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9–9–11
C H A P T E R 9
Organizational Decision Making
Jon L. Pierce &Donald G. Gardnerwith Randall B. Dunham
Management
OrganizationalBehavior
PowerPoint Presentationby Charlie Cook
An Integrated Perspective
Copyright © 2002 by South-Western
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–22
Part IIIPart IIIManagement Functionsand the Organizational
Behavior Context• Decision Making• Planning and Controlling• Leading Members• Organizing and Coordinating
the Work of Organizations• Organizational Design
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–33
Organizational Behavior (OB) ContextOrganizational Behavior (OB) Context
ManagementPractice
OrganizationDesign
ManagementPhilosophy
FIGURE IIIFIGURE III–1–1
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–44
ManagementPractice
OrganizationDesign
Employee Attitudes,Motivation & Behavior
FIGURE IIIFIGURE III–2–2
Organization’s Internal EnvironmentOrganization’s Internal Environment
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–55
Learning ObjectivesLearning Objectives
1.1. Describe the nature of decision making. What is decision Describe the nature of decision making. What is decision making, what types of conditions surround the decision-making, what types of conditions surround the decision-making process, and what types of decisions confront making process, and what types of decisions confront organizational members?organizational members?
2.2. Describe and distinguish between the different Describe and distinguish between the different approaches to decision making.approaches to decision making.
3.3. Compare and contrast the rational/economic (classical) Compare and contrast the rational/economic (classical) and administrative (behavioral) models of decision and administrative (behavioral) models of decision making.making.
4.4. Explain how individual attributes, such as cognitive style, Explain how individual attributes, such as cognitive style, personality, and motivation, affect decision making.personality, and motivation, affect decision making.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–66
Learning Objectives (cont’d)Learning Objectives (cont’d)
5.5. identify and discuss the most common problems that identify and discuss the most common problems that managers face when making decisions.managers face when making decisions.
6.6. Discuss participative decision making and its relationship Discuss participative decision making and its relationship with job satisfaction and performance.with job satisfaction and performance.
7.7. Explain the role individual differences play in the Explain the role individual differences play in the decision-making process.decision-making process.
8.8. Compare and contrast approaches to decision making Compare and contrast approaches to decision making under control-oriented and involvement-oriented under control-oriented and involvement-oriented management practices.management practices.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–77
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–88
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
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–99
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–1010
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
FIGURE 9FIGURE 9–2–2
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–1111
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–1212
Decision Characteristics (cont’d)Decision Characteristics (cont’d)
• 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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–1313
Decision Characteristics (cont’d)Decision Characteristics (cont’d)
• 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
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–1414
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).
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–1515
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–1616
Types of Decisions (cont’d)Types of Decisions (cont’d)
• 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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–1717
Types of Decisions (cont’d)Types of Decisions (cont’d)
• 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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–1818
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
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–1919
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?
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–2020
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)
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–2121
Decision StrategiesDecision Strategies
Computational
Judgmental Inspirational
Compromise
Agree
Agree
Disagree
Disagree
BeliefAboutCausation
Outcome Preferences
FIGURE 9FIGURE 9–3–3
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–2222
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
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–2323
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
FIGURE 9FIGURE 9–4–4
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–2424
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–2525
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
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–2626
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–2727
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–2828
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
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–2929
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–3030
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–3131
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
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–3232
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
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–3333
Employee Responses to the Participative Employee Responses to the Participative Decision-Making ModelDecision-Making Model
FIGURE 9FIGURE 9–5–5
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
+
+
+
+
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–3434
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
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–3535
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.
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–3636
Procedural and Distributive Justice Procedural and Distributive Justice EffectsEffects
If Decision-Making Process(e.g., Hierarchical)
ProceduralJustice
DistributiveJustice
PositiveEmployeeEffects
FIGURE 9FIGURE 9–6–6
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–3737
Participative Decision Making and Participative Decision Making and Procedural Justice EffectsProcedural Justice Effects
ParticipativeDecisionMaking
Voice
Control
ProceduralJustice
PositiveEmployeeEffects
FIGURE 9FIGURE 9–7–7
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–3838
Determinants of Procedural JusticeDeterminants of Procedural Justice
Consistency
Bias suppression
Accuracy
Correctability
Representativeness
Ethicality
Attributes of the Decision-Making Process
Procedural
Justice
FIGURE 9FIGURE 9–8–8
Copyright © 2002 by South-WesternCopyright © 2002 by South-Western 9–9–3939
Control- and Involvement-Oriented Control- and Involvement-Oriented Management and Management and
OrganizationalOrganizationalDecisionDecision
MakingMaking
FIGURE 9FIGURE 9–9–9
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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