copyright © 2002 by south-western 9–1 the nature of decision making decision makingdecision...

Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–11

The Nature of Decision MakingThe Nature of Decision Making

•Decision makingDecision making The process of identifying a set of feasible alternatives The process of identifying a set of feasible alternatives

and from these, choosing a course of action.and from these, choosing a course of action.

•DecisionDecision A judgment that affects A judgment that affects

a course of action.a course of action.


Decision Making, Choice Making, and Decision Making, Choice Making, and Problem SolvingProblem Solving

Step 1

Recognizing

the need

for a

decision

Step 2

Generating

alternative

solutions

Step 3

Evaluatingthealternatives

Step 4

Choosing an

alternative

Step 5

Implementing

the chosen

alternative

Step 6

Monitoring

and main-

taining the

solution

Decision Making

Problem Solving

Choice Making

FIGURE 9FIGURE 9–1–1


When Decisions are NeededWhen Decisions are Needed

1.1. The current state of affairs has fallen short The current state of affairs has fallen short of a goal or ideal.of a goal or ideal.

2.2. A problem or crisis may arise that requires A problem or crisis may arise that requires managerial action.managerial action.

3.3. An opportunity may present itself.An opportunity may present itself.

4.4. In order to maintain the status quo.In order to maintain the status quo.

5.5. There is a need to be proactive as managerial There is a need to be proactive as managerial entrepreneurs.entrepreneurs.


Decision CharacteristicsDecision Characteristics

•Degree of Certainty and Decision MakingDegree of Certainty and Decision Making

Unawareness of all alternativesUnawareness of outcomes even for known alternativesDecision requires creativity and willingness to take risk in the face of uncertainty

UncertaintyAwareness of all alternativesUnawareness of outcomes for each alternativeDecision requires educated guesses for alternative outcomes

RiskAwareness of all alternativesAwareness of all outcomes related to each alternativeDecision can identify the best solution

Certainty

CircumstancesCompletelyUnknown

CircumstancesCompletelyKnown

Level of Certainty



Decision Characteristics (cont’d)Decision Characteristics (cont’d)

•Problem StructureProblem Structure Structured problemStructured problem

A problem whose nature and context are well defined.A problem whose nature and context are well defined. The desired end state is clear and the course of action The desired end state is clear and the course of action

to get to the end state is clear.to get to the end state is clear. Unstructured problemUnstructured problem

A problem characterized by a lack of problem and A problem characterized by a lack of problem and context definition.context definition.

The desired end state is not clearly understood, and The desired end state is not clearly understood, and therefore the appropriate course of action is unknown.therefore the appropriate course of action is unknown.



• Sources of conflicts in decision makingSources of conflicts in decision making The psychological make-up (i.e., history, biases, The psychological make-up (i.e., history, biases,

preferences, etc.) of decision makers can create intra-preferences, etc.) of decision makers can create intra-individual conflicts with job requirements.individual conflicts with job requirements.

Interpersonal (individual-to-individual Interpersonal (individual-to-individual and group-to-group) conflicts may and group-to-group) conflicts may require compromises in therequire compromises in thedecision making process.decision making process.



•PoliticsPolitics The use of power to achieve and/or protect one’s self-The use of power to achieve and/or protect one’s self-

interests in the presence of other interest groups interests in the presence of other interest groups through:through:

Building coalitionsBuilding coalitions BargainingBargaining Trading support across issues at different points in Trading support across issues at different points in

timetime Working to achieve control of key organizational Working to achieve control of key organizational

positionspositions Controlling critical organizational resourcesControlling critical organizational resources


Types of DecisionsTypes of Decisions

•Means decisionMeans decision Concerns, procedures or actions undertaken to achieve Concerns, procedures or actions undertaken to achieve

particular goals; it specifies how a goal is to be reached.particular goals; it specifies how a goal is to be reached.

•Ends decisionEnds decision Focuses on the articulation Focuses on the articulation

of a desired goal (outcome).of a desired goal (outcome).


Types of Decisions (cont’d)Types of Decisions (cont’d)

•Decision levelsDecision levels Strategic decision—identifies the ends and means Strategic decision—identifies the ends and means

associated with the positioning of an organization in its associated with the positioning of an organization in its external task environment.external task environment.

Managerial (tactical) decision—specifies how an Managerial (tactical) decision—specifies how an organization intends to integrate its institutional level organization intends to integrate its institutional level with its technical core, and how it will coordinate the with its technical core, and how it will coordinate the diverse work systems within the technical core.diverse work systems within the technical core.

Operating decision—deals with the day-to-day operation Operating decision—deals with the day-to-day operation of an organization.of an organization.



•Programmed decisionProgrammed decision Routines (predetermined courses of action) employed Routines (predetermined courses of action) employed

to deal with frequently occurring situations.to deal with frequently occurring situations.

•Nonprogrammed decisionNonprogrammed decision The process of addressing unique The process of addressing unique

or novel situations confronting or novel situations confronting the organization.the organization.



•Other Types of DecisionsOther Types of Decisions Functional decision—relates to one Functional decision—relates to one

of the organization’s functions of the organization’s functions (marketing, production, etc.)(marketing, production, etc.)

Job content decision—relates to the inherent nature of Job content decision—relates to the inherent nature of the work performed by an individual or work group.the work performed by an individual or work group.

Job context decision—relates to Job context decision—relates to issues that surround the job,issues that surround the job,

but are not part pf the but are not part pf the job per se. job per se.


A Systematic Approach to the A Systematic Approach to the Decision-making ProcessDecision-making Process

• Step 1:Step 1: Recognizing the need for a decision:Recognizing the need for a decision:problem sensitivity, definition andproblem sensitivity, definition andunderstandingunderstanding

• Step 2:Step 2: Generating alternative solutionsGenerating alternative solutions• Step 3:Step 3: Evaluating alternatives Evaluating alternatives• Step 4:Step 4: Choosing an alternativeChoosing an alternative


Contingency Approaches to Decision Contingency Approaches to Decision MakingMaking

•Thompson and Tudin Model considers two Thompson and Tudin Model considers two situational conditions in providing guidance in situational conditions in providing guidance in the selection of an organizational strategy:the selection of an organizational strategy: Is there agreement about the outcome that will result Is there agreement about the outcome that will result

from the decision we are about to make?from the decision we are about to make? Is there agreement about the processes we should use Is there agreement about the processes we should use

to achieve our goal? to achieve our goal?


Contingency Approaches to Decision Contingency Approaches to Decision Making (cont’d)Making (cont’d)

•Thompson and Tudin Model (cont’d)Thompson and Tudin Model (cont’d) Computation decision-making approachComputation decision-making approach

reliance on an expert for guidancereliance on an expert for guidance Judgmental decision-making approachJudgmental decision-making approach

reliance on the majority rule of expertsreliance on the majority rule of experts Compromise decision-making approachCompromise decision-making approach

reliance on a decision negotiated among competing reliance on a decision negotiated among competing groupsgroups

Inspirational decision-making approachInspirational decision-making approach reliance on creativity and intuition (inspiration)reliance on creativity and intuition (inspiration)


Decision StrategiesDecision Strategies

Computational

Judgmental Inspirational

Compromise

Agree

Agree

Disagree

Disagree

BeliefAboutCausation

Outcome Preferences


Source: Adapted from J. D. Thompson and A. Tudlin. 1959. Strategies, structures, and processes of organizational decisions. In J. D. Thompson, P. B. Hammond, R. W. Hawkes, B. H. Junker and A Tudlin (Eds.) Comparative studies in administration. University of Pittsburgh Press, 195–216.


Contingency Approaches to Decision Contingency Approaches to Decision MakingMaking

•The Decision Tree (Vroom, Yetton, and Jago) The Decision Tree (Vroom, Yetton, and Jago) Model helps managers decide how to decide.Model helps managers decide how to decide.Approaches to employee involvement in decisions:Approaches to employee involvement in decisions:

Autocratic I—manager makes decision, seeks no inputAutocratic I—manager makes decision, seeks no input Autocratic II—manager makes decision, asks for inputAutocratic II—manager makes decision, asks for input Consultative I—manager makes decision after Consultative I—manager makes decision after

consulting with individuals in the groupconsulting with individuals in the group Consultative II—manager makes decision after Consultative II—manager makes decision after

consulting with the groupconsulting with the group Group—manager accepts group input and implements Group—manager accepts group input and implements

plan or decision agreed to by groupplan or decision agreed to by group


Illustration of a Decision Tree ModelIllustration of a Decision Tree Model

B C . . . G

Low

SuggestedApproach

Autocratic I

Questions: A

Group (G)

High Yes

No



Other Approaches to Decision Other Approaches to Decision MakingMaking•Muddling throughMuddling through

Using an incremental approach to decision making by Using an incremental approach to decision making by making small adjustments to the status quo over longer making small adjustments to the status quo over longer periods of time.periods of time.

• ““Garbage can” approachGarbage can” approach Managers haphazardly mix Managers haphazardly mix

problems, solutions, alternatives,problems, solutions, alternatives,and participants together in hopes and participants together in hopes that they will connect on some level.that they will connect on some level.


Problems in the Decision-Making Problems in the Decision-Making ProcessProcess•Misunderstanding a situationMisunderstanding a situation

Incomplete or poorly organized informationIncomplete or poorly organized information Difficulty in applying meaning to abstract informationDifficulty in applying meaning to abstract information Limited or selective perception of the situationLimited or selective perception of the situation Mistaking symptoms for the problem itselfMistaking symptoms for the problem itself

•Rushing the decision-making processRushing the decision-making process Limiting the search for alternativesLimiting the search for alternatives Inadequately evaluating courses of actionInadequately evaluating courses of action Using the wrong decision-making processUsing the wrong decision-making process


Improving Decision MakingImproving Decision Making

• Improving the role of individualsImproving the role of individuals Use heterogeneous groups to expand the knowledge Use heterogeneous groups to expand the knowledge

base.base. Use a devil’s advocate to challenge decisions.Use a devil’s advocate to challenge decisions. Reward and protect decision-makers.Reward and protect decision-makers. Provide training in systematic Provide training in systematic

decision making.decision making.


Improving Decision Making (cont’d)Improving Decision Making (cont’d)

• Structured group decision-making processesStructured group decision-making processes Manage group decision processes effectively to avoid Manage group decision processes effectively to avoid

social loafing and group think.social loafing and group think. Use structured group processes (e.g., Delphi and Use structured group processes (e.g., Delphi and

nominal group techniques) to control the group nominal group techniques) to control the group decision-making process.decision-making process.


Improving Decision Making (cont’d)Improving Decision Making (cont’d)

•Organizational learningOrganizational learning The process by which organizations gain new The process by which organizations gain new

knowledge and insight that leads to a modification of knowledge and insight that leads to a modification of behavior and action (expanded capacity to produce new behavior and action (expanded capacity to produce new and improved results).and improved results).

identifying and using ideas from other organizationsidentifying and using ideas from other organizations developing ideas within the organizationdeveloping ideas within the organization regularly monitoring organizational regularly monitoring organizational

eventsevents


Models of Individual Decision MakingModels of Individual Decision Making

•A classical (rational/economic) decision A classical (rational/economic) decision making model.making model. Objective rationality–the notion that decision makers Objective rationality–the notion that decision makers

are completely informed of all alternatives and their are completely informed of all alternatives and their probabilities and consequences, are infinitely sensitive, probabilities and consequences, are infinitely sensitive, and therefore they will make decisions based on fact and therefore they will make decisions based on fact and rational thought.and rational thought.


Models of Individual Decision MakingModels of Individual Decision Making

•A behavioral (administrative) decision making A behavioral (administrative) decision making model.model. Bounded rationality–the tendency of decision makers to Bounded rationality–the tendency of decision makers to

behave rationally within the limits of their information behave rationally within the limits of their information processing capabilities and within the context of their processing capabilities and within the context of their attitudes and emotions.attitudes and emotions.

They cannot be aware of all They cannot be aware of all alternatives, consequences and alternatives, consequences and probabilities, and therefore will probabilities, and therefore will make “satisficing” decisions by make “satisficing” decisions by choosing the first satisfactorychoosing the first satisfactorysolution that they identify.solution that they identify.


Four Decision-Making ModelsFour Decision-Making Models

The Irrational Person The Creative/Self-Actualizing Person

Has a variety of fears, anxieties, and drives.

Pursues total development of the inner self.

Decisions are driven by the unconscious motives underlying these fears and anxieties.

Decisions are driven by the desire to develop the self even at the expense of external factors.

The Rational/Economic Person The Administrative Person

Is rational and deals with objective facts.

Is aware of only certain alternatives.

Is economically motivated. Is limited by restricted cognitive capacity.

Decisions are driven by objective rationality and a search for the best possible alternative.

Decisions are driven by a desire to identify and select the first acceptable alternative.

TABLE 9TABLE 9–1–1


Individual DifferencesIndividual Differencesin Decision Makingin Decision Making

CognitiveCognitiveAttributesAttributes(Judgmental)(Judgmental)IntelligenceIntelligence

LearningLearningRememberingRemembering

ThinkingThinking

CognitiveCognitiveAttributesAttributes(Judgmental)(Judgmental)IntelligenceIntelligence

LearningLearningRememberingRemembering

ThinkingThinking

PersonalityPersonalityAttributesAttributes(Style)(Style)

High Risk High Risk DogmaticDogmaticImpatientImpatient

CompetitiveCompetitiveTolerance for Tolerance for

AmbiguityAmbiguity(avoiders,(avoiders,solvers,solvers,seekers)seekers)

PersonalityPersonalityAttributesAttributes(Style)(Style)

High Risk High Risk DogmaticDogmaticImpatientImpatient

CompetitiveCompetitiveTolerance for Tolerance for

AmbiguityAmbiguity(avoiders,(avoiders,solvers,solvers,seekers)seekers)

DecisionDecisionMakingMaking


Employee Responses to the Participative Employee Responses to the Participative Decision-Making ModelDecision-Making Model


ParticipativeParticipativeDecisionDecisionMakingMaking

Affective ModelAffective Model::Ego/higher-orderEgo/higher-orderneed satisfactionneed satisfactionValue of work,Value of work,freedomfreedom

Cognitive Model:Cognitive Model:More informationMore informationto work withto work withMore ideasMore ideasMore approachesMore approaches

SelfSelfintointoworkwork

WorkWorkmeaning-meaning-fulnessfulness

JobJobsatisfactionsatisfaction

WorkWorkmotivationmotivation

PerformancePerformance

QualityQualityofof

decisiondecisionSuccessfulSuccessfulimplementationimplementationof decisionsof decisions

+

+

+

+


Employee Participative ProgramsEmployee Participative Programs

•Critical conditions for long-term program Critical conditions for long-term program effectiveness (Lawler)effectiveness (Lawler) Employees must have:Employees must have:

the skills and abilities to be effective contributorsthe skills and abilities to be effective contributors the information needed to make a contributionthe information needed to make a contribution the power to make something meaningful happenthe power to make something meaningful happen the opportunity to participate the opportunity to participate

in gainsharingin gainsharing


Distributive and Procedural JusticeDistributive and Procedural Justice

•Distributive justiceDistributive justice The fairness in the outcomes that derive from The fairness in the outcomes that derive from

organization decisions.organization decisions.

•Procedural justiceProcedural justice The perception that the processes employed to make a The perception that the processes employed to make a

decision were fair.decision were fair.

•Possible outcomesPossible outcomes Poor procedure produces good distribution outcome.Poor procedure produces good distribution outcome. Poor procedure produces poor distribution outcome.Poor procedure produces poor distribution outcome. Good procedure produces good distribution outcome.Good procedure produces good distribution outcome. Good procedure produces poor distribution outcome.Good procedure produces poor distribution outcome.


Procedural and Distributive Justice Procedural and Distributive Justice EffectsEffects

If Decision-Making Process(e.g., Hierarchical)

ProceduralJustice

DistributiveJustice

PositiveEmployeeEffects



Participative Decision Making and Participative Decision Making and Procedural Justice EffectsProcedural Justice Effects

ParticipativeDecisionMaking

Voice

Control

ProceduralJustice

PositiveEmployeeEffects



Determinants of Procedural JusticeDeterminants of Procedural Justice

Consistency

Bias suppression

Accuracy

Correctability

Representativeness

Ethicality

Attributes of the Decision-Making Process

Procedural

Justice



Control- and Involvement-Oriented Control- and Involvement-Oriented Management and Management and

OrganizationalOrganizationalDecisionDecision

MakingMaking


HighUncertainty

LowUncertainty

Mechanistic organizationsMechanistic organizationsCentralized; decision making Centralized; decision making concentrated at upper levels; concentrated at upper levels; top-down decision making; top-down decision making; no-low participationno-low participation

Organic OrganizationsOrganic OrganizationsDelegated, decentralized, Delegated, decentralized, participative decision participative decision making; individual and/or making; individual and/or group decision makinggroup decision making

ComplexComplex

SimpleSimple

EnvironmentalEnvironmentalComplexityComplexity

EnvironmentalEnvironmentalChangeChange

ModerateUncertainty

ModerateUncertainty

StableStable DynamicDynamic

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