Decision Making Chapter 13

1. Decision Making Chapter 13

2. Introduction This lecture will: Define decision making and explore neoclassical and rational assumptions Look at the reality of decision making compared to its theory Look at aspects of employee involvement and pros and cons of decision making Introduce the ethics of decision making Discuss the development of decision making and techniques for improvement

3. The Nature of Decision Making Decision Making is a conscious process for making choices with an intention of moving towards a desired course of action (March, 1997; Mintzberg, 1979) Decision making can be analysed at various different levels: Organizational Group Individual

4. Table 13.1 - Levels of Organizational Decision Making Behaviour

5. The Assumption of Rationality It is assumed that decisions will be made rationally (Fayol) This assumption of rationality feeds into the control perspective of management and into models of efficiency focused on performance The rational decision making model is rooted in neoclassical economics and underscores the importance of managerial decision making in relation to: Resource allocation Efficiency Labour productivity It is a normative model and it suggests seven key steps for the achievement of decision making, forming a feedback loop

6. Figure 13.1 - A Rational Decision Making Model

7. Assumptions Within Rationality Assumptions are built into the way a problem is identified, not just at the level of analysis thereafter When attempting to make a rational decision, different weights are assigned to different factors The differing weights are based on the decision maker’s own values and preferences The designers of the rational decision making model itself hold a cluster of assumptions about decision making, relating to Problem clarity, knowledge of options, clarity and consistency of preferences, efficiency of solution, and time/cost constraints

8. Realities of Decision Making In practice, normative decision making is impossible to realize Weaknesses can exist at the individual, group or organizational level These weaknesses are due to the integration of criteria, often accorded weights (following the rational model), which have weak underlying premises

9. Realities: The Individual Level Impediments to decision making at an individual levelinclude: Information processing failure – excess or limits on the information acquired leading to non-optimal decisions Perceptual bias – filtering of information or ‘blinkered’ mental models Intuition and emotion – either can cause non-rational effects in decision making Escalation of commitment to a course of action

10. Table 13.2 – Individual Bias in Decision Making

11. Realities: The Group Level Impediments to decision making at the group levelinclude: Conformity – the group decision can be blighted by excessive conformity (eg Asch and Milgram’s experiment on the line-matching with playing cards) Groupthink – highly cohesive groups can over-conform to a given understanding (eg the NASA case)

12. Figure 13.2 – An Example of the Cards Used In Asch’s Experiment

13. Table 13.3 - The Symptoms of Groupthink

14. Realities: The Organizational Level Impediments to decision making at the organizational level include: Messiness – individual and organizational group decisions are polycontextual, with multiple tasks and shifting opportunities and constraints – the metaphor of the garbage-can is used (Cohen, March and Olsen, 1972) Past history/politics – these can affect decisions This has led to the political theory model which argues that past politics represents an invisible hand in all decisions

15. Employee Involvement in Decision Making Employee Involvement (EI) refers to the degree to which subordinates can influence the organization and performance of their work EI can involve: Direct involvement in decisions Indirect involvement in decisions (eg through representatives) EI links in with empowerment and work team cultures The indirect representation system is linked to industrial democracy Examples are: Joint Consultation Committees, European Work Councils, Worker Directors

16. Advantages of Employee Involvement In changing business and HR strategies, EI is used to: Gain commitment Create high performance work systems Identify problems quickly (Marchington, 2001) Verma (1995) makes a case for EI in terms of: Economic reasons: qualitative improvement according to the US 'doctrine of excellence' Moral reasons: social responsibilities of management in a democracy Behavioural reasons: desire for community ownership of decision making

17. Figure 13.3 - The involvement–commitment cycle This is linked to EI; it shows the positive advantages of employee involvement in the workplace

18. Ethics and Decision Making (1) Failure to adhere to moral principles has affected the corporate world This includes the US scandals in 2003 partly linked to ENRON The reaction led to a program of reform including a revision of accountancy regulations Research suggests that moral or immoral behaviour is caused by Individual traits The context in which people work, including the organizational norms Therefore misbehaviour can be a systems failure!

19. Ethics and Decision Making (2) The following factors determine ethical behaviour Contextual factors – individual perception of expectations Governance norms – democratic decision making that is non-hierarchical in nature, facilitating discussion Moral development – an individual’s capacity to judge morally Locus of control – the apportionment of responsibility for moral choices Constraints imposed by context can only diminish unethical behaviour if modes of socialization and a systemic structure to reward ethical behaviour and punish unethical behaviour is present in the organization

20. Figure 13.4 - Determinants of Ethical Behaviour in Work Organizations This draws on the work of Trevion (1986), Carroll (2004) and Bratton, Grint and Nelson (2005)

21. Developing Decision Making Skills (1) Improvements in decision making skills can limit non-rational effects on outcomes Group decision making can be improved by: Setting objectives Maintaining optimal group size Preventing over-dominance of processes by an individual

22. Developing Decision Making Skills (2) Four specific methods can be used to help reduce the danger of bias/error: Brainstorming – fosters the development of many ideas in a non-critical environment Nominal group technique – a variation of brainstorming with semi-independent ideas generated Computer mediated brainstorming – a hi-tech technique employing anonymous suggestions The Delphi technique – uses rounds of questionnaires and also incorporates anonymity as ideas are refined