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PPT.2o6LONWeek8-ModelsofDecisionMaking.pptx
206LON: Business Management and Decision
Making Process
Week 8 – Seminar: Decision Making Models
Learning Outcomes:
At the end of this week, students should be able to:
▪ Understand the different models of decision making
▪ Appreciate the impact of ethics on the decision making
▪ Apply different scenarios of decision making models and ethics
The fact that almost everything a manager does involves making decisions doesn’t mean that decisions are always time-consuming or complex. Most decision making is routine. For instance, every day of the year you make a decision about what to eat for dinner. It’s no big deal. You’ve made the decision thousands of times before. It’s a pretty simple decision and can usually be handled quickly. It’s the type of decision you almost forget is a decision.
And managers also make dozens of these routine decisions every day; for example, which employee will work what shift next week, what information should be included in a report, or how to resolve a customer’s complaint. Keep in mind that even though a decision seems easy or has been faced by a manager a number of times before, it still is a decision.
Let’s look at four perspectives on how managers make decisions. Some of the decision making models are:
Rational
Bounded Rational
Intuition
Evidence-Based Management
Rational:
We assume that managers will use rational decision making; that is, they’ll make logical and consistent choices. After all, managers have all sorts of tools and techniques to help them be rational decision makers.
What does it mean to be a “rational” decision maker?
rational decision maker would be fully objective and logical,
the problem faced would be clear and unambiguous,
and the decision maker would have a clear and specific goal and know all possible alternatives and consequences,
making decisions rationally would consistently lead to selecting the alternative that maximizes the likelihood of achieving that goal.
These assumptions apply to any decision—personal or managerial. However, for managerial decision making, we need to add one additional assumption—decisions are made in the best interests of the organization. These assumptions of rationality aren’t very realistic and managers don’t always act rationally, but the next concept can help explain how most decisions get made in organizations.
Bounded Rational:
Despite the unrealistic assumptions, managers are expected to be rational when making decisions. They understand that “good” decision makers are supposed to do certain things and exhibit good decision-making behaviours as they identify problems, consider alternatives, gather information, and act decisively but prudently.
When they do so, they show others that they’re competent and that their decisions are the result of intelligent deliberation.
However, a more realistic approach to describing how managers make decisions is the concept of bounded rationality, which says that managers make decisions rationally, but are limited (bounded) by their ability to process information. Because they can’t possibly analyse all information on all alternatives, managers satisfice, rather than maximize.
That is, they accept solutions that are “good enough.” They’re being rational within the limits (bounds) of their ability to process information.
Most decisions that managers make don’t fit the assumptions of perfect rationality, so they satisfice.
However, keep in mind that their decision making is also likely influenced by:
the organization’s culture,
internal politics,
power considerations,
and by a phenomenon called escalation of commitment
Escalation of commitment, is an increased commitment to a previous decision despite evidence that it may have been wrong. The Challenger space shuttle disaster is often used as an example of escalation of commitment. Decision makers chose to launch the shuttle that day even though the decision was questioned by several individuals who believed it was a bad one. Decision makers don’t want to admit that their initial decision may have been flawed. Rather than search for new alternatives, they simply increase their commitment to the original solution.
Managers often use their intuition to help their decision making. What is intuitive decision making?
It’s making decisions on the basis of experience, feelings, and accumulated judgment.
How common is intuitive decision making? One survey found that almost half of the executives surveyed “used intuition more often than formal analysis to run their companies.”
Intuitive decision making can complement both rational and bounded rational decision making. First of all, a manager who has had experience with a similar type of problem or situation often can act quickly with what appears to be limited information because of that past experience. In addition, a recent study found that individuals who experienced intense feelings and emotions when making decisions actually achieved higher decision-making performance, especially when they understood their feelings as they were making decisions. T
Researchers studying managers’ use of intuitive decision making have identified five different aspects of intuition,
Experience-based decisions:
Managers make decisions based on their past experiences
Subconscious mental processing:
Managers use data from subconscious mind to help them make decisions
Values or ethics based decisions:
Managers make decisions based on ethical values or culture
Cognitive-based decisions:
Managers make decisions based on skills, knowledge, and training
Affect-initiated decisions:
Managers make decisions based on feelings or emotions
Evidence-Based Management:
Suppose you were exhibiting some strange, puzzling physical symptoms. In order to make the best decisions about proper diagnosis and treatment, wouldn’t you want your doctor to base her decisions on the best available evidence? Now suppose you’re a manager faced with putting together an employee recognition program. Wouldn’t you want those decisions also to be based on the best available evidence?
Any decision-making process is likely to be enhanced through the use of relevant and reliable evidence, whether it’s buying someone a birthday present or wondering which new washing machine to buy.
That’s the premise behind evidence-based management (EBMgt), the “systematic use of the best available evidence to improve management practice.”
The four essential elements of EBMgt are:
the decision maker’s expertise and judgment;
external evidence that’s been evaluated by the decision maker;
opinions, preferences, and values of those who have a stake in the decision; and
relevant organizational (internal) factors such as context, circumstances, and organizational members.
The strength or influence of each of these elements on a decision will vary with each decision. Sometimes, the decision maker’s intuition (judgment) might be given greater emphasis in the decision;
other times it might be the opinions of stakeholders; and at other times, it might be ethical considerations (organizational context).
The key for managers is to recognize and understand the mindful, conscious choice as to which elements are most important and should be emphasized in making a decision.
Ethical Decision Making
It's often clear what's right and wrong in a situation, but occasionally, the lines can get a little blurry.
When you encounter so many diverse viewpoints on a daily basis, your wrong can seem right to someone else, and vice versa. In these instances, it's critical you and your team knows how to make ethical decisions for the company.
Practicing ethical decision making can help you:
maintain an honest, supportive, and fair workplace culture,
but it's also necessary to ensure your company doesn't get into legal trouble or face major losses down the road.
Ethical decision making is the process in which you aim to make your decisions in line with a code of ethics.
To do so, you must seek out resources such as professional guidelines and organizational policies, and rule out any unethical solutions to your problem.
Making ethical decisions is easier said than done. Maybe your co-worker lied to a client about a deal, but you personally like this colleague and want to give him the benefit of the doubt. Or, perhaps you're tempted to lie to your boss to avoid admitting your team missed a deadline.
Whatever the case, it's critical you have a tangible set of steps to follow the next time you need to apply your ethical decision making skills at work.
Let's take a look at those steps now.
Ethical Decision Making Model
When you're making a major decision for your company, it can be tempting to choose the easiest or most cost-effective course of action -- even if that option isn't the best from an ethical standpoint.
The PLUS Model, a set of questions designed to help you make a decision from an ethical point of view, can ensure you're doing the right thing.
The PLUS model is especially objective because it doesn't focus on revenue or profit, but rather urges leaders to take a legal and fair approach to a problem.
PLUS Model:
P = Policies and Procedures (Does this decision align with company policies?)
L = Legal (Does this decision violate any laws or regulations?)
U = Universal (Is this decision in line with core values and company culture? How does it relate to our organizational values?)
S = Self (Does it meet my standards of fairness and honesty?)
Ethical Decision Making Examples
Let's take a look at a few ethical decision making examples, to give you a better understanding of how to act if anything like this happens to you.
1. Your team misses an important deadline, and you're tempted to tell your boss you reached it anyway.
It might seem like a good idea to tell your boss your team is on-track, and then work quietly to make sure that becomes a reality, but in the long-run this will only hurt you and your team. First, if you don't examine why your team missed the deadline, you won't know how to fix the problem moving forward. Additionally, your boss is meant to be a helpful resource for you, and could help you combat the issue. Lying could destroy your reputation as a leader and employee if your team or boss finds out, and it will be difficult to then prove your integrity. Figure out the guidelines or steps you need to take, and follow those.
2. Your co-worker is giving her sister a major discount on your product.
It makes sense -- family is important, after all. But it's not fair or ethical if some of your customers are receiving discounts simply because of who they are, and can even be seen as a form of discrimination. If the public finds out you don't follow fair rules when it comes to pricing and discounts, your entire company's integrity is at risk. Either mention to your co-worker that you don't feel it's fair, or report the issue to your team leader.
3. You're close to finalizing a deal when you find out some of the information you've provided the client isn't true. Your co-worker takes a look at your slides and lets you know some of the information is outdated and is no longer applicable to the deal. Unfortunately, you could get into legal trouble for lying in a contract, and you don't want to set a precedent of lying and essentially stealing from clients to close deals. Be upfront and own up to the misinformation, and then work with the client to create a new deal. Ideally, the client will appreciate your honesty. If not, at least you didn't win a deal through false measures, which might've gotten you into bigger trouble down the road.
Short Case Study: ETHICS DILEMMA
In the United Kingdom, the National Health Service employs 1.7 million people. It is the world’s largest publicly funded health service. There are cases when employees have found themselves “victimized” by management for one reason or another. A prime example is that of a senior consultant, around 50 years old, working for a London hospital. She was suspended on full pay for three years after raising concerns over staffing levels in her clinic.
Shortly before her suspension, a major case of child abuse implicating the hospital hit the headlines. As the hospital had failed to pick up on these problems, the consultant became a whistle-blower and exposed staffing concerns. Deeply concerned, the hospital promptly offered her money with a gagging clause as part of the agreement. She turned it down. It took the support of hundreds of colleagues for her to eventually return to work. Petitions that received great support from former patients had added to the call. However, she would never work for that hospital again. Since the incident, the consultant has been instrumental in trying to bring about changes to the support and protection of whistle-blowers in service.
Was the hospital’s decision to suspend the consultant correct? Explain why or why not.
If you were the consultant’s line manager, how would you have dealt with the situation?
Burke, L.A. and Miller, M.K. (1999). Taking the mystery out of intuitive decision making, Academy of Management Executive, Vol. 13 No. 4, pp. 91-99.
Robbins, S and Coulter, M. (2017). Management, Global Edition, Pearson.
