Chapter 10

Nelson & Quick

Decision Making by
Individuals & Groups
 The Decision-Making Process

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 the need for a decision
Decision-
Making
Process Identify the objective of
the decision

Gather and evaluate data

and diagnose the situation

List and evaluate

alternatives
 Select the best
The course of action
Decision-
Making
Process Implement
the decision

Gather
feedback

Follow up
 Models of Decision-Making

Effective Decision
a timely decision that
meets a desired objective
and is acceptable to those Rational Model
individuals affected by it
Bounded Rationality
Model
Garbage Can Model
 Rationality - a logical, step-
by-step approach to decision
Rational Model making, with a thorough
analysis of alternatives and their
consequences

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
 Bounded Rationality - a
Bounded Rationality theory that suggests that
Model there are limits upon how
rational a decision maker
can actually be

1. Managers suggest the first satisfactory alternative

Satisfice to select the first alternative that is good

enough, because the costs in time and effort are too
great to optimize
 Bounded Rationality - a
Bounded Rationality theory that suggests that
Model there are limits upon how
rational a decision maker
can actually be

1. Managers suggest the first satisfactory alternative

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 Heuristics shortcuts in decision
making that save mental activity
 Garbage Can Model Solutions

Garbage Can Model - Problems Choice

opportunities
a theory that contends Participants
that decisions in
organizations are
random and unsystematic

From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative Science Quarterly 17 (March 1972) 1.25.
Reprinted by permission of the Administrative Science Quarterly
 Risk and the Manager

Risk Aversion - the tendency to choose options that

entail fewer risks and less uncertainty

Risk takers
accept greater potential for loss

tolerate greater uncertainty

more likely to make risky decisions

Evidence: Successful Managers Take Risks

Escalation of The tendency to continue to
commit resources to a failing
Commitment course of action

Why it occurs
humans dislike inconsistency

optimism

control

sunk costs

How to deal with it

split responsibility for decisions

provide individuals with a graceful exit

have groups make the initial decision

 Cognitive Style

Cognitive Style - an individuals preference for

gathering information and evaluating alternatives

Jungian theory offers a way of

understanding and appreciating
differences among individuals.
 Jungs Cognitive Style

Style Ideal Organization

ST Sensing/thinking Facts/ Impersonal Analysis

SF Sensing/feeling Facts & Org. Relationships

NT Intuiting/thinking Broad Issues/ Impersonal & Ideal

NF Intuiting/feeling Serve Humankind/General Values

 Z Problem-Solving Model

Look at What alternatives

the facts Sensing Intuition do the facts
and details suggest?

Can it be What impact

analyzed Thinking Feeling will it have on
objectively? those involved?
Figure from Type Talk at Work by Otto Kroeger and Janet M. Thuesen. Copyright 1992 by Otto Kroeger
and Janet M. Thuesen. Used by permission of Dell Publishing, a division of Random House. Inc.
 Two Brains, Two Cognitive Styles

Left Hemisphere Right Hemisphere

Verbal Nonverbal, visuospatial

Sequential, temporal, Simultaneous, spatial,
digital analogical
Logical, analytic Gestalt, synthetic
Rational Intuitive
Western thought Eastern thought

Ideal = brain-lateralized making use of

either or both sides, depending on situation
From Left Brain, Right Brain by Springer and Deutsch 1989, 1985, 1981 by Sally Springer and Georg Deutsch.
Used with permission by W.H. Freeman and Company
 Influences on Decision-Making

Intuition - fast, Creativity - a process

positive force in influenced by
decision making individual and
utilized at a level organizational factors
below consciousness, that results in the
involves learned production of novel
patterns of information and useful ideas,
products, or both
 Four Stages of Creative
Process

Preparation Incubation Illumination Verification

experience/ reflective, insight into thinking,
opportunity
often solving sharing,
to build
knowledge unconscious a problem testing the
base thought decision
 Influences on Creativity

Individual examples Organizational examples

Cognitive Processes
Divergent Thinking
Associational Abilities
Unconscious Processes
Personality Factors
breadth of interests
high energy
self-confidence
Flexible organization
structure
Participative decision
making
Quality, supportive
relationships with
supervisors
 Organizations Can Facilitate
Creative Decision Making

Reward creativity
Allow employees to fail
Make work more fun
Provide creativity training
Vary work groups (internal/external)
Encourage creative stimuli (music, art, etc.)
Participative Individuals who are affected
by decisions influence the
Decision Making making of those decisions
Organizational Foundations
Participative, supportive organizational culture

Team-oriented work design

Individual Prerequisites
Capability to become psychologically involved in

participative activities
Motivation to act autonomously

Capacity to see the relevance of participation for ones

own well-being
 Group Decision-Making
Role of synergy - a positive force that occurs in groups
when group members stimulate new solutions to problems
through the process of mutual influence and
encouragement in the group
Role of social decision schemes - simple rules used to
determine final group decisions
(prediction 80% correct) Majority Wins
Truth Wins
Two-thirds Majority
First-shift
 Group Decision Making
1) more knowledge through pooling
of group resources
2) Increased acceptance & commit-
Advantages ment due to voice in decisions
3) greater understanding due to
involvement in decision stages

1) pressure in groups to conform

2) domination by one forceful
member or dominant clique
Disadvantages 3) amount of time required, because
group is slower than individual to
make a decision
 Group Phenomenon

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
 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 devils 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.
 Brainstorming

Self-Managed Nominal
Teams Group
Technique

Group
Decision
Dialectical Techniques Delphi
Inquiry Technique

Quality Circles
Devils Advocacy
& Quality Teams
 Technological Aids to Decision-
Making
Expert Systems - a programmed decision tool set up
using decision rules
Decision Support Systems - computer and
communication systems that process incoming data
and synthesize pertinent information for managers
to use
Group Decision Support Systems - systems that use
computer software and communication facilities to
support group decision-making processes in either
face-to-face meetings or dispersed meetings
Virtual Teams groups of geographically dispersed
coworkers who work together using a combination
of telecommunications and information
technologies to accomplish a task

Group Decision
Support Systems

Tools
for
Virtual Teams
Desktop
Videoconferencing Internet/Intranet
Systems Systems
 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