulability Can managers monitor the objectives at interim points to

ensure progress?

Balance Do the objectives provide a proper balance on all activities,

given organizational goals?
 (cont.)
Criteria Questions to Ask
Flexibility Are the objectives sufficiently flexible or is the organization
likely to find itself locked into a particular course of action?

Timeliness Given the organization’s environment , is this the proper time

to adopt these objectives?

Technology Do the objectives fall within the boundaries of current

technological development?

Growth Do the objectives help the organization grow, not just

survive?

Cost Do the objectives’ expected costs clearly outweigh their

effectiveness benefit?

Accountability Can managers assess the performance of those responsible

for attaining the objectives?
Problems Randomly Attach to Solutions in
the “Garbage Can”
Solutions Problems

Problem A
+
Solution X
mA Prob
Proble lem B

Problem C
tio nX
Solu
Solutio
Solution Y nZ
 Gathering Ideas

•Brainstorming
•The Nominal Group Technique
•The Affinity Diagram
•The Delphi Method
•Electronic Meetings
 Brainstorming
•Topic
•Take turns sharing ideas
•Record each idea
•No comments/criticisms
•Keep the tempo moving
•One idea per turn
•Members may pass
•Keep going until ideas are exhausted
 Mangers Should Follow This Advice for
Successful Brainstorming
•List all ideas.
•Do not Evaluate any ideas during the initial stages.

•Encourage creativity.
•Offer ideas related to those already listed.

•Ask each participant to offer a specific number

(e.g. five to ten) of new ideas.
•Set a time for brainstorming.
 Managers Use an Affinity Diagram to Organize
Brainstorming in a Group of Employees
THEME
Why has the number of The employees
defects increased 10 times lack the right
in the past year? training

Equipment has not Quality control

been repaired in a procedures are
timely fashion inadequate

Materials received
from suppliers have
been defective
The product
design is Top management needs
faulty to reexamine workers’
training needs and find
ways to give them the
right training for their jobs.
 The Nominal Group Technique
(Delbecq, Van de Ven and Gustafson, 1975)
A generic name for face-to-face group techniques in which
instructions are given to group members not to interact with each
other except at specific steps in the process.

•Silent idea generations,

•Round-robin sharing of ideas,
•Feedback to the group,
•Explanatory group discussion,
•Individual re-assessment, and
•Mathematical aggregation of revised judgements.
 Affinity Diagram
Definition: A group decision-making technique designed to sort a large
number of ideas, process variables, concepts, and opinions into
naturally related groups. These groups are connected by a simple
concept.

Purpose: To sort a list of ideas into groups.

Guidelines:

Insure ideas are described with phrases or sentences.

Minimize the discussion while sorting --
discuss while developing the header cards.
Aim for 5-10 groups.
If one group is much larger than others, consider splitting it.
 How to Conduct an Affinity Sort:

•Clarify the list of ideas. Record them on small cards.

•Randomly lay out cards on table, flipchart, wall, etc.
•Sort the cards into "similar" groups in silence -- based on your
gut reaction. If you don't like the placement of a particular card
-- move it. Continue until consensus is reached.
•Create header cards consisting of a concise 3-5 word phrase
description, the unifying concept for the group. Place header card
at top of group.
•Discuss the groupings and try to understand how the groups
relate to each other.
 Tips
•Inquire if ideas are clarified.
•Use 3-5 words in the phrase on the header card to describe
the group.
•If possible, have groupings reviewed by non-team personnel.
•To sort, physically get up and gather around the area the
cards are placed.
•Team members will ultimately reach agreement on
placement -- if for no other reason that exhaustion.
•Sorting begins when all team members are ready.
•If an idea fits in more that one category or group, after
discussion, make a second card and place in both groups.
 Delphi Technique
•Problem stated
•Questionnaires
•Anonymous & Independent
•Compile results
•Distribute copies of results
•New round begins
•Does not require physical
presence
•Time consuming
 Electronic Meetings
•Horseshoe-shaped table
•Up to 50 participants
•Issues are presented
•Responses typed
•Projection screen display
•Anonymity, honesty, & speed
•55% faster than traditional
•Lacks credit
•Fastest typist gets there first
•No face-to-face interchange
 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
Escalation of The tendency to continue to
commit resources to a losing
Commitment course of action

• Why it occurs
– humans dislike inconsistency
– optimism
– control
• How to deal with it
– split responsibility for decisions
– provide individuals with a graceful exit
– have groups make the initial decision
 Cognitive Style
Cognitive Style - an individual’s
preference for gathering
information and evaluating
alternatives
Jungian theory offers a way of understanding and
appreciating differences among individuals.
 Jung’s Cognitive Style

Style Ideal Organization

ST Sensing/thinking Facts/ Impersonal Control

SF Sensing/feeling Facts & Org. relationships

NT Intuiting/thinking Broad issues/ Impersonal & ideal

NF Intuiting/feeling Serve humankind/General values

 Z Problem-Solving Model

Look at What alternatives

the facts Sensing Intuition do the facts
and details suggest?

Can it be What impact

analyzed Thinking Feeling will it have on
objectively? those involved?
Figure from Type Talk at Work by Otto Kroeger and Janet M. Thuesen. Copyright © 1992 by Otto Kroeger
and Janet M. Thuesen. Used by permission of Dell Publishing, a division of Random House. Inc.
 Influences on Decision-Making
Intuition - fast, Creativity - a process
positive force in influenced by
decision making individual and
utilized at a level organizational
below factors that results
consciousness, in the production of
involves learned novel and useful
patterns of ideas, products, or
information both
 Four Stages of Creative Process
• Preparation - experience/ opportunity
to build knowledge base
• Incubation - reflective, often
unconscious thought
• Illumination - insight into problem
• Verification - thinking, sharing, testing
the decision
 Influences on Creativity
• Individual examples • Organizational ex.
– Cognitive Processes – Flexible organization
• Divergent Thinking structure
• Associational Abilities – Participative
– Personality Factors decision-making
• breadth of interests – Quality, supportive
• high energy relationships with
• self confidence supervisors
 Organizations Can Facilitate
Creative Decision-Making
• Reward creativity
• Allow employees to fail
• Make work more fun
• Provide creativity training
• Vary work groups (internal/external)
• Encourage creative stimuli (music, art,
etc.)
 Participative Individuals who are affected
by decisions influence the
Decision Making making of those decisions

• 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
 Two Brains, Two Cognitive Styles

Left Hemisphere Right Hemisphere

Verbal Nonverbal, visuospatial

Sequential, temporal, Simultaneous, spatial,
digital analogical
Logical, analytic Gestalt, synthetic
Rational Intuitive
Western thought Eastern thought

Ideal = “brain-lateralized” making use of

either or both sides, depending on situation
From Left Brain, Right Brain by Springer and Deutsch © 1989, 1985, 1981 by Sally Springer and Georg Deutsch.
Used with permission by W.H. Freeman and Company
 Group Decision-Making
• Role of synergy - a positive force in groups
that occurs 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 Majority Wins
final group decisions Truth Wins
(prediction 80% correct) Two-thirds Majority Wins

First-shift rule
 Group Decision-Making
Advantages 1) pressure in
1) more knowledge groups to conform
through pooling of 2) domination by
group resources one forceful member
2) increased or dominant clique
acceptance & 3) amount of time
commitment due required, because
to voice in decisions group is slower
3) greater under- than individual
standing due to to make a
involvement in decision
decision stages Disadvantages
 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
 Brainstorming
Nominal Group Technique
Self-Managed Teams

Group
Decision
Delphi Technique
Techniques

Quality Circles & Quality Teams

Devil’s Advocacy
Dialectical Inquiry
 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
 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
• How will it make me feel about myself