Decision-making in Organizations
DDBA 8560 - Seminar in Healthcare Managerial Decision Making
Walden University
2022
Decision-making in Organizations
Organizations are decision making systems, and can be understood in terms of
their decision processes (Simon, 1976, pp. ix & xxv). Since decision making is the
core of organizations, it is important to understand the underlying conditions of the
organizational processes in terms of decisions. In the subsections below, definitions
and key concepts related to decision making and organizations are presented.
Individual and organizational decision-making as well as prominent decision
making models are explored.
Definition
According to the Business Dictionary, decision making is “the thought process of
selecting a logical choice from the available options.” It involves consideration for
alternative options, the ability to predict outcome of each alternative, and a selection
based on the best alternative for the situation (Business Dictionary). Herrmann (2015)
defined decision making as the process of transforming inputs into outputs. The input
is information, the output is new information.
Daft (1998) defined organizational decision making has the process of
identifying and solving problems. In the identifying stage, information about the
environment and organizational conditions are gathered to diagnose deficiencies. In
the problem solving stage, alternatives are considered and analyzed, and the best
option, for the context, is selected and implemented. Important organizational
characteristics, structure and context, that will be used for later comparisons are
summarized in the proceeding section.
Characteristics of organization
Organizations can be described in terms of structure and context. Structure
describes the internal “differentiation and patterning of relationships” within an
organization (Thompson, 1967). Although Daft (1998), in his descriptions of the
structural dimension, considered formalization, specialization, standardization,
hierarchy of authority, complexity, centralization and professionalism, this
review will only focus on hierarchy, complexity, and centralization.
Hierarchy of authority describes who reports to whom. This is described as
the span of control, number of employees reporting to the supervisor (Daft, 1998).
Hierarchy is typically depicted by height in an organization’s chart: An organization
with more span of control would be taller, whereas an organization with less span of
control will be shorter. Thompson (1967) argued that the term hierarchy is not just
related to highness and lowness. He argued that hierarchy reflects clustering,
displaying combinations of interdependent groups. This idea of clustering puts forth
an aspect of coordination which goes beyond the scope of components.
Complexity refers to the number of subsystems within an organization and is
measured in terms of hierarchical degree, number of departments across an
organization, and number of geographical locations (Daft, 1998). For example, the
healthcare system, consisting of a high degree of hierarchy, multitudes of
departments, and vast number of geographical locations, is considered complex.
Thompson (1967) argued that the fundamental problem for complex organizations is
dealing and coping with uncertainty. He stated that uncertainty stems from a lack of
cause/effect understanding, contingencies, and interdependency of components.
Contingency is the idea that a future event cannot be predicted with certainty.
Thompson also suggested that technology and environments are major sources of
uncertainty.
Centralization refers to the expanse of authority at each hierarchical level.
When decision making authority are limited to the top level of an organization, the
organization is centralized. Conversely, when decision making authority is dispersed
to lower levels, the organization is decentralized.
Daft (1998) described organization’s contexts, which considers overlapping
elements in structure and work processes. Some important contexts include size,
number of people working for an organization, and technology. He described
technology as the actions and techniques used to transform inputs into outputs. The
environmental context are elements outside the boundary of the organization.
Goals and strategy define scope and purpose of the organization. Organization’s
culture are the underlying values and norms shared amongst employees. The
following section expand the ideas laid above to include decision making.
