Understanding How Decisions Happen in Organizations by James March

1. Understanding How Decisions Happen in Organizationsby James March Published in Organizational Decision Making, Ed. ZurShapira, Cambridge University Press

2. March … introduction “Economics (and by analogy psychology) is all about how people make choices; sociology (and by analogy anthropology and political science) is all about how they don’t have any choices to make.” (James Duesenberry 1960) Organizational decision theorists in the midst of the distinction …

3. March … the nature of human decision making The study of how decisions happen provides a setting for a cluster of issues about human decision making: • Should decisions be viewed as choice-based or rule-based? • Is decision making typified more by clarity and consistency or by ambiguity and inconsistency? • Is decision making an instrumental activity (means to ends) or an interpretive (sense making) activity? • Are outcomes of decision processes attributable to the actions of autonomous actors or to the properties of an interacting ecology?

4. March … decisions as rational choices Human action is the result of human choice and that human choice is intendedly rational. There is: • Knowledge of alternatives • Knowledge of consequences • Consistent, precise, stable, exogenous preferences • A decision rule to make a choice (such as expected utility maximization) “The durability of this structure is impressive.” Organizational decision theorists basically share these ideas of consequential choice, but they have modified them considerably (Cyert, March, Simon). How? … bounded rationality

5. March … decisions as rule-based actions “Much of the decision making behavior we observe reflects the routine way in which people seek to fulfill their identities … most people in organizations follow rules … much of the behavior in organizations is specified by standard operating procedures, professional standards, cultural norms. … They follow traditions, hunches, cultural norms and the advice or action of others.” Describe how this logic differs from the logic of consequence? Rather than evaluating alternatives in terms of the values of their consequences, it matches situations and identities. For example, is it an appropriate thing to smoke?

6. March … decisions as rule-based actions Interesting research questions: • Nature of rules: heuristics (not optimization) • Rule development – rules as coded information, role of experiential learning • Rule implementation, rule interpretation, ambiguity of rules, role of self interest

7. March … decision making an instrumental or interpretive activity Sense making (out of a confusing world; of their pasts, futures, natures), providing meaning Sense making as an input to decision making: Coding situations into terms meaningful to a DM. Description of decision making is incomplete without clarifying the ways in which individual and organizational processes shape the premises of decision making. DMs simplifying, editing situations/preferences, ignoring some information and focusing on other information, decomposing problems into sub-problems, ignoring interactions, working backward from desired outcomes to necessary preconditions.

8. March … decision making an instrumental or interpretive activity Sense making as an output to decision making: Decision outcomes are a primary product of a decision process (rational, rule-based). The significance of sense making lies in its effects on decision outcomes. Post-decision justification! Sense making (meaning) is not only a premise of decision making but also a result of it.

9. March … life a sequence of choices or more concerned with forming interpretations (making sense) “We are led to a perspective that questions the idea that life can be conceived as a sequence of choices. The alternative is that life is more concerned with forming interpretations (individual and social meaning) than with making choices … outcomes are seen as less significant than processes … processes give meaning to life, and meaning is the core of life … decisions happen” Comment the quote!

10. March … Decision Making Ecologies “Theories of organizational decision making focus on what is happening at a particular place, in the heads of particular persons, and at a particular time … They tend to ignore the significance of the interactive conflict, confusion, and complexity surrounding actual decision making … Many things are happening at once and they affect each other.” Is it possible to describe decisions as resulting from the intentions and interests of independent actors? Or should we emphasize the ways in which individuals, organizations, and societies fit together and interact?

11. March … Decision Making Ecologies “Decision making is embedded in a social context that is itself simultaneously shaped by decision making in other organizations … The development of rules, beliefs, and expectations in one organization is intertwined with their development in others … Competition, cooperation, and imitation lead organizations to shape each other’s decisions and decision making.” Examining these connections requires “an ecological vision of decision making … that considers how the structure of relationships among individual units interacts with the behavior of these units to produce … properties not easily attributable to the individual behavior alone”.

12. March … Decision Making Ecologies • Disorderliness: Funny soccer games (randomness?) • No, but … Ways in which organizations bring order to disorder is less hierarchical and less based on means-ends chains than is anticipated by conventional theories. There is order but not conventional order. … • A more limited version focuses on the allocation of attention: The attention devoted to a particular decision by a participant depends on alternative claims on attention. … Multiple, changing claims on attention (garbage-can model by Cohen & March).

13. March … Conclusion “The grandest tradition of research is to increase ignorance at the same time as it increases knowledge” • Does this quote fit organizational decision making theories? • What do organizational decision theorists agree on? How could we deal with the difficulties of organizational decision making? What about operative decisions versus strategic decisions? • Have you acted in a decision making capacity in an organization? What kind of decision maker are you?