Leadership and the decision-making process

1. Leadership and the decision-making process Victor H. Vroom Amanda Brown

2. Victor H. Vroom • Professor – Yale School of Management • An authority on the psychological analysis of behavior in organizations, particularly on leadership and decision making • Education • PhD University of Michigan, 1958 • MPs.Sc. McGill University, 1955 • B.Sc. McGill University, 1953

3. Victor H. Vroom • His 1964 book, Work and Motivation, is regarded as landmark in that field, and his books dealing with leadership, Leadership and Decision Making and The New Leadership, are widely cited as breakthroughs in the study of organizational behavior. • Consulted to over 50 major corporations, including Bell Labs, GTE, American Express, and General Electric • Achievements • Distinguished Scholarly Contribution Award from Academy of Management, 2004  • 2004 Literati Award - Best article in 2003 • Distinguished Scientific Contributions Award, Society of Industrial and Organizational Psychology, 1998 • Fellow, American Psychological Association • Fellow, American Psychological Society • Fellow, The Academy of Management • Excellence in Teaching Award from the Yale SOM Alumni Association, 1994 • President, Society of Industrial and Organizational Psychology, 1980-1981 • James McKeenCattell Award, American Psychological Association, 1970 • Fulbright Lecturer in United Kingdom, 1967-1968 • McKinsey Foundation Research Design Competition Winner, 1967 • Ford Foundation Faculty Fellowship, 1961-1962 • Ford Foundation Doctoral Dissertation Competition Winner, 1958-1959

4. The Jim Burns Decision • Challenge • 10,000 gallons of crude oil escaped and was making its way 5 miles downstream towards a wildlife sanctuary • Jim’s team members were inexperienced • Issues in problem solving and decision making • 1) Determining what solution or decision should be adopted • Should Jim begin the cleanup or defer any action pending resolution of the liability issues? • 2) Determining how and with whom it should be decided • Should Jim decide himself, or should he involve the team in some way determining what decision should be made?

5. Leadership Styles • Vroom’s Question: What happens between a leader and the leader’s associates in decision-making situations? • Tannenbaum and Schmidt Taxonomy • a simple model which shows the relationship between the level of freedom that a manager chooses to give to a team, and the level of authority used by the manager • Starting point for the development of a Normative Model for managers • helps managers/leaders select a style that best fits a given situation

6. Vroom’s Adaptation of Tannenbaum and Schmidt’s Taxonomy • Taxonomy of Leadership Styles • Decide – make the decision alone and either announce or “sell” it • Consult Individually – You present the problem to the group members individually, get their suggestions, and then make the decision • Consult Group – You present the problem to the group members in a meeting, get their suggestions, and then make the decision • Facilitate - You present the problem to the group in a meeting. You act as a facilitator, defining the problem to be solved and the boundaries within the decision must be made. Your objective is to get concurrence on a decision. Above all, you take care to ensure that your ideas are not given any greater weight than those of others simply because of your position. • Delegate – You permit the group to make the decision within prescribed limits. The group undertakes the identification and diagnosis of the problem, developing alternative procedures for solving it, and deciding on one or more alternative solutions. While you play no role in the groups’ deliberations unless explicitly asked, your role is an important one behind the scenes, providing needed resources and encouragement. • Point Scale (0 – 10) • Decide is completely influenced by the leader (0) to Delegate allows an area of freedom for the group to make the decision.

7. Toward A Normative Model • Decision Quality • Desire: wise, well reasoned, analytically sound, and consistent with goals to be achieved • Nature of the decision and quality will change as you move across the scale • Depends Upon: • Where relevant knowledge or expertise resides (leader, group, or both) • Goals of the potential participants and extent of support the organizational objectives embedded in the problem • The amount of synergy in the skills and abilities of team members in working effectively towards problem solving

8. Decision Implementation • Group - effectiveness of implementation can be dependent upon the groups commitment to success • People support what they build • Greater “buy in,” commitment to decisions, and motivation to implement successfully • Leader – expert with legitimate right to make decision • group will support decision made by leader, regardless

9. Costs of Decision Making • Resources consumed/costs • Time used for decision making process (Hours Consumed) • Increases caused by • Time interval between the occurrence of a problem and obtaining a solution • Participation (number of group members) • Seeking Consensus VS Direct/Consultative Methods

10. Development • Offset costs with developmental benefits • Highly Participative Styles increase potential value of the group: • Develop the knowledge and confidence of members by providing opportunities to work through problems • Increases teamwork and collaboration by providing opportunities to problem solve as a team • Increases identification with organizational goals by giving people a voice in making significant decision in their organization • Development benefits are negligible if: • Decision lacks significance • Future of group member within organization is nonexistent

11. Decision Matrices • Time-Drive Model • Short-term orientation, concerned with making effective decisions at minimum cost • No value placed on employee development • Development-Driven Model • Long-term model, concerned with making effective decisions • Maximum developmental consequences for employees • No value is placed on time

12. Using the Models • First, have a decision problem in mind that has 2 properties • 1) it must fall within your area of freedom or discretion (up to you to make the decision) • 2) there must be some identifiable group of others who are potential participants in the decision • Second, enter the matrix at left-hand side (Problem Statement) • Third, to obtain recommended process, ascertain whether the decision to be made is significant • If so, select H (HIGH) and of not, selects L (LOW) • answer the next question(s) accordingly • Continuing this procedure will bring you to a recommended process

13. Situational Factors in the Normative Model • Decision Significance: the significance of the decision to the success of the project or organization • Importance of Commitment: the importance of team members’ commitment to the decision • Leader’s Expertise: Your knowledge or expertise in relation to this problem • Likelihood of Commitment: the likelihood that the team will commit itself to a decision that you might make on your own • Group Support for Objectives: the degree to which the team supports the organization’s objectives at stake in this problem • Group Expertise: team members’ knowledge or expertise in relation to this problem • Team Competence: The ability of team members to work together in solving problems

14. Toward A Descriptive Model • Problem Set – compiled set of 30 cases over a 25 year period, each depicting a manager faced with a decision to make • Originally developed as a research tool • Became a diagnostic tool capable of revealing the “managers model” • a multi-factorial experimental design permits determining which of the relevant factors influences each individual manager, in what way, and to what degree • Managers enjoyed and benefited from the experience of thinking through how they would deal with highly different situations and attempt to make sense of choices they made • Can show each manager how their choices were influenced by each of the situational factors

15. Practice • Setting: Banking • Your Position: President & CEO • Situation: • Write off commercial real estate loans, depleting already low capital • Bank is in danger of being closed by regulators • Top executive left to pursue other interests, but replaced with competent younger managers • You conclude to reduce critical expenses and the sale of assets to other banks • All to be done quickly or bank will be forced to close • You know what you want to do but want to use 3 young executives to help with the final decision • Do not know each other well, but all are dedicated to the survival of the bank

16. Analysis • Time Drive Model: • Situational Factors: • Decision Significance: H • Importance of Commitment: H • Leader’s Expertise: H • Likelihood of Commitment: L • Groups Support for Objectives: H • Group Expertise: H • Team Competence: L • CONSULTANT GROUP

17. A Managers Behavior • Managers behave situationally – they adapt their behavior to the situations they face • Autocratic when: • Leader makes decision on own, NO group • Participative when: • Highly significant decisions • Need commitment of the group • Lack the expertise • Likelihood of commitment to their decision is low • Group’s expertise is high • Group has history of effectively working together

18. Situational Factors • Some managers affected by all factors, some affected by only 1 or 2 and ignore the rest • Model responds to 7 situational factors configurally (1 factor level depends on the level of certain other factors) • Managers are affected by combinations of factors rather than individually

19. 10-Point Scale of Participation • Correlating the differences in where people stand on the scale: • Data collected over a 25 year period (problem set/basis of model) – leaders have become more participative over the years • Culture accounts for the greatest variance (different countries) • Gender differences – women managers are more participative • Level in the organization – the higher level, the more participative manager

20. Conclusion • Findings are restricted to managers responses in standardized cases (Problem Sets) • Process ignores managers style (what they are “good at” and their “organizational culture”) because what worked in the past is no guarantee of success in the future • Habits need to be converted back into choices • Goal: Re-examine management styles used in the past and reassess their appropriateness in today's environment

21. REFERENCES • Vroom, Victor H. "Educating Managers for Decision Making and Leadership.“ Management Decision. 41.10 (2003): 968-78. • Vroom, Victor H., and Arthur G. Jago. "The Role of the Situation in Leadership." American Psychologist. 62.1 (2007): 17-24. • Rausch, Erwin. "Guidelines for Management and Leadership Decision." Management Decision. 41.10 (2003): 979-88.