Week 13

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Chapter13.Decision-MakingProcesses.pptx

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Chapter 13 Decision-Making Processes

Organization Theory and Design

Thirteenth Edition

Richard L. Daft

Chapter

Learning Objectives (slide 1 of 2)

Explain the differences between programmed and nonprogrammed decisions.

Describe the ideal, rational approach to decision making comparing it with the bounded rationality approach to decision making.

Describe how cognitive biases can cause decision errors.

Explain the management science approach to decision making.

Describe the Carnegie and incremental decision models.

Identify the components of the garbage can model of decision making.

Learning Objectives (slide 2 of 2)

Explain how to determine the best decision-making approach by using the contingency decision-making framework.

Describe how high-velocity environments and decision mistakes influence decision making for today’s managers.

Types of Decisions

Organizational decision making is the process of identifying and solving problems and has two stages:

Problem identification

Problem solution

Programmed decisions are repetitive and well defined

Nonprogrammed decisions are novel and poorly defined

Decision Making in Today’s Environment

Rational Approach

The rational approach suggests an “ideal” method for how managers should make decisions:

Monitor the decision environment

Define the decision problem

Specify decision objectives

Diagnose the problem

Develop alternative solutions

Evaluate alternatives

Choose the best alternative

Implement the chosen alternative

Steps in the Rational Approach to Decision Making

Bounded Rationality Perspective

Many decisions must be made quickly, and managers cannot evaluate every goal, problem, and alternative

The bounded rationality perspective is how decisions are made under severe time and resource constraints

Constraints from both organizational and personal circumstances can impinge the decision maker

The bounded rationality perspective is often associated with intuitive decision making, which is the use of experience and judgment, rather than sequential logic or explicit reasoning, to make decisions

Constraints and Tradeoffs During Nonprogrammed Decision Making

Cognitive Biases

Managers must be aware of their cognitive biases, or severe errors in judgment that all humans are prone to and that typically lead to bad choices, including:

Being influenced by initial impressions

Seeing what you want to see

Being influenced by emotions

Being overconfident

Escalating commitment

Fearing failure or loss

Being influenced by the group or groupthink

Managers can avoid cognitive bias through evidence-based management and the encouragement of dissent and diversity, including the assignment of a devil’s advocate

Organizational Decision Making

Managers can use one of four primary types of organizational decision-making processes:

Management science approach

Carnegie model

Incremental decision model

Garbage can model

Management Science Approach

Management science involves the use of mathematics and statistics to:

Identify and quantify relevant variables

Develop a quantitative representation of alternative solutions and the probability of each one solving the problem

Management science can accurately and quickly solve problems that have too many explicit variables for adequate human processing

A drawback of management science is that quantitative data are not rich and lack tacit knowledge

Carnegie Model

The Carnegie model is based on research that indicated that organization-level decisions involved many managers and that a final choice was based on a coalition among those managers

Management coalitions are needed because:

Goals are often ambiguous and inconsistent, with disagreement about priorities among managers

Individual managers intend to be rational, but they function with constraints

Coalition building implications for organizational decision behavior include:

Satisficing

Problemistic search

The importance of discussion and bargaining

Choice Processes in the Carnegie Model

Incremental Decision Model

The incremental decision model emphasizes the structured sequence of activities undertaken from problem discovery to problem solution

Organizational choices are usually a series of small choices that combine to produce a major decision

Decision interrupts are barriers to decision making

Organizations move through three decision phases:

Identification Phase

Development Phase

Selection Phase

Dynamic factors may force a decision making loop or cycle back to an earlier stage

The Incremental Decision Model

Combining the Incremental and Carnegie Models

The Carnegie model of coalition building is especially relevant for the problem identification stage

The incremental model tends to emphasize the steps used to reach a solution

When both parts of the decision process are simultaneously highly uncertain, decision processes in that situation may be a combination of the Carnegie and incremental models

Decision Process When Problem Identification and Problem Solution Are Uncertain

Garbage Can Model

The garbage can model deals with the pattern or flow of multiple decisions within whole organizations

It was developed to explain the decision making in organized anarchy, the highly uncertain conditions that some organizations experience as a result of:

Problematic preferences

Unclear, poorly understood technology

Turnover

Decisions are made from streams of events—problems, potential solutions, participants, or choice opportunities—instead of defined problems and solutions

Consequences of the Garbage Can Model

Solutions may be proposed even when problems do not exist

Choices are made without solving problems

Problems may persist without being solved

A few problems are solved

Illustration of Independent Streams of Events in the Garbage Can Model of Decision-Making

Contingency Decision-Making Framework

The use of a decision making approach is contingent on the organization setting

Problem consensus refers to the agreement among managers about the nature of a problem or opportunity and about which goals and outcomes to pursue

Technical knowledge refers to understanding and agreement about how to solve problems and reach organizational goals

The contingency decision-making framework brings together these two dimensions

Contingency Framework for Using Decision Models

Special Decision Circumstances

Managers have to make high-stakes decisions more often and more quickly than ever in increasingly less predictable environments

To improve the chances of a good decision in high-velocity environments, some organizations stimulate constructive conflict through a technique called point-counterpoint

Managers and organizations go through the process of decision learning by making mistakes and by acquiring sufficient experience and knowledge to perform more effectively

Organizational Design Essentials (slide 1 of 2)

Decision making involves the stages of problem identification and problem solution.

Decisions vary in complexity.

Most organizational decisions are not made in a logical, rational manner, nor do they begin with the careful analysis of a problem, followed by systematic analysis of alternatives, and finally implementation of a solution.

Allowing cognitive biases to cloud decision making can have serious negative consequences for an organization.

Organizational Design Essentials (slide 2 of 2)

Individual managers make decisions, but most organizational decisions are not made by a single individual.

Many problems are not clear, so widespread discussion and coalition building take place.

Managers can follow the prescriptions of the contingency decision-making framework to use the correct decision-making approach and increase the likelihood of a successful decision.