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HRM 601 Organizational Behavior

Explore the various analytical models of decision-making in organizations, including the rational-economic model, bounded rationality model, and intuitive image theory. Understand cognitive biases such as framing effects, availability heuristic, and representativeness heuristic that influence decision-making. Learn the advantages and disadvantages of group decisions compared to individual decisions to enhance organizational outcomes.

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HRM 601 Organizational Behavior

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  1. HRM 601 Organizational Behavior Session 9 Decision Making In Organizations

  2. General Analytical Model of Decision Making • Conception of decision making as a series of analytical steps • The model focuses on two aspects: • identifying the problem • implementing the solution

  3. Steps in the Analytical Model Problem Identification Evaluate choice Define Objectives Implement choice Predecision Make a choice Generate Alternatives Evaluate Alternatives

  4. Programmed vs Non-Programmed Decisions • Programmed decisions are highly routine decisions usually made by lower level workers alone. (Time to re-order toner for the copy machine) • Non-programmed decisions -- Decisions about a novel problem. There is no set course of action. (Identifying the cause of some rare disease)

  5. Certain vs Uncertain Decisions • The degree of risk involved in making the decision. The means the continuum ranges from • complete uncertainty (no risk) to • complete uncertainty (high risk) • The point is to minimize risk by obtaining information

  6. Rational-Economic Model • A model in which decision makers consider all possible solutions before selecting the optimal one. Presumes • We are entirely rational and logical • We have complete and perfect information • We can process all this information

  7. Bounded Rationality Model • A model that realizes that humans have a limited view of the problem, do not have perfect information or all the alternatives • We accept a solution that is good enough • This is called satisficing or settling for the decision that meets the criteria but may not meet them optimally

  8. Image Theory • Following your gut instinct. This model says we make decisions intuitively, by going through a two-step process. Step one is the compatibility test. Does the alternative feel right? • Step 2: Profitability test - Which of the alternatives that feel right is best?

  9. Framing Effects • (from Bazerman, 1983): A large car manufacturer has recently bee hit with a number of economic difficulties and it appears as if three plants need to be closed and 6,000 employees laid off. The vice-president of production has been exploring alternative plans to avoid this crisis. She has developed two plan • Plan A: This plan saves one of the three plants and 2,000 jobs • Plan B: This plan has a 1/3 probability of saving al l three plants and all 6,000 jobs but a 2/3 probability of saving no plants and no jobs.

  10. Framing Effects • A large car manufacturer has recently bee hit with a number of economic difficulties and it appears as if three plants need to be closed and 6,000 employees laid off. The vice-president of production has been exploring alternative plans to avoid this crisis. She has developed two plan • Plan C: This plan will result in the loss of two of the three plants and 4,000 jobs. • Plan B: This plan has a 2/3 probability of resulting in the loss of all three plants and all 6,000 jobs but a 1/3 probability of losing no plants and no jobs

  11. More Framing • A. A sure gain of $240. • B. A 25% chance to gain $1,000 and a 75% chance to gain nothing • C. A sure loss of $750 • D. A 75% chance to lose $1,000 and a 25% chance to lose nothing

  12. Availability Heuristic • The tendency for people to base decisions on information that is easily accessed • Which is riskier? • A. Driving a car on a 400 mile trip • B. Flying on a 400 mile trip on a commercial flight

  13. Availability Heuristic • The tendency for people to base decisions on information that is easily accessed • Which is riskier? • A. Driving a car on a 400 mile trip • B. Flying on a 400 mile trip on a commercial flight

  14. Representativeness Heuristic • The tendency to perceive other in stereotypical ways if they appear to be typical of the category to which they belong • Mark is finishing his MBS at a prestigious university. He is very interested in the arts and at one time considered a career as a musician. Mark is most likely to take a job • A. In the management of the arts • B. With a management consulting firm

  15. Other Cognitive Biases • Anchoring -- People develop estimates based on initial information. When that information turns out to be wrong, people make adjustments to their decisions but not enough to overcome the impact of the initial piece of information. • Confirmation bias -- We tend to focus only on evidence that supports our decisions. • Overconfidence -- Because of confirmation bias, we are more confident than we are correct.

  16. Group Decisions • Advantages • Pooled knowledge and information • Specialization of labor. • Scan the environment • Decision acceptance and commitment • Diffusion of responsibility

  17. Group Decisions • Disadvantages • Time to reach a decision • Conflict • Domination

  18. Groups Exceed Individuals Complex Problems 1. Members have complementary skills 2. Ideas are communicated & accepted Groups are better than best member

  19. Individuals Exceed Groups Simple Problem No one in the group has the correct answer Group is worse than worst member

  20. Group Process in Decision Making • Handling risk • Risky shift • Conservative shift • Decision valence

  21. Group Think Antecedents Symptoms Outcomes

  22. Group Think • The tendency of highly cohesive groups to conform to group pressures and to suspend reality testing and engage in consensus seeking. • Antecedents • .High cohesiveness • Group structure • Stressful situations

  23. Group Think Cont. • Symptoms • Overestimation of the group • Close-mindedness • Increased pressure for uniformity • Consequences • Defective decision making • High probability of a bad decision • Preventive tactics

  24. Group Think Cont. • Symptoms • Overestimation of the group • Close-mindedness • Increased pressure for uniformity • Consequences • Defective decision making • High probability of a bad decision • Preventive tactics

  25. Improving the Effectiveness of Group Decisions • Group training • Brainstorming • Delphi technique • Nominal group technique • Managing controversy • Electronic groups

  26. Group Training • Problem stating in an objective manner • Providing and sharing relevant information • Drawing out group members • Preventing domination • Avoid moving to evaluation prematurely; • Stimulating discussion and clarify points; • Summarizing to mark group progress.

  27. Group Training, Cont. • Training also reduces 3 problems • Unconflicted adherence • Defensive avoidance • Hyper-vigilance

  28. Delphi Technique • Enlist cooperation of experts and propose problem • Experts record solutions • Solutions are compiled and shared with others • Experts comment on others’ solutions • Solutions compiled and consensus sought

  29. Nominal Group Technique • Group gathers to hear problem • Participants write down ideas privately • All ideas are presented on a chart • Each idea is discussed by group members • Members privately rank ideas • Highest ranked idea is the solution

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