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Chapter Seven
Individual & Group
Decision Making
How ManagersMake Things
Happen
McGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
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Major Questions You Should Be
Able to Answer
7.1How do people know when theyre being
logical or illogical?
7.2 How can I improve my decision making using
evidence-based management and business
analytics?
7.3 How do I decide to decide?
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Major Questions You Should Be
Able to Answer
7.4 What guidelines can I follow to be sure that
decisions I make are not just lawful but
ethical?
7.5 What are the barriers to decision making?
7.6 How do I work with others to make things
happen?
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Two Kinds of Decision Making
Decision
choice made from among available alternatives
Decision making
process of identifying and choosing alternative
courses of action
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Rational Decision Making
Figure 7.1
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Rational Decision Making
Rational model of decision making
explains how managers should make decisions
assumes managers will make logical decisions
that will be optimum in furthering the
organizations interest
also called the classical model
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Assumptions of the Rational Model
Complete information, no uncertainty
Logical, unemotional analysis (rational)
Best decision for the organization (optimizing)
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Table 7.1
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Nonrational Decision Making
Nonrational models
of decision making
assume that decision
making is nearlyalways uncertain and
risky, making it difficult
for managers to make
optimal decisions
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Bounded Rationality
Bounded Rationality
suggests that the ability of decision makers to be
rational is limited by numerous constraints
complexity, time and money, cognitive capacity
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Some Hindrances to Perfectly
Rational Decision Making
Complexity
Time and money constraints
Different cognitive capacity, values, skills,habits, and unconscious reflexes
Figure 7.2
7-10
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Some Hindrances to Perfectly
Rational Decision Making
Imperfect information
Information overload
Different priorities
Conflicting goals
Figure 7.2
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Satisficing and Incremental Models
Satisficing Model
managers seek alternatives until they find one
that is satisfactory, not optimal
Incremental Model
managers take small, short-term steps to alleviate
a problem
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Intuition Model
Intuition
making a choice without the use of conscious
thought or logical inference
sources are expertise and feelings
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Implementation Principles of
Evidence-Based Decision Making
Treat your organization as an unfinished
prototype
No brag, just facts
See yourselfand your organization as
outsiders do
Evidence-based management is not just for
senior executives
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Implementation Principles of Evidence-
Based Decision Making (cont.)
Like everything else, you still need to sell it
If all else fails, slow the spread of bad practice
The best diagnostic question: what happenswhen people fail?
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What Makes It Hard to Be Evidence
Based
1. Theres too much evidence
2. Theres not enough good evidence
3. The evidence doesnt quite apply4. People are trying to mislead you
5. You are trying to mislead you
6. The side effects outweigh the cure7. Stories are more persuasive anyway
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Analytics
Analytics
sophisticated forms of business data analysis
Portfolio analysis, time-series forecast
also called business analytics
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Key Attributes Among Analytics
Competitors
1. Use of modeling: going beyond simpledescriptive statistics
2. Having multiple applications, not just one
3. Support from the top
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General Decision-Making Styles
Decision-making style
reflects the combination of how an individual
perceives and responds to information
Value orientation
Tolerance for ambiguity
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Decision-Making Styles
Figure 7.3 7-20
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Decision-Making Styles
Directive
people are efficient, logical, practical, and
systematic in their approach to solving problems
action oriented, decisive, and likes to focus on
facts
Analytical
considers more information and alternatives
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Decision-Making Styles
Conceptual
takes a broad perspective to problem solving
likes to consider many options and future
possibilities
Behavioral
supportive, receptive to suggestions, show
warmth
prefer verbal to written information
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Which Style Do You Have?
Knowledge of your decision-making style:
Helps you to understand yourself
Can increase your ability to influence othersGives you an awareness of how people can
take the same information and yet arrive at
different decisions
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R d M t Ethi l D i i
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Road Map to Ethical Decision
Making: A Decision Tree
1. Is the proposed action legal?
2. If yes, does the proposed action maximizeshareholder value?
3. If yes, is the proposed action ethical?
4. If no, would it be ethical notto take theproposed action?
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The Ethical Decision Tree
Figure 7.4 7-25
l l l f
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General Moral Principles for
Managers
Dignity of human life
Autonomy
Honesty
Loyalty
Fairness
Humaneness
The common good
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ff
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Ineffective Responses to a Decision
Situation
Relaxed avoidance
Relaxed change
Defensive avoidancePanic
7-27
h ff i i idi
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Three Effective Reactions: Deciding
to Decide
Importance
How high priority is this situation?
Credibility
How believable is the information about the
situation?
Urgency
How quickly must I act on the information about
the situation?
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Ad t f G D i i
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Advantages of Group Decision
Making
Greater pool ofknowledge
Different perspectives
Intellectual stimulationBetter understanding of decision rationale
Deeper commitment to the decision
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Disadvantages of Group Decision
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Disadvantages of Group Decision
Making
A few people dominate or intimidate
Groupthink
SatisficingGoal displacement
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Groupthink
Groupthink
occurs when group members strive to agree for
the sake of unanimity and thus avoid accurately
assessing the decision situation
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h d b
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What Managers Need to Know About
Groups & Decision Making
They are less efficient
Their size affects decision quality
They may be too confident
Knowledge counts
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Group Problem-Solving Techniques
Computer-aided decision making
Chauffeur-driven systems
ask participants to answer predetermined questions
on electronic keypads or dials
Group-driven systems
involves a meeting within a room of participants who
express their ideas anonymously on a computernetwork
for anonymous networking
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