2_Decision Making

2_Decision Making - Outline of Today’s Class Outline of...

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Unformatted text preview: Outline of Today’s Class Outline of Today Wrap­up Control AND Commitment OB as competitive advantage, why is OB important Illustrative example of OB problems potentially derailing a product launch: Terra­ Cog Case Human and Social Capital Human and Social Capital Human Capital the productive potential of an individual’s knowledge and actions Social Capital productive potential resulting from strong relationships, goodwill, trust, and cooperative effort The Strategic Importance and The Strategic Importance and Dimensions of Human and Social Capital Strategic Assumption: People, individually and collectively, are the key to organizational success Individual Human Capital Organizational Learning (Shared Knowledge) Social Capital Terra­Cog Case Study Terra­Cog Case Study How have departmental and individual objectives led to the current situation? What is the current decision­making process? What are the strategic and organizational implications of each of the company’s options? What should Emma Richardson do? A Control Theory Model: Control and A Control Theory Model: Control and Commitment? Feed Up Principles Feedback/Reinforcement Expectations Feed Down Organizational Goals Organizational Goals Values Values Standards Standards Project Project Discrepant? Actual Actual Feedback Change Change In teams In teams Identify and discuss an organizational situation (from public or personal knowledge) where a faulty decision or error occurred wherein: The decision was attributed to organizational/people processes and/or Could have been avoided with better processes The Traditional, Analytical Model of The Traditional, Analytical Model of Decision Making 1. Identify the Problem (e.g., insufficient funds to meet payroll obligations) 2. Define Objectives 8. Follow up (e.g., do I now have sufficient funds?) (e.g., increase cash flow) 3. Make a predecision 7. Implement choice (e.g., decide to solve this problem alone) (e.g., raise prices slightly and sell excess inventory) 6. Make a choice (e.g., decide to raise prices slightly and sell excess inventory) 4. Generate alternatives (e.g., raise prices, lay off workers, liquidate equipment, etc.) 5. Evaluate alternatives (e.g., higher prices may lower sales, laying off workers will slow production) The Administrative Decision­Making Model Negotiating goals Monitoring problems & prospects to determine routineness Routine problems Nonroutine problems Initiate performance programs Expert evaluate alternatives sequentially Check outcome against minimum acceptability standard (satisfying) First alternative that meets minimum acceptable standard chosen Check outcome against minimum acceptable standard Factors That Prevent Rationality Factors That Prevent Rationality 1. Lack of Consensus on goals on ways to achieve goals 2. Uncertainty Causal ambiguity: What are means­>ends relationships? what are expected values? (uncertainty vs. risk or certainty) 3. “Noisy” Environments poor measures Information overload 4. Emotion Types of Decisions Types of Decisions Programmed ­ Highly routine decisions made according to preestablished organizational routines and procedures. Nonprogrammed ­ Decisions made about a highly novel problem for which there is no prescribed course of action. Types of Decisions: Uncertainty Types of Decisions: Uncertainty Certainty CDs Risk Lottery Uncertainty Stocks When Is the Super Lotto When Is the Super Lotto a “FAIR BET”????? Fair Bet: expected amount won is equal to cost/investment Bad Bet: expected value is less Good Bet: expected value is greater Odds of winning are (about) 11,000,000 to 1 Here are your choices: a. 11,000,000 b. 16,000,000 c. 24,000,000 d. 32,000,000 Explain your choice ___________________ Types of Decisions Types of Decisions Top­Down ­ The practice of vesting decision­ making power in the hands of superiors as opposed to lower level employees. Empowered ­ The practice of vesting power for making decisions in the hands of employees themselves (Job enrichment) Types of Decisions Types of Decisions 1. Both quality & acceptance are important setting priorities for the School of Management 2. Quality is important, but acceptance is not pricing policy purchasing technical problems 3. Acceptance is important, but quality is not issues of “fairness”, e.g., who does overtime, who does “crummy” job, who gets new computer equipment, etc. Escalation of Commitment: An Escalation of Commitment: An Overview Past Past Time Decision Decision Do X Do X Do X Do X Do X Do X Do X Do X Do X Do X Do X Do X Outcome Outcome Present Present Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Do X Again? Do X Again? Yes No Yes No Escalate commitment; Escalate commitment; throw good money after throw good money after bad in order to justify bad in order to justify previously made decisions previously made decisions Conditions under Conditions under which escalation which escalation of commitment of commitment is unlikely is unlikely •• Limited resources Limited resources •• Overwhelming Overwhelming eevidenceof vidence of nnegativeoutcomes egative outcomes •• Diffused Diffused rresponsibility esponsibility for previous for previous ddecisions ecisions Give up; cut Give up; cut losses and run losses and run Structured Decision­Making Structured Decision­Making Techniques Nominal Group Technique (NGT) Delphi technique Step­ladder technique The Nominal Group Technique: An Overview The Nominal Group Technique: An Overview 1. A small group gathers around a table and receives instructions; problem is identified. 2. Participants privately write down ideas about problem solving. 3. Each participant’s ideas are presented, one at a time, and are written on a chart until all ideas are expressed. 4. Each idea is discussed, clarified, and evaluated by group members. 5. Participants privately rank the ideas in order of their preference. 6. The highest-ranking idea is taken as the group’s decision Delphi Technique Delphi Technique 1. Leader identifies a problem and develops a questionnaire. 2. Participants (experts) are selected. 3. Questionnaires completed & returned to leader. 4. Results compiled and sent to all participants. 5. Participants comment on each other’s ideas and propose final recommendations. 6. Leader looks for consensus & accepts the group’s choice. The Stepladder Technique: A Summary The Stepladder Technique: A Summary Step 4 Step 3 Step 2 Step 1 Final group decision made by Person A, Person B, Person C, and Person D Tentative group decision made by Individual decision by Person A, Person B, and Person C Person D Tentative group decision made by Individual decision by Person A and Person B Person C Individual decision by Individual decision by Person A Person B Follow these 12 steps to more Follow these 12 steps to more efficient and effective meetings: Prepare a meeting agenda. Distribute the agenda in advance. Consult with participants before the meeting. Get participants to go over the agenda. Establish specific time parameters. Maintain focused discussion. Encourage and support participation of all members. Maintain a balanced style. Encourage the clash of ideas. Discourage the clash of personalities. Be an effective listener. Bring proper closure. Take Homes This Week Take Homes This Week Think systematically, problemanalysis(cause)solution It Depends (on what) A commitment (freedom) strategy is popular and gaining strength, but control and commitment can Treat people with dignity and respect, an asset, not a means of production; related, people ARE a main source of sustained competitive advantage. There are degrees of “going along”—be a pig. Control may be necessary, but may also inhibit creativity/innovation, be aware of unintended consequences ...
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