M 05 Decision Making

• “Greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice, and discipline.” – Jim Collins

• “The quality of decision is like the well-timed swoop of a falcon which enables it to strike and destroy its victim.” – Sun Tzu

• “Whenever you see a successful business, someone once made a courageous decision.” – Peter Drucker

• The next slide provides a model of some of the issues involved in making a decision.

• These are not items that are on the surface – they are hidden inside of us and yet they impact our questions, thoughts, ideas, and the way we decide.

Values

Attitudes

Personality

Ability

Motivation

Perception

Learning

IndividualBehavior in

Decision Making

Decision Making Styles

• Decide– You decide alone and “announce” or “sell” it

• Consult Individually– Present it individually to all and then decide

• Consult Group– Present collectively and then decide

• Facilitate– Present, facilitate, define the problem and boundaries– Seek concurrence

• Delegate– Permit group decision within prescribed limits

….. to consider(so many variables)

• Responsibilities• Power• Vulnerability• Dilemmas• Pressures• Loneliness• Analyzing• Not independent, solitary events

……. to consider…

• Not just logical analysis & problem solving• Social process• Unending stream of decisions• Communication• Perceptions• Information• Experience

……. to consider ….

• Wisdom• Stakeholders

Critical pieces of decision making

• Determining how the problem is to be solved, not necessarily the solution.

• Determining how much data is needed.

• Understanding the background that lead to this point

What doesn’t work

• Persuasion– Selling expert opinions to convince

• Edicts– Directives that announce decisions

– Depletes “social credits”

Models of Decision Making

• Rational Decision-Making

• Bounded Rationality

• Garbage Can

Rational Decision-Making

• Assumption that all facts are knowable• Process similar to problem solving– Define the problem– Develop and weight criteria– List alternatives– Select the best alternative– Implement – Evaluate

• Question: Is it possible to know all the facts?

Bounded Rationality

• People are restricted:– in the information they have ,– limit their searches,– settle for less than optimal solutions.

• Assumptions– Satisficing – accepting the first, minimally acceptable solution– Comfortableness without all the alternatives– Judgmental shortcuts – called “heuristics”– Alternatives fall within the bounds of current moral & ethical

standards

Garbage Can

• Organization – metaphorically described as a “garbage can”

• Floating in the GC are– Problems, Participants, Solutions, Choice opportunities– If they connect – a decision results

• Assumptions– Haphazard– Chaotic– Unpredictable– Sheer luck

Common Decision Biases• Anchoring and adjusting

• (the first information is overweighted)

• Representativeness • (does this resemble another event?)

• Availability • (what we remember easily)

• Overconfidence • (Unrealistically optimistic views)

• Bounded Awareness • (perception narrows –thus limiting information needed)

• Emotional Involvement • (belief in a more positive outcome)

• Self-serving Reasoning • (credit for success & avoiding blame for failure)

Tools

• Decision Trees» Significance» Level of Commitment » Leader Expertise» Likelihood of Commitment» Group – Support, Expertise, Competence

Issues ( +/- ), to consider

• Zone of Indifference• http://www.examiner.com/article/helping-employees-

work-within-the-zone-of-indifference

• Groupthink• http://www.mindtools.com/pages/article/

newLDR_82.htm

• Escalation of commitment• http://en.wikipedia.org/wiki/Escalation_of_commitment

Reality(what happens…)

• Rationality • Otherwise we believe that people make irrational decisions.

We may not understand their rationality – but to them it is rational

• Intuitive consideration• We pull all our experiences together without even knowing it

and use that data as well as the data around the proplem

• Combine to provide decisions• Decision making is complex – not just for us but for everyone

The Literature Suggests…..

• There are four (4) guidelines to making better decisions:– Personally manage your decision making.

» This isn’t something that you can delegate

– Search for understanding.» Make sure you know what is at stake

– Establish a direction with objectives.» Objectives help you to know what you really want

– Manage the social and political forces» Always know your clear rational