Chapter Six

1. Chapter Six Decision Making and Ethics

2. Chapter Six Outline • Models of Decision Making • The Rational Model • Bounded Rationality Model • Dynamics of Decision Making • Selecting Solutions: A Contingency Perspective • Personal Decision-Making Styles • Escalation of Commitment • Creativity

3. Chapter Six Outline (cont’d) Group Decision Making • Advantages and Disadvantages of Group-Aided Decision Making • Participative Management • When to Have Groups Participate in Decision Making: The Vroom/Yetton/Jago Model • Fostering Ethical Organizational Behaviour • Group Problem-Solving Techniques • How to Improve the Organization’s Ethical Climate

4. The Rational Model of Decision Making • Consists of a structured four-step sequence* identifying the problem * generating alternative solutions * selecting a solution * implementing and evaluating the solution

5. Bounded Rationality Model of Decision Making • Based on premise that decision making is not rational • Decision making is characterized by*limited information processing * use of judgmental heuristics * satisficing  choosing a solution • that meets a minimum standard • of acceptance

6. Judgmental Heuristics Availability Heuristic:A decision maker’s tendency to base decisions on information that is readily available in memory. Representativeness Heuristic:The tendency to assess the likelihood of an event occurring based on one’s impressions about similar occurrences.

7. Characteristics of Decision Task:The decision problem* Unfamiliarity* Ambiguity* Complexity*InstabilityThe decision environment*Irreversibility* Significance *Accountability* Time and/or money constraints Generating alternatives Characteristics of Decision Maker* Knowledge * Ability * Motivation* Risk Propensity * Decision Making Style A Contingency Model for Selecting a Solution Strategies toselect a solution * Aided analytic* Unaided-analytic* Nonanalytic

8. Contingency Relationships in Decision Making • Analytic strategies are used when the decision problem is unfamiliar, ambiguous, complex, or unstable • Nonanalytic methods are employed when the problem is familiar, straightforward, or stable. • Assuming there are no monetary or time constraints, analytic approaches are used when the solution is irreversible and significant and when the decision maker is accountable. • Nonanalytic strategies are used when the decision can be reversed and is not very significant or when the decision maker is not held accountable.

9. Contingency Relationships in Decision Making (cont’d) • As the probability of making a correct decision goes down, analytic strategies are used. • As the probability of making a correct decision goes up, nonanalytic strategies are employed. • Time and money constraints automatically exclude some strategies from being used. • Analytic strategies are more frequently used by experienced and educated decision makers. • Nonanalytic approaches are used when the decision maker lacks knowledge, ability, or motivation to make a good decision.

10. High Analytical Conceptual Directive Behavioural Tolerance for Ambiguity Low Tasks and TechnicalConcerns People and SocialConcerns Value Orientation Personal Decision Making Styles

11. 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. • Provide more frequent feedback about project completion and costs. • Reduce the risk of penalties of failure. • Make decision makers aware of the costs of persistence.

12. Stages Underlying the Creative Process • Preparation:Reflects the notion that creativity starts from a base of knowledge. • Concentration:Where an individual concentrates on the problem at hand. • Incubation:Done unconsciously. During this stage, people engage in daily activities while their minds simultaneously mull over information and make remote associations. • Illumination:Remote associations from the incubation stage are ultimately generated. • Verification:Entails going through the entire process to verify, modify, or try out the new idea.

13. Advantages and Disadvantages of Group-Aided Decision Making Advantages Disadvantages 1. Greater pool of knowledge 1. Social pressure 2. Different perspectives 2. Minority domination 3. Greater comprehension 3. Logrolling 4. Increased acceptance 4. Goal displacement 5. Training ground 5. Groupthink

14. Symptoms of Groupthink • Illusion of invulnerability • Belief in inherent morality of the group • Rationalization • Stereotyped view of opposition • Self-censorship • Illusion of unanimity • Peer pressure • Mindguards

15. How to Prevent Groupthink • Assign each member of the group the role of critical evaluator, to voice objections and doubts. • Top level executives should not use policy commitment to rubber-stamp decisions that have already been made • Different groups with different leaders should explore the same policy questions • Subgroup debates and outside experts should be used to introduce fresh perspectives • Someone should be given the role of devil’s advocate when discussing major alternatives. • Once a consensus has been reached, everyone should rethink their position to check for flaws.

16. Management Decision Styles in the Vroom-Yetton-Yago Model AI–The manager solves the problem or make the decision him or herself, using information available to him or her at that time. AII –The manager obtains the necessary information from his or her subordinate(s), then decides on the solution to the problem alone. CI –The manager shares the problem with relevant subordinates individually, getting their ideas and suggestions without bringing them together as a group. Then he or she makes the decision that may or may not reflect the subordinates’ influence. CII–The manager shares the problem with subordinates as a group, collectively obtaining their ideas and suggestions. Then the manager make the decision that may or may not reflect subordinates’ influence. GII –The manager shares a problem with subordinates as a group. Together they generate and evaluate alternatives and attempt to reach agreement (consensus) on a solution.

17. QR Quality Requirement Commitment Requirement Leader’s Information Problem Structure Commitment Probability Goal Congruence Subordinate Conflict SubordinateInformation CR LI ST CP GC CO SI LI Vroom and Jago’s Decision-Making Model Yes AI CP No Yes Yes GII GC SI No No Yes Yes CII CP No No No No Yes SI No No GII GC ST Yes Yes CO CII High GC No AII CP No CR No GC CI Low CO Yes Yes Yes No CII High ST No LI State the Problem Yes AI QR Low Low Yes CR GII High No CP

18. A Model of Ethical Behaviour in the Workplace Cultural Influences - Family - Education -Religion - Media/entertainment RoleExpectations Individual - Personality - Values - Moral principles - History of reinforcement - Gender Organizational Influences - Ethical codes - Organizational culture - Role models - Perceived pressure for results - Rewards/punishment system Ethical behaviour Political/legal/ economic influences

19. How to Improve an Organization’s Ethical Climate • Behave ethically yourself • Screen potential employees • Develop a meaningful code of ethics • Distributed to every employee • Firmly supported by top management • Refer to dilemmas likely to be encountered • Evenly enforced • Provide ethics training • Reinforce ethical behaviour • Create specific positions in the organization to deal with ethics