Chapter 17 Decision Making

1. Chapter 17 Decision Making

2. Objectives • Explain why decision making is a social process • Define and explain how bounded rationality influences decision making • Describe five models of decision making • Explain groupthink and how it can be avoided

3. …Objectives • Explain how experts make decisions • Identify your personal approach to organizational decision making • Apply the leader-participation model of decision making

4. Are Individual Decisions Independent? • Individual decisions are not independent, solitary events Instead • They are closely connected to previous decisions And • Are influenced by the social processes that brought the decision point to a head

5. …Are Individual Decisions Independent? • Decision making at very high levels • A lonely, individual struggle? NO! Instead, • It involves information sharing and inter-dependence among organization members

6. The Manager’s Role in Decision Making • The manager’s job is to handle the decision process by assessing • The information needed • The players who need to be involved

7. Process of Rational Decision Making 1. Recognize and define problem 5. Evaluate alternatives 2. Identify decision objective and criteria 6. Select the best alternative 3. Allocate weights to criteria 7. Implement the decision 4. List and develop alternatives 8. Evaluate the decision

8. Bounded Rationality - Defined The theory of bounded rationality maintains that people are restricted in making decisions and settle for less than ideal solutions They satisfice, selecting the first alternative that is satisfactory.

9. Common Decision Biases • Anchoring and adjusting • Representativeness • Availability • Overconfidence • Bounded awareness • Emotional involvement • Self-serving reasoning

10. Garbage Can Model • Factors: • Problems • Participants • Solutions • Choice opportunities • Above factors float randomly inside the organization and if they connect, a decision results

11. Choice Shift • Occurs when groups make more extreme decisions than individuals • Risky shift People support riskier decisions in a group setting than they would individually • Cautious shift The group decision is more conservative than individual positions

12. Groupthink - Defined Groupthink isthe tendency for members of a highly cohesive group to seek consensus so strongly that they fail to do a realistic appraisal of other possibly better alternatives

13. Traditional Groupthink Model • Antecedent Conditions • Cohesion • Insulation • Directive leadership • High stress & low esteem & low hope of finding solution • Limited search and appraisal • Groupthink Symptoms • Self-censorship • Pressure on dissenters • Pressure toward uniformity • Illusion of unanimity • Illusion of invulnerability • Belief in inherent morality • Collective rationalization • Outgroup stereotyping • DefectiveDecision Making Symptoms • Poor information search • Selective information processing • Failure to appraise risks • Incomplete survey of alternatives and solutions Defective Decisions Consensus seeking

14. How to Avoid Groupthink • Encourage all members to express their doubts • Assign a devil’s advocate • Adopt the perspectives of other constituencies • Bring in qualified outsiders to discuss decisions • “Sleep” on a tentative decision and have a second chance meeting • Leaders should listen to others’ opinions first • Leaders should demonstrate willingness to be criticized

15. Escalation of Commitment Occurs when people continue to commit resources to a failing course of action

16. Leader-Participation Model • Contingency theory of leadership • Continuum of leadership styles ranges from autocratic to participative styles • Decide • Consult individuals and groups • Facilitate • Delegate

17. …Leader-Participation Model • Choice of leadership style can affect outcomes of the decision-making process Decision Quality Decision Implementation Cost of Decision Making Development

18. Seven Questions for Managers to Ask about a Decision Team Competence Decision Significance ? Group Expertise Importance of Commitment Group Support for Objectives Leader’s Expertise Likelihood of Commitment

19. Unstructured Problems Novel, infrequent and / or complex problems for which no procedures have been developed Types of Problems Structured Problems Repetitive, routine problems for which definite procedures have been developed

20. Intuition - Defined • Intuition is a cognitive conclusion based on a decision maker’s previous experiences and emotional inputs • Thus, intuition and rational analysis are complementary aspects of good decision making

21. The Zone of Indifference • Zone of indifference • The range within which each person in which he or she willingly accepts orders without consciously questioning authority

22. Recognition PrimedDecision (RPD) Model Components of the Model • Cue recognition and pattern matching • Action script activation • Mental simulation driven by mental models

23. Klein’s RPD Model Situation generates Cues Mental Simulations to affect the using your that let you recognize Mental Models which you assess by Patterns Action Scripts that activate

24. PreMortem Exercises • Designed to expose vulnerabilities in planning