15 Chapter Decision Making and Organizational Learning
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What is Decision Making?
The process by which members of an organization choose a specific course of action to respond to the opportunities and problems that confront them
Opportunities
Problems
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Basic Types of Organizational Decisions
Nonprogrammed Novel opportunities or problems Requires extra information Uncertainty Programmed Recurring opportunities or problems Based on performance program
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Nonprogrammed and Programmed Decision Making
Novel problem arises Problem or opportunity recurs Nonprogrammed decision making Programmed decision making Performance Program used
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The Decision-Making Process
Classical Decision Making Model
Administrative Decision Making Model
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Classical Decision-Making Model
Prescriptive Assumptions People have access to all necessary information People choose the best possible solution
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Steps in the Classical Model
List all alternatives List consequences of each alternative Rank alternatives from most preferred to least preferred based on outcomes desired Select alternative that results in most preferred set of consequences Follow-up
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Problems with the Classical Model
All necessary information for optimal decision Unable to use some information Cognitive abilities Information overload Cost/Benefit not there
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Administrative Decision-Making Model
Bounded Rationality Assumptions Approximations of situation used Not all information considered Satisficing
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Bounded Rationality
Ability to reason that is limited by the limitations of the human mind itself Lack of cognitive abilities Subjective definitions of situation Satisfice rather than optimize
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Sources of Error in Decision Making
Shortcuts
Escalation of Commitment
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Escalation of Commitment
Tendency of decision makers to invest additional time, money, or effort into poor decisions
Reconfirm correctness of original decision Desire to recoup losses (sunk costs) Risky behaviors increased by negative situation
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Escalation of Commitment
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Heuristics and Resulting Biases
Availability Heuristic Representativeness Heuristic Anchoring & Adjustment Heuristic
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Heuristics are rules of thumb used to simplify a decision process.
2005 Prentice Hall
Availability Heuristic
Reflects tendency to determine the frequency of an event and its causes by how easy these events and causes are to remember. Biases Overestimation of frequency of vivid events recent events
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Representativeness Reflects Heuristic
the tendency to predict the likelihood of an event occurring from the extent to which the event is typical of similar kinds of past events and outcomes following specific events. Biases Failure to consider actual or base rate Overestimating likelihood of rare event
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Anchoring and Adjustment Heuristic
Reflects tendency to make decisions based on adjustments from some initial amount Biases Inappropriate decisions when initial amounts are too high or too low Salary increments are based on what the salary is now. Perhaps we should ask each year what the position is worth. (or not)
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Group Decision Making
Advantages Availability/ diversity of members' skills, knowledge, expertise Enhanced memory Greater ability to correct errors Greater decision acceptance Disadvantages Time to make a decision Group conflict Potential for groupthink
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Advantages and Disadvantages of Group Decision Making
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Use Individual Decision Making When...
An individual has all capabilities necessary to make a good decision An individual can gather and assess all necessary information Acceptance of decision is unnecessary or likely to occur anyway
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Symptoms of Groupthink
Illusion of invulnerability Belief in inherent morality of group Collective rationalizations Stereotypes of other groups
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Self-censorship Illusions of unanimity Direct pressure on dissenters Emergence of selfappointed mind guards
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Steps for Minimizing Groupthink
Group leader encourages thoughtfulness/ criticism Group leader refrains from expressing own opinion and views until group has considered all alternatives Group leader encourages group members to gather information from outside people Group leader assigns devil's advocate Group leader holds second meeting for important decisions
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Other Consequences of Group Decision Making
Diffusion of Responsibility Potential for Conflict Group Polarization
(conservative and risky Shift)
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Proper Communication of Decisions
Employees are more likely to embrace changes when they are involved in the decision process. What should employees be told about decisions? How the decision was made. The reasons for it. What alternatives were rejected. How the decision fits into the organization's new mission and vision. What changes it will mean for the company. How it affects employees.
Phillip Clampitt, WSJ, 2007
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Group Decision Making Techniques
Brainstorming Delphi Technique Nominal Group Technique
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Brainstorming Problems
Suppression Of Ideas
(inhibition)
Production Blocking
(i.e., leveling)
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