Decision Making: How Individuals and Groups Arrive at Decisions

2. 7 Organizational Behavior core concepts McGraw-Hill/Irwin Organizational Behavior, Core Concepts Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. Decision Making: How Individuals and Groups Arrive at Decisions

3. Learning Objectives • Compare the rational model of decision making with Simon’s normative model. • Discuss knowledge management and ways that companies increase knowledge sharing. • Explain the model of decision-making styles and the stages of the creative process.

4. Learning Objectives • Summarize pros and cons of involving groups in the decision-making process. • Explain how participative management affects performance. • Describe techniques used to improve the quality of group decisions

5. Models of Decision Making • Decision making • identifying and choosing solutions that lead to a desired result

6. Models of Decision Making • The Rational Model • logical four-step approach to decision making.

7. The Rational Model • Identifying the problem • Generating alternative solutions • Selecting a solution • Implementing and evaluating the solution

8. Rational Model • Identifying the Problem • Problem – exists when the actual situation and the desired situation differ • Generating Solutions • For routine decisions alternatives are readily available through decision rules

9. Rational Model • Selecting a Solution • Want to maximize the expected utility of an outcome • People vary in their preferences for safety or risk • Ethics should be considered

10. Rational Model • Selecting a Solution • Evaluating alternatives assume they can be judged according to some criteria • Assumes valid criteria exists • Each alternative can be compared to these criteria • Decision maker actually uses the criteria

11. Rational Model • Implementing and Evaluating the Solution • After solution is implemented, the evaluation phase is used to evaluate its effectiveness • Optimizing – choosing the best possible solution

12. Simon’s Normative Model Decision making is characterized by: • Limited information processing • Use of judgmental heuristics • Satisficing

13. Simon’s Normative Model • Bounded rationality • constraints that restrict decision making

14. Simon’s Normative Model Limited Information Processing • Tendency to acquire manageable rather than optimal amounts of information • Difficult for managers to identify all possible alternative solutions

15. Question? What is a rule of thumb that people use to reduce information processing demands? • Decision maker • Judgmental heuristics • Judgmental verdict • Decision conclusion

16. Simon’s Normative Model • Judgmental heuristics • rules of thumb or shortcuts that people use to reduce information processing demands.

17. Simon’s Normative Model • Availability heuristic • tendency to base decisions on information readily available in memory. • Representativeness heuristic • tendency to assess the likelihood of an event occurring based on impressions about similar occurrences.

18. Simon’s Normative Model • Satisficing • choosing a solution that meets a minimum standard

19. Dynamics of Decision Making • Knowledge management • implementing systems and practices that increase the sharing of knowledge and information throughout an organization

20. Forms of Knowledge • Tacit knowledge • information gained through experience that is difficult to express and formalize. • Explicit knowledge • information that can be easily put into words and shared with others.

21. General Decision Making Styles • Decision making styles • combination of how individuals perceive and respond to information

22. General Decision Making Styles • Value orientation • reflects the extent to which an individual focuses on either task and technical concerns or people and social concerns when making decisions • Tolerance for ambiguity • extent to which a person has a high need for structure or control in his life

23. Decision Making Styles Figure 7-1

24. Escalation of commitment sticking to an ineffective course of action too long Escalation of Commitment

25. Escalation of Commitment Psychological and Social Determinants • Tend to bias facts so that they support previous decisions • Take more risks when a decision is stated in negative terms • Get too ego-involved with the project

26. Escalation of Commitment Organizational Determinants • Breakdowns in communication • Workplace politics • Organizational inertia

27. Escalation of Commitment Project Characteristics • Tendency to attribute setbacks to temporary causes that are correctable with additional expenditures

28. Escalation of Commitment Contextual determinants • Culture of the decision makers • Political climate of the escalation situation

29. Recommendations To Reduce Escalation of Commitment • Set minimum targets for performance, and have decision makers compare their performance with these targets. • Have different individuals make the initial and subsequent decisions about a project. • Encourage decision makers to become less ego-involved with a project.

30. Recommendations To Reduce Escalation of Commitment • Provide more frequent feedback about project completion and costs. • Reduce the risk or penalties of failure. • Make decision makers aware of the costs of persistence.

31. Question? What is the process of using imagination to develop a new process? • Originality • Innovation • Creativity • Resourcefulness

32. Creativity • Creativity • process of using intelligence, imagination, and skill to develop a new or novel product, object, process, or thought

33. Stages of the Creative Process • Preparation • Concentration • Incubation • Illumination • Verification

34. Group Involvement • Minority dissent • extent to which group members feel comfortable disagreeing with other group members, and the extent to which group members participate in decision making

35. Advantages and Disadvantages of Group-Aided Decision Making

36. Participative Management • Participative Management • involving employees in various forms of decision making • Setting goals • Making decisions • Solving problems • Making changes in the organization

37. Group Problem Solving Techniques • Consensus • presenting opinions and gaining agreement to support a decision • Brainstorming • process to generate a quantity of ideas

38. Rules for Brainstorming • Defer judgment • Build on the ideas of others • Encourage wild ideas • Go for quantity over quality • Be visual • Stay focused on the topic • One conversation at a time

39. Group Problem Solving Techniques • Nominal Group Technique • process to generate ideas and evaluate solutions. • Delphi technique • process to generate ideas from physically dispersed experts

40. Group Problem Solving Techniques • Computer-aided decision making • reduces consensus roadblocks while collecting more information in a shorter period of time

41. Computer-aided Decision Making • Chauffeur-driven systems • ask participants to answer predetermined questions on electronic keypads • Group-driven meetings • conducted in special facilities equipped with individual workstations that are networked to each other