Decision Making Lecture Slide

8/10/2019 Decision Making Lecture Slide

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Aims of the Decision Making lecture

Escalation of commitment; Group think

http://www.youtube.com/watch?v=Oc3C70p_JVs

Theories and modelsTechniques and influences

Levels of decision making

Definitions, roles and processes

RMIT University 2014 2
http://www.youtube.com/watch?v=Oc3C70p_JVshttp://www.youtube.com/watch?v=Oc3C70p_JVs


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Levels of decision-making behaviour

Organisational

Group

Individual



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Levels of decision-making behaviour

Level of

analysis

Theoretical

Approaches Key issues Constraints

Organisation

Theories of

organisation power,

conflict and decision

making

Effects of power and

conflict

1.Multiple ongoing tasks

2.Historical precedents

3.HRM systems

4.Time constraints

Group

Group conformity,

group dynamics,

group size, and

networks

Effects of group

dynamics, individual

perceptions and

behaviours

1. Group norms

2. Group think

Individual 1.Information-processing theory

2. Cognitive

psychology

1.Informationoverload

2.Personal biases

1.Information processing

failures2.Perceptual biases

3.Intuition and emotion

4.Escalation of

commitment

RMIT University 2014 4Source: Bratton et al. 2010: 409, 411


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A decision is often defined as aproductof decision making processes...Managers often seek to avoidmaking decisions or obscure them,often to avoid accountabilityfor courses of action that aresubsequently seen as misguided.

(Linstead & Fulop 2009)

Decision : a definitionSource: Linstead & Fulop, 2009: 667-708


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Decisional Roles

Entrepreneur

Disturbance

Handler

ResourceAllocator

Negotiator

RMIT University 2014 6Source: Wilson 2014: 69


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Decisional Roles

Seek to improve the unit and adapt tochanges

Seek and initiate new ideasEntrepreneur

Respond to pressuresDisturbance

Handler

Decide what resources go whereResourceAllocator

Negotiator

RMIT University 2014

A way of life for managers

7Source: Wilson 2014:69


8/29RMIT University 2014 8

Decision making isthe ability to takethe right decisions in given situations, totake responsibilityand be accountablefor them and to understand the

consequencesof particular courses ofactioninvolves being able to take anoverviewor strategicview of thesituation, see the longer term andtake a wider general perspective

(the helicopter view).(Pettinger 2010)

Decision making


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Types of decision processes

Sporadic

InformalWill suffer fromdelays

Information fromvarious sourcesof expertise

Time delays

Fluiddecision

Flow, formallychannelled,Speedy &predictable

Information fromfewer sources

Fewer delays

Constricteddecision

Narrowlychannelled,

technicalinformation

Decision madeby experts

RMIT University 2014 9Source: Linstead & Fulop, 2009: 672


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Traditional decision-making theories and choice

Decision making: a response to a situation requiring

a choice.

A general agreement aboutorganisational goals and thebest means to achievethem.

Unitaryapproach

Emphasises conflict & power

struggles between individuals &coalitions in organisations incircumstances where participantshave substantial knowledge andinformation.

Plural istapproach



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Types of choice

Which two products to adopt.StraightforwardClear choice

Alternatives of improving profitabilityCompeting

choice

Occurs when issues arising requireresolution

Choiceavoidance

When information is distorted orsuppressed

Choicesuppression



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Models of decision Making

Decisions are made after carefulevaluation of alternative courses of actionRational

Questions whether managers are capableof making fully rational decisions

Administrative/ Bureaucratic

Introduces the idea that decisions arereally problems looking for solutionsGarbage-can

Political


Examines the role of powerful decision

making groups (dominant coalitions) and

why many decisions are really non-

decisions

Source: Linstead & Fulop, 2009: 667-708


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The rat ionaldecision modelRecognition and

definition of a

problem

Search for alternativecourses of action

Gathering andanalysing data

Identification andapplication of choice

criteria

Evaluation ofalternatives in relation

to choice criteria


Implementation of decision

Assumptions

Problem clarity

Known options

Clear preferences

Constant preferences Maximum pay-off

No time or cost constraints

Outcome will be rational

Source: Bratton et al. 2010: 411; Linstead & Fulop 2009:674;Nelson et al. 2012:150 13


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Bureaucrat ic/ adminis trat ivemodelBased on theactual behaviour

of decisionmakers

There are cognitiveor mental limits tohuman rationality

Decision making isgoverned bybounded rationality

Influence of non-rational elements in

humans

Satisfices


Decision made on best in

the circumstances

AssumptionsManagers:

Select the first satisfactory alternative

Are comfortable making decisions

without determining the alternatives

Make decisions by short cuts or

heuristics (managers make decisions

on what has worked in the past)

Satisficebecause of cost of best

choice

Source: Bratton et al. 2010: 411; Linstead & Fulop 2009:676; Nelson et al. 2012:151 14


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Polit icaldecision modelRecognises the

role of conflict andconflict resolutionin the decision-

making process

Pluralisticin nature

Recognises therole ofstakeholders in theorganisation

Decision making isabout reconcilingstakeholdersinterests


Implementation of decision

Difficulty

Thepluralistapproach

does not explain how

decisions can be made or

avoided in organisations

because of the influence or

pressure of external groupswho may form part of adominant coalition.

Source: Linstead & Fulop 2009:685 16


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Z Model of Decision Making

Look at the facts

and details Sensing IntuitionWhat alternatives

do the facts suggest?

What are the facts?

Be specific and realistic.

List all relevant details.

Be clear.

Let your imagination

run wild.

Brainstorm.

Consider various solutions

Can it beanalysed

objectively?

Thinking Feeling What impact will ithave on those

involved?

Consider the

# consequences of eachalternative

# cause and effect of each

action

If you were not involved, what

would you suggest?

Is it something you

can live with?How do you feel about the

action?

What hunches do you have

about others reactions?

RMIT University 2014 17Source: Nelson et al. 2012: 148-164


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PfeffersFourOrganisational

Decision-MakingModels


DIMENSION

RATIONAL

(Unitary)

BUREAUCRATIC

(unitary)

GARBAGE CAN

(pluralist)

POLITICAL POWER

(pluralist)

PREFERENCES

&

GOALS

Consistent

among

participants

Reasonably consistent Unclear, ambiguous,

may be constructed

afterwardsto legitimise actions

Inconsistent, diverse

or conflicting goals

& preferences

POWER&

CONTROL

Focuses onhierarchical

authority

Less centralised ,still legitimate authority

Very decentralised,anarchic; power is also

recognised

Shifting coalitions&interest groups who

have power but not

necessarily authority

DECISION

PROCESS

Orderly,

rational

Procedural rationality

embodied in programmes&standard operating

procedures

Ad hoc

Disorderly, characterised

by push & pull of interestgroups

EXPECTED

RESULTS

& OUTCOMES

Maximisation

&

optimisation

Follow fromsatisficing mode

Unclear, ambiguous Power & stabilisation

of demands

INFORMATION

REQUIREMENTS

Extensive

&systematicinformation gathering

Reduced by the use of

rules & proceduresinformation

Haphazard collection &

use of information

Information used

&withheld strategically

RATIONALEEfficiency

&effectiveness in

achieving agreed-to

performance criteria

Stability, fairness Playfulness Conflict & power

struggles among

relatively equal

opponents

18Source: Linstead & Fulop, 2009


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Types of decision Traditional decision-making

techniques

Modern decision-making

techniques

1.Programmed

Routine, repetitive

decisions;

organisation develops

specific processes for

handling them.

Low uncertainty and

low ambiguity

Habit

Clerical routine: standard

operating procedures,

policies, manuals

Organisation structure

know your place

Systems of sub-goals

Well-defined information

channels

Operations research

mathematical models,

computer simulations

Electronic data

processing

Management

information systems

2. Non-programmed

One-shot, ill-

structured novel policy

decisions.

Handled by general

non-routine problem-

solving processes.

High uncertainty and

ambiguity.

Judgment, intuition ,

creativity

Rule of thumb (by top

management)

Heuristic (problem solving)

techniques applied to:

constructing computer

models

brainstorming

counter-planning

simulation

Techniques of decision making

Linstead & Fulop 2009:Table 14.1: 677 19


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Influences of Decision Making

Influences

Risk, riskaversion

Personality,attitudes,

values

IntuitionCreativity

Organisation

Environment


Individuals differ in

risk behaviour

Enablers

and

barriers tocreativity

Ability to make

judgment about a

situation based on a

hunch.

4 stages:

Preparation

Incubation

Illumination

Verification

Source: Nelson et al. 2012: 153


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Escalation of Commitment

Limitation that all decisionmaking models share

Unwillingness toabandon a baddecision, or continuing

to support a failing

course of action, evenwhen substantial costsare incurred

The desire to win is amotivation to continue

to escalate

RMIT University 2014 21Source: Nelson et al. 2012: 151


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Group Decision making

Synergy = 1 + 1 = 3

Advantages

More knowledge and

information

Greater understandingof the decision

Member involvement

Disadvantages

Pressure to conform

Domination by oneforceful member

Time required to makea decision



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Negative factors arising from group cohesiveness

Groupthink

Moraljudgment andreality testing

aresuspended

Often occurswith high riskdecisions inhigh-status

groups withdominantleadership

High stressconditions andthreats to self-

esteem

RMIT University 2014 23Source: Thompson & McHugh, 2009: 375


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Symptoms of Groupthink

Excessive optimismand risk taking

Group believes itcannot make a baddecision

Illusion ofinvulnerability

Conform andreach consensus

Unpopular ideasmay besuppressed

Members who

oppose the groupare stereotyped asweak, evil orstupid.

Pressure

onindividuals

Groupconsensus


Leads to discounting

warnings and negative

information.

An illusion of unanimity

emerges

Self-censorships of any

deviation from group

norms.Belief in the

inherent morality

of the group

Leads members to be

convinced of the

logical correctness ofwhat

they are dong and

ignore

the ethical or moral

consequences of

decisions.

Source: Linstead & Fulop, 2009: 691


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Avoiding Groupthink

Can be avoided with some effort

Interactionwith other

groups

Inviteconsultantsand others

to challengethe group

Developalternative

plans


Leaders need to be ref lexiveto assess their behaviour and stay impartial

Source: Linstead & Fulop, 2009: 691


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Group Polarisation

The tendency for group discussion to produceshifts toward more extreme attitudes among

members.

Can be disastrous

If individuals areleaning towards a

dangerous decision theyare likely to support it

more strongly followingdiscussion.



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Minimising Bias and Errors in Decision Making

Generation of free flowing multiple ideas Computer mediated brainstormingBrainstorming

Variation of brainstorming , independent

contribution

Nominal group

technique

Discussion with two initial members, thenadditional members added until all groupmembers have joined the discussion

Stepladdertechnique

Delphitechnique


Structured team decision-making process of

pooling the collective knowledge of subject

experts

Source: Bratton et al. 2010 :425 27


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Current issuesin organisational decision making

Power-distance

Individualism-collectivismCulture

Artificial intelligence

Virtual teamworkTechnology

Profit making v social responsibility

Actions & valuesEthics

RMIT University 2014 28Source: Wood et al. 2013: 486-493


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References Bratton, J., Sawchuck, P., Forshaw, C., Callinan, M., and Corbett, M. 2010, Work and

Organization Behaviour, 2nd edn, Palgrave MacMillan, UK. Chapter 15: Decision

Making and Ethics, pp.407-432

Haslam, S.A. 2004, Psychology in organisations: the social identity approach, 2nd edn,

Sage London. Chapter 6: Group decision making, pp.99-119

Linstead S., Fulop, L., and Lilley, S. 2009, Management and Organization: A critical

text, 2ndedn, Palgrave MacMillan, London. Chapter 14: Decision making in

organisations, pp. 667-708

Nelson, D.L., Quick, J.C., Wright, S., and Adams, C. 2012, OrgB Asia-Pacific Edition,Cengage, Sydney. Chapter 10: Decision making by individuals and groups, pp. 148-

164

Pettinger, R. 2010, Organizational Behaviour: Performance management in practice.

Routledge, London. Chapter 20

Thompson, P. & McHugh, D. 2009 Work Organisations: A critical approach, PalgraveMacmillan, London. Chapter 24: From groups to teams, pp. 369-387

Wilson, F.M. 2014, Organizational Behaviour and Work: A critical introduction, Oxford

University Press, London. Chapter 3, p.69

Wood, J. Zeffane, R. Fromholtz, M. Wiesner, Morrison, R. and Seet, P.

2013, Organisational Behaviour: Core Concepts and Applications, Wiley, Brisbane

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Decision Making Lecture Slide