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© 2011 Cengage Learning. All rights reserved.
Chapter 10 Decision Making by Individuals &
GroupsL
earn
ing
Ou
tco
mes
1. Identify the steps in the decision-making process.
2. Describe various models of decision making.
3. Discuss the individual influences that affect decision making.
4. Explain how groups make decisions.
5. Describe the role culture plays in decision making.
6. Explain how organizations can improve the quality of decisions through participation.
© 2011 Cengage Learning. All rights reserved.
Learning Outcome
Identify the steps in the decision-making process.
1
© 2011 Cengage Learning. All rights reserved.
Types of Decisions
Programmed Decision
a simple, routine matter for which a manager has an
established decision rule
Nonprogrammed Decision
a new, complex decision that requires a creative
solution
Recognize the problem and the need for a decision
Gather and evaluate dataand diagnose the situation
Identify the objective ofthe decision
List and evaluatealternatives
Decision Making Process
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Select the bestcourse of action
Gather feedback
Implementthe decision
Follow up
Decision Making Process
© 2011 Cengage Learning. All rights reserved.
© 2011 Cengage Learning. All rights reserved.
Learning Outcome
Describe various models of decision making.
2
© 2011 Cengage Learning. All rights reserved.
Rationality
a logical, step-by-step approach to
decision making, with a thorough
analysis of alternatives and their
consequences
© 2011 Cengage Learning. All rights reserved.
Models of Decision Making
Effective Decision
a timely decision that meets a desired objective and is acceptable to those individuals affected by it
1. The outcome will be completely rational
2. The decision maker uses a consistent system of preferences to choose the best alternative
3. The decision maker is aware of all alternatives
4. The decision maker can calculate the probability of success for each alternative
Rational Model
© 2011 Cengage Learning. All rights reserved.
© 2011 Cengage Learning. All rights reserved.
Bounded Rationality
a theory that suggests that there are
constraints that force a decision
maker to be less than completely
rational
1. Managers select the first alternative that is satisfactory
2. Managers recognize that their conception of the world is simple
3. Managers are comfortable making decisions without determining all the alternatives
4. Managers make decisions by rules of thumb or heuristics
Bounded Rationality Model
© 2011 Cengage Learning. All rights reserved.
• Assumes that managers satisfice – select the first alternative that is “good enough”
• Assumes that managers develop heuristics, short cuts, to make decisions in order to make decisions to save mental activity.
Bounded Rationality Model
© 2011 Cengage Learning. All rights reserved.
© 2011 Cengage Learning. All rights reserved.
Garbage Can Model
a theory that contends that decisions in organizations are random and unsystematic
Problems
Participants
Solutions
Choiceopportunities
Beyond the Book:
© 2011 Cengage Learning. All rights reserved.
Escalation of Commitment
the tendency to continue to commit
resources to a failing course of action
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Escalation of Commitment
• Why it occurs– people dislike inconsistency– overly optimistic– illusion of control– sunk costs
• How to deal with it– split responsibility for decisions– closely monitor decision makers– provide individuals with a graceful exit– have groups make the initial decision
© 2011 Cengage Learning. All rights reserved.
Learning Outcome
Discuss the individual influences that affect decision making.
3
© 2011 Cengage Learning. All rights reserved.
Cognitive Style
an individual’s preference for
gathering information and evaluating
alternatives
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Risk Aversion
the tendency to choose options
that entail fewer risks and less
uncertainty
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Risk and the Manager
• Many decisions involve some element of risk.
• Individuals differ in terms of risk aversion.
• Risk aversion is determined by individual tendencies and organizational factors.
• To encourage risk taking, must view failure as “enlightened trial and error.”
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Influences onDecision Making
Intuition – fast, positive force in decision making utilized at a level below consciousness, involves learned patterns of information
Creativity – a process influenced by individual and organizational factors that results in the production of novel and useful ideas, products, or both
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Influences on Creativity• Individual:
– Cognitive Processes• Divergent Thinking• Associational Abilities• Unconscious Processes
– Personality Factors• breadth of interests• high energy• self-confidence
• Organizational:– Flexible organization structure– Participative decision making– Quality, supportive relationships with supervisors
Creative performance is highest when there is a match or fit between the
individual and organizational influences.
© 2011 Cengage Learning. All rights reserved.
GPS devices and freely-available online maps are forcing the mapping industry to change how it does business.
Map companies are incorporating digital services into their business model, capitalizing on the benefits of paper maps, expanding into related fields like astronomy and planetary mapping, or simply scaling back their businesses.
Faced with a challenge, map industry professionals are charting a variety of courses--which decisions will succeed?
Beyond the Book:Mapping Changes in the Industry
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Four Types of Creativity
Responsive
Expected Contributory
Proactive
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Can you think of new solutions to these common organizational problems?
• Employees’ productivity declines sharply the day after the Super Bowl.
• Your organization has been in deficit for three consecutive quarters. Where do you make cuts in the budget?
• You learn that the company can no longer afford to provide lunch to employees. How would you maintain morale?
Beyond the Book:Be Creative!
© 2011 Cengage Learning. All rights reserved.
Group Decision Making
• Synergy – occurs when group members stimulate new solutions to problems through the process of mutual influence and encouragement within the group.
• Social decision schemes – simple rules used to determine final group decisions
Majority WinsTruth Wins
Two-thirds Majority First-shift
Group Decision Making
1. more knowledge through pooling of group resources
2. increased acceptance and commitment due to voice in decisions
3. greater understanding due to involvement in decision stages
Advantages
1. pressure in groups to conform2. domination by one forceful member
or dominant clique3. amount of time required, because
group is slower than individual to make a decision
Disadvantages
© 2011 Cengage Learning. All rights reserved.
© 2011 Cengage Learning. All rights reserved.
Limits of Group Decision Making
Groupthink – a deterioration of mental efficiency, reality testing, and moral judgment resulting from in-group pressures
Group Polarization – the tendency for group discussion to produce shifts toward more extreme attitudes among members
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Preventing Groupthink
• Ask each group member to act as critical evaluator
• Have the leader avoid stating his opinion prior to the group decision
• Create several groups to work simultaneously
• Appoint a devil’s advocate• Evaluate the competition carefully• After consensus, encourage rethinking
the position
From Janis, Irving L., Groupthink: Psychological Studies of Policy Decisions and Fiascoes, Second Edition. Copyright © 1982 by Houghton Mifflin Company.
Self-Managed Teams Dialectical
InquiryBrainstorming
Devil’s Advocacy
Delphi Technique
Nominal Group Technique
Quality Circles and Quality Teams
Group Decision Techniques
© 2011 Cengage Learning. All rights reserved.
© 2011 Cengage Learning. All rights reserved.
Special Decision-Making Groups
• Quality circles – small groups that meet voluntarily to address work-related problems.
• Quality teams – a team that is part of an organization, empowered to act on its decisions regarding quality
• Self-managed teams – more broadly focused than above two types
© 2011 Cengage Learning. All rights reserved.
Learning Outcome
Describe the role culture plays in decision making.
5
© 2011 Cengage Learning. All rights reserved.
Hofstede’s Dimensions
• Styles of decision making vary by
culture
• Many of Hofstede’s
dimensions have implication for
how people deploy the decision-
making process
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Beyond the Book:Decisions in Japan
“Teamwork” and “Collaboration” look much different in Japan than in the United States. In Japanese firms, workers (especially lower level) tend to remain silent during meetings, avoid sitting next to upper management, and rigorously avoid using their boss’ first name. Upper management, meanwhile, steer clears of direct feedback or delivering the “hard truth.” At all levels, harmony and restraint, rather than independence and risk-taking, are prized values.
© 2011 Cengage Learning. All rights reserved.
Decision Making in the Virtual Workplace
Desktop Videoconferencing
Systems
Internet/IntranetSystems
Tools for
Virtual Teams
Group DecisionSupport Systems
Bey
ond
the
Boo
k
© 2011 Cengage Learning. All rights reserved.
Learning Outcome
Explain how organizations can improve the quality of decisions through participation.
6
© 2011 Cengage Learning. All rights reserved.
Participative Decision Making
Occurs when individuals who are affected by decisions influence decision-making
Supportive organizational cultureTeam-oriented work design
People must be psychologically equipped
Motivation to act autonomouslyEmployees must be able to see benefit
OrganizationalFoundation
IndividualFoundation
© 2011 Cengage Learning. All rights reserved.
Beyond the Book:Ethics Check
• Is it legal? – Does it violate law– Does it violate
company policy• Is it balanced?
– Is it fair to all– Does it promote win–win relationships
• How will it make me feel about myself
© 2011 Cengage Learning. All rights reserved.
Workers face a growing problem – the computers, applications and phones they use at work are ancient compared to what they use personally. For example, some chafe at having to use email systems with limited storage when free webmail options provide gigabytes of space. Others are frustrated that their company still uses an operating system released in 2001.
How would you resolve this issue? How would you provide cutting-edge technology while maintaining costs? How would you deal with employees who are not tech savvy?
Beyond the Book:Can I Use Another Computer?
© 2011 Cengage Learning. All rights reserved.
Failure to Launch
1. Does “The Bird Problem” present Kit and Ace with a programmedor nonprogrammed decision? What features of their decision problemled to your choice?
2. Review the earlier section describing the decision-making process. Which steps in that process appear in “The Bird Problem?” Note the examples of each step that you see.
3. Assess the degree of certainty, uncertainty, and risk that Kit and Aceface in this decision problem. What factors set the degree of certainty,uncertainty, and risk?