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Chapter 10 Decision Making by Individuals and Groups

Decision Making by Individuals and Groups

 Chapter Introduction

 10-1The Decision-Making Process

 10-2Models and Limits of Decision Making o 10-2aRational Model o 10-2bBounded Rationality Model o 10-2cZ Model o 10-2dEscalation of Commitment

 10-3Individual Influences on Decision Making o 10-3aRisk and the Manager o 10-3bPersonality, Attitudes, and Values o 10.3cIntuition o 10-3dCreativity

 10-4The Group Decision-Making Process o 10-4aAdvantages and Disadvantages of Group Decision Making o 10-4bLimits of Group Decision Making o 10-4cTechniques for Group Decision Making o 10-4dFactors in Selecting the Appropriate Technique o 10-4eSpecial Decision-Making Groups

 10-5Diversity and Culture in Decision Making

 10-6Participation in Decision Making o 10-6aThe Effects of Participation o 10-6bFoundations for Participation and Empowerment o 10-6cWhat Level of Participation?

 Chapter 10In Review o Learning Outcomes o Key Terms o What about You? Which Side of Your Brain Do You Favor? o Test your knowledge

Chapter Introduction

Moodboard/Photoshot

The first step is recognizing the problem; that is, the manager realizes that a decision must be made.

Learning Outcomes

 10-1 Identify the steps in the decision-making process.

 10-2 Describe various models of decision making.

 10-3 Discuss the individual influences that affect decision making.

 10-4 Explain how groups make decisions.

 10-5 Describe the role culture plays in decision making.

 10-6 Explain how organizations can improve the quality of decisions through participation.

 10-1 The Decision-Making Process  Decision making is a critical activity in the lives of managers. The decisions a manager faces can range

from very simple, routine matters for which the manager has an established decision rule (programmed decisionsprogrammed decisionsA simple, routine matter for which a manager has an established decision rule.) to new and complex decisions that require creative solutions (nonprogrammed

decisionsnonprogrammed decisionsA new, complex decision that requires a creative solution.). Scheduling lunch hours for one’s work group, for example, is a programmed decision. The manager performs this programmed decision activity daily, using an established procedure with the same clear goal in mind each time. In contrast, decisions like buying out another company are nonprogrammed, providing a unique, unstructured situation and requiring considerable judgment. Regardless of the type of decision made, it is helpful to understand as much as possible about how individuals and groups make decisions.

 Decision making is a process involving a series of steps, as shown in Figure 10.1. The first step is recognizing the problem; that is, the manager realizes that a decision must be made. Identifying the real problem is important; otherwise, the manager may be reacting to symptoms rather than dealing with the

root cause of the problem. Next, a manager must identify the objective of the decision. In other words, the manager must determine what is to be accomplished by the decision. The third step in the decision- making process is gathering information relevant to the problem. The manager must accumulate sufficient information about why the problem occurred. This involves conducting a thorough diagnosis of the situation and going on a fact-finding mission.

 Figure 10.1The Decision-Making Process

  © Cengage Learning 2013

 The fourth step is listing and evaluating alternative courses of action. During this step, a thorough “what- if” analysis should be conducted to determine the various factors that could influence the outcome. It is important to generate a wide range of options and creative solutions in order to be able to move on to the next step. Next, the manager selects the alternative that best meets the decision objective. If the problem

has been diagnosed correctly and sufficient alternatives have been identified, this step is much easier. After the solution is implemented, the situation must then be monitored to see whether the decision met its objective. Consistent monitoring and periodic feedback are essential parts of the follow-up process.

 Decision making can be stressful. Managers must make decisions with significant risk and uncertainty, and often without all of the necessary information. They must trust and rely on others in their decision-making process,yet they are ultimately responsible for the final decision. Sometimes decisions are painful and involve exiting businesses, firing people, and admitting wrong.

 Blue Man Group has a history of making effective decisions. Its theatrical productions blend comedy, music, and multimedia in a unique brand of entertainment. It has grown wildly famous and successful by making sound business choices, even though none of the founders has any formal training in music, acting, or business. The group has turned down offers to sell credit cards, soft drinks, breath mints, and paint, all related to the color blue. With each new opportunity, the three founders use the same evaluation: “Okay, that’s all good and well, that’s a nice thought—but is it Blue Man?” The group has also completed a detailed operating manual, a task many businesses never complete. Finally, the founders make decisions by

unanimous agreement.

 10-2 Models and Limits of Decision Making  The success of any organization depends on managers’ abilities to make effective decisionseffective

decisionsA timely decision that meets a desired objective and is acceptable to those individuals affected by it.. An effective decision is timely, is acceptable to the individuals affected by it, and meets the

desired objective. This section describes three models of decision making: the rational model, the bounded rationality model, and the Z model. The section will conclude with a discussion of the limits of decision-making techniques.

10-2a Rational Model

RationalityRationalityA logical, step-by-step approach to decision making, with a thorough analysis of alternatives and their consequences.refers to a logical, step-by-step approach to decision making with a thorough analysis of alternatives and their consequences. The rational model of decision making comes from classic economic theory and assumes the following:

1. The outcome will be completely rational. 2. The decision maker has a consistent system of preferences, which is used to choose the best alternative. 3. The decision maker is aware of all the possible alternatives.

4. The decision maker can calculate the probability of success for each alternative.

In the rational model, the decision maker strives to optimize, that is, to select the best possible alternative.

Managers often satisfice because of time constraints.

© Rangizzz/ Shutterstock.com

Given the assumptions of the rational model, it is unrealistic. There are time constraints and limits to human knowledge and information-processing capabilities. In addition, a manager’s preferences and needs change often. The rational model is thus an ideal that managers strive for in making decisions, and it captures the way a decision

should be made, but it does not reflect the reality of managerial decision making.

10-2b Bounded Rationality Model

Recognizing the deficiencies of the rational model, Herbert Simon suggested that there are limits on how rational a decision maker can actually be. His decision theory, the bounded rationality model, earned a Nobel Prize in economics in 1978. Also referred to as the “administrative man” theory, Simon’s theory rests on the idea that there are constraints that force a decision maker to be less than completely rational. The bounded rationality model has four assumptions:

1. Managers select the first alternative that is satisfactory. 2. Managers recognize that their conception of the world is simple. 3. Managers are comfortable making decisions without determining all the alternatives. 4. Managers make decisions by rules of thumb, or heuristics.

Bounded rationalityBounded rationalityA theory that suggests that there are limits to how rational a decision maker can actually be.assumes that managers satisficesatisficeTo select the first alternative that is “good enough,” because the costs in time and effort are too great to optimize.; that is, they select the first

alternative that is “good enough,” because the costs of optimizing in terms of time and effort are too great. Further, the theory assumes that managers develop shortcuts, called heuristicsheuristicsShortcuts in decision making that save mental activity., to make decisions in order to save mental activity. Heuristics are rules of thumb that allow managers to make decisions based on what has worked in past experiences.

Does the bounded rationality model portray the managerial decision process more realistically? Research indicates

that it does. One of the reasons managers face limits to their rationality is that they must make decisions under risk and time pressure. The situation they find themselves in is highly uncertain, and the probability of success is not known.

10-2c Z Model

Isabel Briggs Myers, co-creator of the Myers-Briggs Type Indicator, also developed the Z problem-solving model, which capitalizes on the strengths of the four separate preferences (Sensing, Intuiting, Thinking, and Feeling). By using the Z problem-solving model, managers can use both their preferences and nonpreferences to make decisions more effectively. The Z model is presented in Figure 10.2. According to this model, good problem solving has four steps:

Figure 10.2The Z Problem-Solving Model

SOURCE: From Type Talk at Work by Otto Kroeger and Janet Theusen, copyright © 1992 by Janet Theusen and Otto Kroeger. Used by permission of Delacorte Press, an imprint of The Random House Publishing Group, a division of Random House, Inc.

1. Examine the facts and details. Use Sensing to gather information about the problem. 2. Generate alternatives. Use Intuiting to develop possibilities. 3. Analyze the alternatives objectively. Use Thinking to logically determine the effects of each alternative. 4. Weigh the impact. Use Feeling to determine how the people involved will be affected.

Using the Z model can help an individual develop his nonpreferences. Another way to use the Z model is to rely on others to perform nonpreferred activities. For example, an individual who is an NF (Intuition-Feeling person) might want to turn to a trusted NT (Intuition-Thinking person) for help in analyzing alternatives objectively.

10-2d Escalation of Commitment

Each decision-making model carries its own unique limits. There is, however, one limitation that they all share: the decision maker’s unwillingness to abandon a bad decision. Continuing to support a failing course of action is known as escalation of commitmentescalation of commitmentThe tendency to continue to support a failing course

of action.. In situations characterized by escalation of commitment, individuals who make decisions that turn

out to be poor choices tend to hold fast to those choices, even when substantial costs are incurred. An example of escalation is the price wars that often occur between airlines. The airlines reduce their prices in response to competitors until at a certain stage both airlines are in no-win situations. They continue to compete despite the heavy losses they incur. The desire to win is a motivation to continue to escalate, and each airline continues to reduce prices (lose money) based on the belief that the other airline will pull out of the price war.

Another example of escalation of commitment is NASA’s enormous International Space Station. Originally estimated to cost $8 billion, the space station has been redesigned five times and remains unfinished. As of 2003, its estimated cost topped $30 billion, and some pundits speculate that the total bill may reach $100 billion for what physicist Robert Park describes as “the biggest technological blunder in history.” Despite the station’s drain on virtually every other NASA program, it remains a focal point of NASA’s work and continues to consume vast

resources.

Why does escalation of commitment occur? One explanation is offered by cognitive dissonance theory, as we discussed in Chapter 4. This theory assumes that people dislike inconsistency and that when it exists among their

attitudes or between their attitudes and behavior, they strive to reduce the dissonance. Other reasons why people may hang on to a losing course of action are optimism and control. Some people are overly optimistic and overestimate the likelihood that positive things will happen to them. Other people operate under an illusion of

control—that they have special skills to control the future that other people don’t have. Some individuals “throw good money after bad.” They think, “Well, I’ve invested this much … what’s a few dollars more?” The closer a project

is to completion, the more likely escalation is to occur.

Hanging on to a poor decision can be costly to organizations. While many foreign automakers saw promise in the green movement and shifted their development toward hybrid vehicles in 2002, General Motors stuck with a cost- cutting strategy that streamlined its operations and focused on production of SUVs and trucks. Between 2005 and

2008 GM lost $82 billion, and even these losses did not change the ailing company’s strategy. In 2009 CEO Rick Wagoner finally attempted to de-escalate, announcing that GM’s focus on SUVs and trucks was no longer a viable strategy. It was too late, however, and despite a multibillion-dollar loan from the U.S. government, GM declared bankruptcy.

Recent research on de-escalation found that individuals with higher self-esteem and those who are given an

opportunity to affirm an important value are more likely to de-escalate. Organizations can use this information to deal with escalation of commitment in several ways. One method of reducing escalation is to split the responsibility for project decisions by allowing different individuals to make decisions at different project stages. Another way that companies have tried to eliminate escalation of commitment is to closely monitor decision

makers. Still another suggestion is to provide individuals with a graceful exit from poor decisions so that their images are not threatened. There can be a reward of some type for those who admit to poor decisions before escalating their commitment to them or having groups make an initial investment decision. This way participants

in group decision making may experience a diffusion of responsibility for the failed decision rather than feeling

personally responsible; thus, they can pull out of a bad decision without threatening their image.

We have seen that there are limits to how rational a manager can be in making decisions. On reason is that most managerial decisions involve considerable risk, and individuals react differently to risk situations, a subject we address in the next section.

10-3 Individual Influences on Decision Making

No decision is made in a vacuum. In many ways, decisions reflect the people who make them, so it is appropriate to examine the individual influences on decision making: comfort with risk, cognitive stylecognitive styleAn individual’s preferred method for gathering information and evaluating alternatives., personality, intuition, and creativity.

10-3a Risk and the Manager

Many decisions involve some element of risk. For managers, decisions regarding hiring, promotions, delegation, acquisitions and mergers, overseas expansions, and new product development are among many that make risk a part of the job. As individuals, managers, of course, differ in terms of their willingness to take risks—that is, their degree of risk aversionrisk aversionThe tendency to choose options that entail fewer risks and less uncertainty.. Some choose options that entail fewer risks, preferring familiarity and certainty, while others are risk takers and will accept greater potential for loss in decisions as well as tolerating greater uncertainty. Those prone

to making risky decisions are more likely to take the lead in group discussions.

Research indicates that women are more risk averse than men and that older, more experienced managers are more risk averse than younger managers. There is also some evidence that successful managers take more risks

than unsuccessful managers. However, the tendency to take risks or avoid them is only part of behavior toward risk. Risk taking is influenced not only by an individual’s tendency but also by organizational factors. In commercial banks, loan decisions that require the assessment of risk are made every day.

Upper-level managers face a tough task in managing risk-taking behavior. By discouraging lower-level managers from taking risks, they may stifle creativity and innovation. If upper-level managers are going to encourage risk taking, however, they must allow employees to fail without fear of punishment. One way to accomplish this is to

consider failure as “enlightened trial and error.” The key is establishing a consistent attitude toward risk within the organization.

Obviously, when individuals take risks, losses may occur. Suppose an oil producer thinks there is an opportunity to uncover oil by reentering an old drilling site. She gathers a group of investors and shows them the logs, and they chip in to finance the venture. The reentry is drilled to a certain depth, and nothing is found. Convinced they did not drill deep enough, the producer goes back to the investors and requests additional financial backing to continue drilling. The investors consent, and she drills deeper, only to find nothing. She approaches the investors, and after lengthy discussion, they agree to provide more money to drill deeper. Why do decision makers sometimes throw good money after bad? Why do they continue to provide resources to what looks like a losing venture?

10-3b Personality, Attitudes, and Values

In addition to all of the individual differences variables (discussed in Chapters 3 and 4)—personality characteristics, attitudes, and values—managers must use both their logic and their creativity to make effective decisions. Most of us are more comfortable using either logic or creativity, and we show that preference in everyday decision making.

Our brains have two lateral halves (Figure 10.3). The right side is the center for creative functions, while the left side is the center for logic, detail, and planning. There are advantages to both kinds of thinking, so the ideal

situation is to be brain-lateralized, that is, be able to use either logic or creativity or both, depending on the

situation. There are ways to develop the side of the brain that you use less often. To develop your right side, or creative side, you can ask what-if questions, engage in play, and follow your intuition. To develop the left side, you can set goals for completing tasks and work to attain those goals. For managers, it is important to see the big picture, craft a vision, and plan strategically, all of which require right-brain skills. But it is equally important to be able to understand day-to-day operations and flowchart work processes, which are left-hemisphere brain skills.

Figure 10.3Functions of the Left and Right Brain Hemispheres

SOURCE: Based on ideas from S. P. Springer and G. Deutsch, Left Brain, Right Brain (New York: W. H. Freeman and Company,

1993), 272.

Two particular individual influences that can enhance decision-making effectiveness will be highlighted next: intuition and creativity.

10.3c Intuition

There is evidence that managers often use their intuitionintuitionA fast, positive force in decision making that

is utilized at a level below consciousness and involves learned patterns of information.to make decisions. Henry Mintzberg, in his work on managerial roles, found that in many cases managers do not appear to use a systematic, step-by-step approach to decision making. Rather, Mintzberg argued, managers make judgments based

on “hunches.” Daniel Isenberg studied the way senior managers make decisions and found that intuition was

used extensively, especially as a mechanism to evaluate decisions made more rationally. Robert Beck studied the way managers at Bank of America made decisions about the future direction of the company following the deregulation of the banking industry. Beck described their use of intuition as an antidote to analysis paralysis, or

the tendency to analyze decisions rather than developing innovative solutions.

Dr. Gary Klein, a renowned cognitive psychologist, has written a book on the power of intuition. Dr. Klein and colleagues insist that skilled decision makers rely on patterns of learned information in making quick and efficient

decisions. In a series of studies conducted with the U.S. Navy, firefighters, and the U.S. Army, they found that decision makers normally rely on intuition in unfamiliar, challenging situations. These decisions were superior to

those made after careful evaluation of information and potential alternatives.

Just what is intuition? In Jungian theory, intuiting (N) is a preferred method used for gathering data. This is only one way that the concept of intuition has been applied to managerial decision making, but it is perhaps the most widely researched form of the concept of intuition. There are, however, many definitions of intuition in the managerial literature. Chester Barnard, one of the early influential management researchers, argued that intuition’s

main attributes were speed and the inability of the decision maker to determine how the decision was made. Other researchers have contended that intuition occurs at an unconscious level and that this is why the decision

maker cannot verbalize how the decision was made.

Intuition has been variously described as follows:

 The ability to know or recognize quickly and readily the possibilities of a situation.

 Smooth automatic performance of learned behavior sequences.

 Simple analyses frozen into habit and into the capacity for rapid response through recognition.

These definitions share some common assumptions. First, there seems to be a notion that intuition is fast. Second, intuition is used at a level below consciousness. Third, there seems to be agreement that intuition involves learned patterns of information. Fourth, intuition appears to be a positive force in decision making.

The use of intuition may lead to more ethical decisions as intuition allows an individual to take on another’s role with ease, and role taking is a fundamental part of developing moral reasoning. You may recall from Chapter 4 the role of cognitive moral development in ethical decision making. One study found a strong link between cognitive moral development and intuition. The development of new perspectives through intuition leads to higher moral

growth, and thus to more ethical decisions.

Did You Know?

Brain hemispheric dominance is related to students’ choices of college majors. Left-brained students gravitate toward business, engineering, and sciences, whereas right-brained students are attracted to education, nursing, communication, and literature.

SOURCE: R. Rowan, The Intuitive Manager (New York: Little Brown, 1986).

One question that arises is whether managers can be taught to use their intuition. Weston Agor, who has conducted workshops on developing intuitive skills in managers, has attained positive results in organizations such as the city government of Phoenix and entertainment powerhouse Walt Disney Enterprises. After giving intuition tests to more than 10,000 executives, he has concluded that in most cases, higher management positions are held by individuals with higher levels of intuition. But, just as the brain needs both hemispheres to work, Agor cautions that organizations need both analytical and intuitive minds to function at their peak. Lee Iacocca, in his autobiography,

spends pages extolling intuition: “To a certain extent, I’ve always operated by gut feeling.” Agor suggests

relaxation techniques, using images to guide the mind, and taking creative pauses before making a decision. A review of the research on intuition suggests that, although intuition itself cannot be taught, managers can be

trained to rely more fully on the promptings of their intuition.

Intuition, with its many definitions, is an elusive concept. Some researchers view so-called rational methods as preferable to intuition, yet satisfaction with a rational decision is usually determined by how the decision feels

intuitively. Intuition appears to have a positive effect on managerial decision making, but it is not without controversy. Some writers argue that intuition has its place and that instincts should be trusted, but not as a substitute for reason. With new technologies, managers can analyze a lot more information in a lot less time,

making the rational method less time-consuming than it once was.

10-3d Creativity

In some ways, creativity is as elusive a concept as intuition. (We know it when we encounter it and when we feel its absence.) Even though creativity is highly individual, it is also collective. Personal creativity plays a role in the decisions made in organizations every day. For our purposes in this text, we can define creativitycreativityA process influenced by individual and organizational factors that results in the production of novel and useful ideas, products, or both.as a process influenced by individual and organizational factors that results in the

production of novel and useful ideas, products, or both.

Illumination is essential to the creative process

© Peshkova/ Shutterstock.com

The four stages of the creative process are preparation, incubation, illumination, and verification. Preparation means seeking out new experiences and opportunities to learn because creativity grows from a base of knowledge. Incubation is a process of reflective thought and is often conducted subconsciously. During incubation, the individual engages in other pursuits while the mind considers the problem and works on it. Illumination occurs when the individual senses an insight for solving the problem. Finally, verification is conducted to determine if the solution or idea is valid. Verification is accomplished by thinking through the implications of the decision, presenting the idea to another person, or trying out the decision. Momentary quieting of the brain through

relaxation can increase coherence, or the ability of different parts of the brain to work together. Both individual and organizational influences affect the creative process.

Individual Influences

Several individual variables are related to creativity. One group of factors involves the cognitive processes that creative individuals tend to use. One such cognitive process is divergent thinking, meaning the individual’s ability to

generate several potential solutions to a problem. In addition, associational abilities and the use of imagery are

associated with creativity. Unconscious processes such as dreams are also essential cognitive processes related

to creative thinking.

Personality factors have also been related to creativity in studies of individuals from several different occupations. These characteristics include intellectual and artistic values, breadth of interests, high energy, concern with

achievement, independence of judgment, intuition, self-confidence, and a creative self-image. Tolerance of

ambiguity, intrinsic motivation, risk taking, and a desire for recognition are associated with creativity as well. Not surprisingly, people who have a high level of motivation are more creative, since they are more likely to try to

think of different ways to get things done. Also, people who are able to see and understand others’ perspectives are

more creative since they have skills at seeing situations from more than one viewpoint.

There is evidence that people who are in a good mood are more creative. Positive affect is related to creativity in

work teams because being in a positive mood allows team members to explore new ways of thinking. Positive emotions enhance creativity by broadening one’s cognitive patterns and resources. These positive emotions initiate

thoughts and actions that are novel and unscripted. Moreover, it is a cyclical process: thinking positively makes

us more creative, and being more creative makes us think positively.

Yet, conversely, it has been found that people in negative moods perform better at tasks involving considerable cognitive demands. Apparently, when an individual experiences negative moods or emotions, it is a signal to him that all is not well and thus leads to more attention and vigilance in cognitive activity.

Organizational Influences

The organizational environment in which people work can either support creativity or impede creative efforts. Creativity killers include focusing on how work is going to be evaluated, being closely monitored while you are working, and competing with other people in win–lose situations. In contrast, creativity facilitators include feelings

of autonomy, being part of a team with diverse skills, and having creative supervisors and coworkers. High-

quality, supportive relationships with supervisors are related to creativity. Plus, high-quality, cohesive social networks can have a positive impact on creative decision making. Such social networks encourage creative decision

making by facilitating shared sense-making of relevant information and consensus building. In addition, flexible organizational structures and participative decision making have been associated with creativity.

An organization can present impediments to creativity by means of internal political problems, harsh criticism of

new ideas, destructive internal competition, and avoidance of risk. Even the physical environment can hamper creativity. Companies like Oticon, a Danish hearing aid manufacturer, and Ethicon Endo-Surgery, a division of Johnson & Johnson, use open-plan offices that eliminate walls and cubicles so that employees can interact more

frequently. When people mix, ideas mix as well. Organizations can therefore enhance individuals’ creative decision making by providing a supportive environment, participative decision making, and a flexible structure.

FastFact

Studies of the role of organizational rewards in encouraging creativity have mixed results. Some studies have shown that monetary incentives improve creative performance, whereas others have found that they do not. Still other studies have indicated that explicitly contracting to obtain a reward actually led to lower levels of creativity when compared with contracting for no reward, being presented with just the task, or being presented with the task and receiving the reward later.

SOURCES: D. M. Harrington, “Creativity, Analogical Thinking, and Muscular Metaphors,” Journal of Mental Imagery 6 (1981): 121– 126 ; R. M. Kanter, The Change Masters (New York: Simon & Schuster, 1983) ; T. M. Amabile, B. A. Hennessey, and B. S. Grossman, “Social Influences on Creativity: The Effects of Contracted-for-Reward,” Journal of Personality and Social Psychology 50 (1986): 14–23.

Individual-Organization Fit

Research has indicated that creative performance is highest when there is a match, or fit, between the individual and organizational influences on creativity. When individuals who desire to be creative are matched with an

organization that values creative ideas, the result is more creative performance.

A common mistaken assumption regarding creativity is that either you have it or you do not. Research refutes this

myth and has shown that individuals can be trained to be more creative. The Disney Institute, for example, features a wide range of programs offered to companies, and one of their best sellers is creativity training. Part of

creativity training involves learning to open up mental locks that keep us from generating creative alternatives to a decision or problem. Following are some mental locks that diminish creativity:

 Searching for the “right” answer

 Trying to be logical

 Following the rules

 Avoiding ambiguity

 Striving for practicality

 Being afraid to look foolish

 Avoiding problems outside our own expertise

 Fearing failure

 Believing we are not really creative

 Not making play a part of work

Note that many of these mental locks stem from values within organizations.

Organizations can facilitate creative decision making in many ways. Rewarding creativity, allowing employees to fail, making work more fun, and providing creativity training are a few suggestions. Another way companies can encourage creativity is by exposing employees to new ideas through job rotation. As employees move through different jobs, they can be exposed to different information, projects, and teams, either within or outside the company. Finally, managers can encourage employees to surround themselves with stimuli that they have found to enhance their creative processes. These may be music, artwork, books, or anything else that encourages creative

thinking.

We have seen that both individual and organizational factors can produce creativity. Another important point to make about creativity is that it means finding problems as well as fixing them. Four different types of creativity in regard to this idea of finding problems have been proposed based on the source of the trigger (internal or external) and the source of the problem (presented versus discovered):

 Responsive creativity means responding to a problem that is presented to you by others because it is part of your job.

 Expected creativity is discovering problems because the organization expects you to do so.

 Contributory creativity is responding to problems presented to you because you want to be creative.

 Proactive creativity is discovering problems because you want to be creative.

3M consistently ranks among the top ten in Fortune’s annual list of most admired corporations. It earned this reputation through innovation. More than one-quarter of 3M’s sales are from products less than four years old. Post-It Notes, for example, were created by a worker who wanted little adhesive papers to mark pages in his hymnbook for church service. He thought of another worker who had perfected a light adhesive, and the two spent their free time developing Post-It Notes. 3M has continued its tradition of innovation with Post-It Flags, Pop-Up Tape Strips, and Nexcare Ease-Off Bandages.

3Ms products, such as Scotch Tape, benefit from the company’s continuous efforts to innovate.

Frances Roberts/Alamy

Leaders can play key roles in modeling creative behavior. Sir Richard Branson, founder and chairman of the U.K.-based Virgin Group, believes that if you do not use your employees’ creative potential, you are doomed to failure. At Virgin Group, the culture encourages risk taking and rewards innovation rather than following rules and regulations. “Analyzing ideas to death” is avoided. Branson says an employee should be

able to have an idea in the mo10-4 The Group Decision-Making Process

Managers use groups to make decisions for several reasons. One is synergysynergyA positive force that occurs in groups when group members are stimulated to produce new solutions to problems through the process of mutual influence and encouragement within the group., which occurs when group members stimulate new solutions to problems through the process of mutual influence and encouragement within the group. Another reason for using a group is to gain commitment to a decision. Groups also bring more knowledge and experience to the problem-solving situation.

Group decisions can sometimes be predicted by comparing the views of the initial group members with the final group decision. These simple relationships are known as social decision schemessocial decision schemesSimple rules used to determine final group decisions.. One social decision scheme is the majority-wins rule, in which the group supports whatever position is taken by the majority of its members. Another scheme, the truth-wins rule, predicts that the correct decision will emerge as an increasing number of members realize its appropriateness. The two-thirds-majority rule means that the decision favored by two-thirds or more of the members is supported. Finally, the first-shift rule states that members support a decision represented by the first shift in opinion shown by a member.

Research indicates that these social decision schemes can predict a group decision as much as 80 percent of the

time. Current research is aimed at discovering which rules are used in particular types of tasks. For example, studies indicate that the majority-wins rule is used most often in judgment tasks (i.e., when the decision is a matter

of preference or opinion), whereas the truth-wins rule predicts decisions best when the task is an intellective one

(i.e., when the decision has a correct answer).

rning and implement it that afternoon.

10-4a Advantages and Disadvantages of Group Decision Making

Group decision making has advantages and disadvantages. The advantages of group decision making include

 (1)

more knowledge and information through the pooling of group member resources,

 (2)

increased acceptance of and commitment to the decision because the members had a voice in it, and

 (3)

greater understanding of the decision because members were involved in the various stages of the decision process.

The disadvantages of group decision making include

 (1)

pressure within the group to conform and fit in,

 (2)

domination of the group by one forceful member or a dominant clique who may ramrod the decision, and

 (3)

the amount of time required because a group makes decisions more slowly than an individual.

Given these advantages and disadvantages, should decisions be made by an individual or a group? Substantial empirical research indicates that effectively making that determination depends on the type of task involved. For judgment tasks requiring an estimate or a prediction, groups are usually superior to individuals because of the

breadth of experience that multiple individuals bring to the problem. On tasks that have a correct solution, other

studies have indicated that the most competent individual outperforms the group. This finding has been called into question, however. Much of the previous research on groups was conducted in the laboratory, where group members interacted only for short periods of time. Researchers wanted to know how a longer group experience would affect decisions. Their study showed that groups who worked together for longer periods of time outperformed the most competent member 70 percent of the time. As groups gained experience, the best members

became less important to the group’s success. This study demonstrated that experience in the group is an important variable to consider when evaluating the individual versus group decision-making question.

Given the emphasis on teams in the workplace, many managers believe that groups produce better decisions than individuals, yet the evidence is mixed. More research needs to be conducted in organizational settings to help answer this question.

10-4b Limits of Group Decision Making

There are two potential liabilities in group decision making: groupthink and group polarization.

Groupthink

One liability of a cohesive group is its tendency to develop the dysfunctional process of groupthinkgroupthinkA deterioration of mental efficiency, reality testing, and moral judgment resulting from pressures within the group.. Irving Janis, the originator of this concept, describes groupthink as “a deterioration of mental efficiency,

reality testing, and moral judgment” resulting from pressures within the group. One of the conditions that leads to the development of groupthink is high cohesiveness. Cohesive groups tend to favor solidarity because members

identify strongly with the group. High-ranking teams that make decisions without outside help are especially prone to groupthink because they are likely to have shared mental models; that is, they are more likely to think

alike. Homogeneous groups (ones with little to no diversity among members) are more likely to suffer from

groupthink.

Two other conditions that encourage groupthink are

 (1)

having to make a highly consequential decision and

 (2)

time constraints.

A highly consequential decision is one that will have a great impact on the group members and on outside parties. Time restraints may cause group members to rush through the decision-making process. Both conditions can influence members to desire concurrence in decisions so much that they fail to evaluate one another’s suggestions critically. A group suffering from groupthink shows recognizable symptoms. Table 10.1 presents these symptoms and makes suggestions on how to avoid groupthink.

Table 10.1

Symptoms of Groupthink and How to Prevent it

SYMPTOMS OF GROUPTHINK

 Illusions of invulnerability. Group members feel that they are above criticism. This symptom leads to excessive optimism and risk taking.

 Illusions of group morality. Group members feel they are moral in their actions and therefore above reproach. This symptom leads the group to ignore the ethical implications of their decisions.

 Illusions of unanimity. Group members believe there is unanimous agreement on the decisions. Silence is misconstrued as consent.

 Rationalization. Group members concoct explanations for their decisions to make them appear rational and correct. The results are that other alternatives are not considered, and there is an unwillingness to reconsider the group’s assumptions.

 Stereotyping the enemy. Competitors are stereotyped as evil or stupid. This leads the group to underestimate its opposition.

SYMPTOMS OF GROUPTHINK

 Self-censorship. Members do not express their doubts or concerns about the course of action. This prevents critical analysis of the decisions.

 Peer pressure. Any members who express doubts or concerns are pressured by other group members who question their loyalty.

 Mindguards. Some members take it upon themselves to protect the group from negative feedback. Group members are thus shielded from information that might lead them to question their actions.

GUIDELINES FOR PREVENTING GROUPTHINK

 Ask each group member to assume the role of the critical evaluator who actively voices objections or doubts.

 Have the leader avoid stating his or her position on the issue prior to the group decision.

 Create several groups that work on the decision simultaneously.

 Bring in outside experts to evaluate the group process.

 Appoint a devil’s advocate to question the group’s course of action consistently.

 Evaluate the competition carefully, posing as many different motivations and intentions as possible.

 Once consensus is reached, encourage the group to rethink its position by reexamining the alternatives.

SOURCE: From Breckler/Wiggins/Olson. Social Psychology Alive!, 1E. © 2008 Nelson Education Ltd. Reproduced by permission. www.cengage.com/permissions © Robnroll/ Shutterstock.com/© sn4ke/ Shutterstock.com

An incident cited as a prime example of groupthink is the 1986 space shuttle Challenger disaster, in which the shuttle exploded, killing all seven crew members. A presidential commission concluded that flawed decision making was the primary cause of the accident. In 2003, the shuttle Columbia exploded over Texas upon reentering the earth’s atmosphere, killing all seven crew members. Within days of the Columbia disaster, questions began to surface about the decision-making process that led flight engineers to assume that damage caused to the shuttle upon take-off was minor and to continue the mission. The subsequent investigation of the disaster led observers to note that NASA’s decision-making process appears just as flawed in 2003 as it was in 1986, exhibiting all the classic symptoms of groupthink. The final accident report blamed the NASA culture that downplayed risk and suppressed

dissent for the decision.

The 1986 explosion of the space shuttle Challenger is an oft-cited example of groupthink.

NASA Archiv/Alamy

Consequences of groupthink include an incomplete survey of alternatives, failure to evaluate the risks of the preferred course of action, biased information processing, and a failure to work out contingency plans. Furthermore, groupthink may be a contributor to corruption in organizations. Beech-Nut sold millions of dollars of phony apple juice, and investigations indicated that employees were aware that the company had been using cheap concentrate. Employees rationalized their actions by saying that other companies were selling fake juice and that it was safe to consume. Ultimately, after incurring $25 million in fines and legal costs, the company was almost

destroyed.

Table 10.1 presents Janis’s guidelines for avoiding groupthink. Many of these suggestions center around ensuring that decisions are evaluated completely, with opportunities for discussion from all group members. This strategy encourages members to evaluate one another’s ideas critically. Groups that are educated about the value of diversity tend to perform better as a result. Less successful are groups that are homogenous and not educated

about the value of diversity.

Janis has used the groupthink framework to conduct historical analyses of several political and military fiascoes, including the Bay of Pigs invasion, the Vietnam War, and Watergate. One review of the decision situation in the

Challenger incident proposed that two variables, time and leadership style, are important to include. When a decision must be made quickly, there is more potential for groupthink. Leadership style can either promote groupthink (if the leader makes his or her opinion known up front) or avoid groupthink (if the leader encourages open and frank discussion).

There are few empirical studies of groupthink, and most of these involved students in a laboratory setting. More applied research may be seen in the future, however, as a questionnaire has been developed to measure the

constructs associated with groupthink. Janis’s work on groupthink has led to several interdisciplinary efforts at

understanding policy decisions. The work underscores the need to examine multiple explanations for failed decisions. Teams that experience cognitive (task-based) conflict are found to make better decisions than teams that experience affective (emotion-based) conflict. As such, one prescription for managers has been to encourage cognitive conflict while minimizing affective conflict. However, these two forms of conflict can also occur together

and more research is needed on how one can be encouraged while minimizing the other.

Group Polarization

Another group phenomenon was discovered by a graduate student. His study showed that groups and individuals within the group made riskier decisions and accepted greater levels of risk following a group discussion of the issue. Subsequent studies uncovered another shift—toward caution. Thus, group discussion produced shifts both

toward more risky positions and toward more cautious positions. Further research revealed that individual group member attitudes simply became more extreme following group discussion. Individuals who were initially against an issue became more radically opposed, and individuals who were in favor of the issue became more strongly supportive following discussion. These shifts came to be known as group polarizationgroup polarizationThe tendency for group discussion to produce shifts toward more extreme attitudes among

members..

The tendency toward polarization has important implications for group decision making. Groups whose initial views lean a certain way can be expected to adopt more extreme views following interaction between members. Several ideas have been proposed to explain why group polarization occurs. One explanation is the social comparison approach. Prior to group discussion, individuals believe they hold better views than the other members. During group discussion, they see that their views are not so far from average, so they shift to more extreme

positions. A second explanation is the persuasive arguments view. It contends that group discussion reinforces

the initial views of the members, so they take a more extreme position. Both explanations are supported by research. It may be that both processes, along with others, cause the group to develop more polarized attitudes.

In sum, group polarization leads groups to adopt extreme attitudes. In some cases, this can be disastrous. For instance, if individuals are leaning toward a dangerous decision, they are likely to support it more strongly following discussion. A recent study found that after discussing hiring decisions as a group, employers were less

accurate in their ratings and were more susceptible both to contrast effects and halo effects.

Both groupthink and group polarization are potential liabilities of group decision making, but several techniques can be used to help prevent or control these two liabilities.

10-4c Techniques for Group Decision Making

Once a manager has determined that a group decision approach should be used, he can determine the technique that is best suited to the decision situation. Seven techniques will be briefly summarized: brainstorming, nominal group technique, devil’s advocacy, dialectical inquiry, quality circles and quality teams, and self-managed teams.

Brainstorming

Brainstorming is a good technique for generating alternatives. The idea behind brainstormingbrainstormingA technique for generating as many ideas as possible on a given subject while suspending evaluation until all the ideas have been suggested.is to generate as many ideas as possible, suspending evaluation until all of the ideas have been suggested. Participants are encouraged to build on the suggestions of others, and imagination is emphasized. One company that benefits from brainstorming is Toyota. Despite its success with the baby boomer generation, Toyota’s executives realized that they were failing to connect with younger buyers who viewed the firm as stodgy. In response, Toyota assembled a group of younger employees to brainstorm new products for this

market. The result was Scion, an entirely new line of boxy crossover vehicles aimed at the younger set.

Evidence suggests, however, that group brainstorming is less effective than a comparable number of individuals working alone. This may be because in groups, participants engage in discussions that can make them lose their

focus.

Nominal Group Technique

A structured approach to decision making that focuses on generating alternatives and choosing one is called nominal group technique (NGT)nominal group technique (NGT)A structured approach to group decision making that focuses on generating alternatives and choosing one., which involves the following discrete steps:

1. Individuals silently list their ideas. 2. Ideas are written on a chart one at a time until all ideas are listed. 3. Discussion is permitted but only to clarify the ideas. No criticism is allowed. 4. A written vote is taken.

NGT is a good technique to usewhen group members fear criticism from others.

Hot Trend: Green Cohesion

Moore Ruble Yudell (MRY) won numerous awards (including an American Architecture Award and a Design Green honor award) for the new Santa Monica Civic Center parking garage. The structure makes use of recycled steel and reflective glass panels that not only look good but greatly reduce energy consumption by allowing natural sunlight to illuminate the garage. Photovoltaic solar panels on the ceiling generate a third of the electricity used in the garage, and a water recycling system is used in the sprinklers.

MRY has long been committed to green architecture, employing strict energy conservation guidelines and healthy building materials in its designs all over the world. The firm’s projects include the U.S. Embassy in Berlin and the Wanhao Century Center office and hotel complex in Beijing, among a host of others. The reduce-reuse-recycle mantra is woven into all the company’s projects and is shared by a staff of sixty professionals. Many of these employees are long-term (fifteen years or more) staffers, which is a testament to the firm’s commitment to fostering creativity and professional growth among individuals.

SOURCES: D. Philadelphia, “Green Business,” Fortune Small Business (October 2008): 23, www.moorerubleyudell.com. © Stocktrek/ Digital Vision/ Getty Images

Devil’s Advocacy

In the devil’s advocacydevil’s advocacyA technique for preventing groupthink in which a group or individual is given the role of critic during decision making.decision method, a group or individual is given the role of critic. This devil’s advocate has the task of coming up with the potential problems of a proposed decision. By

identifying potential pitfalls in advance, organizations can often avoid costly mistakes in decision making. As we discussed in Chapter 9, a devil’s advocate who challenges the CEO and top management team can help sustain the vitality and performance of the upper echelon.

Dialectical Inquiry

Dialectical inquiryDialectical inquiryA debate between two opposing sets of recommendations.is essentially a debate between two opposing sets of recommendations. Although it sets up a conflict, it is a constructive

approach because it brings out the benefits and limitations of both sets of ideas. However, when using this technique, it is important to guard against a win–lose attitude and to concentrate on reaching the most effective solution for all concerned. Research has shown that the way a decision is framed (i.e., win–win versus win–lose) is very important. A decision’s outcome could be viewed as a gain or a loss depending on the way the decision is

framed.

10-4d Factors in Selecting the Appropriate Technique

Before choosing a group decision-making technique, the manager should carefully evaluate the group members and the decision situation. Only then can the best method for accomplishing the objectives of the group decision-making process be selected. If the goal is generating a large number of alternatives, for example, brainstorming would be a good choice. If group members are reluctant to contribute ideas, the nominal group technique would be appropriate. The need for expert input would be best facilitated by the Delphi technique, which uses a panel of experts. To guard against groupthink, devil’s advocacy or dialectical inquiry would be effective. Decisions that concern quality or production would benefit from the advice of quality circles or the empowered decisions of quality teams. Moreover, recent research results suggest that if individuals within a team are made accountable for the process of decision making (rather than the end decision itself), then such teams are more likely to gather

diverse information, share information, and eventually make better decisions. Finally, a manager who wants to provide total empowerment to a group should consider self-managed teams.

10-4e Special Decision-Making Groups

Even though in organizations many types of groups make collective decisions, quality-oriented groups and self- managed teams have higher levels of involvement and authority in group decision making.

Quality Circles and Quality Teams

A quality circlequality circleA small group of employees who work voluntarily on company time, typically one hour per week, to address work-related problems such as quality control, cost reduction, production planning and techniques, and even product design.is a small group of employees who work voluntarily on company time, typically one hour per week, to address work-related problems such as quality control, cost reduction, production planning and techniques, and even product design. Quality circles also extend participative decision making into teams. Managers often listen to recommendations from quality circles and implement the suggestions. Involvement in the decision-making process is the primary reward.

Quality circles are not empowered to implement their own recommendations. They operate in parallel fashion to

the organization’s structure, and they rely on voluntary participation. In Japan, quality circles have been integrated into the organization instead of being added on. This may be one reason for Japan’s success with this technique. In contrast, the U.S. experience is not as positive. It has been estimated that 60 to 75 percent of the quality circles in U.S. firms have failed. Reasons for the failures have included a lack of top management support

and a lack of problem-solving skills among quality circle members.

Quality teamsQuality teamsA team that is part of an organization’s structure and is empowered to act on its decisions regarding product and service quality., in contrast, are included in total quality management and other quality improvement efforts as part of a change in the organization’s structure. Quality teams are generated from the top down and are empowered to act on their own recommendations. Whereas quality circles emphasize the generation of ideas, quality teams make data-based decisions about improving product and service quality. Various decision-making techniques are employed in quality teams. Brainstorming, flowcharts, and cause-and- effect diagrams help pinpoint problems that affect quality.

Quality circles and quality teams are methods for using groups in the decision-making process. Self-managed teams take the concept of participation one step further.

Self-Managed Teams

Another group decision-making method is the use of self-managed teams, discussed in Chapter 9. The decision- making activities of self-managed teams are more broadly focused than those of quality circles and quality teams.

Self-managed teams make many of the decisions that were once reserved for managers, such as work scheduling, job assignments, and staffing.

Many organizations have claimed success with self-managed teams. At Northern Telecom (now Nortel Networks),

revenues rose 63 percent, and sales increased 26 percent following the implementation of self-managed teams. Research evidence shows that self-managed teams can lead to higher productivity, lower turnover among

employees, and flatter organization structure.

Self-managed teams, like any cohesive group, can fall victim to groupthink. The key to stimulating innovation and better problem solving in these groups is welcoming dissent among members. Dissent breaks down complacency and sets in motion a process that results in better decisions. Team members must know that dissent is permissible

so that they won’t fear embarrassment or ridicule.

10-5 Diversity and Culture in Decision Making

Styles of decision making vary greatly among cultures. Many of the dimensions proposed by Hofstede that were presented in Chapter 2 affect decision making. Uncertainty avoidance, for example, can affect the way people view decisions. In the United States, a culture with low uncertainty avoidance, decisions are seen as opportunities for change. In contrast, cultures such as those of Indonesia and Malaysia attempt to accept situations as they are rather

than try to change them. Power distance also affects decision making. In more hierarchical cultures, such as India, top-level managers make nearly all decisions. In countries with low power distance, lower-level employees make many decisions. The Swedish culture exemplifies this type.

The individualist/collectivist dimension has implications for decision making. Japan, with its collectivist culture, favors group decisions. The United States has a more difficult time with group decisions because it is an individualistic culture. Time orientation affects the frame of reference of the decision. In China, with its long-term view, decisions are made with the future in mind. In the United States, many decisions are made considering only the short term.

The masculine/feminine dimension can be compared to the Jungian thinking/feeling preferences for decision making. Masculine cultures, as in many Latin American countries, value quick, assertive decisions. Feminine cultures, as in many Scandinavian countries, value decisions that reflect concern for others.

Recent research examining the effects of cultural diversity on decision making has found that when individuals in a group are racially dissimilar, they engage in more open information sharing, encourage dissenting perspectives,

and arrive at better decisions than racially similar groups. Other kinds of diversity, such as functional background, have been studied as well. Top management teams that have members who come from a variety of functional backgrounds (e.g., marketing, accounting, information systems) engage in greater debate in decision making than top management teams in which the members come from similar backgrounds. This diversity results

in better financial performance for the firm. Research also indicates that strategic decision making in firms can vary widely by culture. For example, one such source of variation stems from the differential emphasis placed on environmental scanning in different cultures. Furthermore, strategic decision making might appear rational but is

also informed by firm level and national characteristics.

10-6 Participation in Decision Making

Effective management of people can improve a company’s economic performance. Firms that capitalize on this fact

share several common practices. Chief among them is participation of employees in decision making. Many companies do this through highly empowered self-managed teams. Even in situations where formal teams are not feasible, decision authority can be handed down to frontline employees who have the knowledge and skills to make a difference. At Hampton Inn hotels, for example, guest services personnel are empowered to do whatever is necessary to make guests happy—without consulting their superiors.

The Effects of Participation

Participative decision makingParticipative decision makingDecision making in which individuals who are affected by decisions influence the making of those decisions.occurs when individuals who are affected by decisions influence the making of those decisions. Participation buffers employees from the negative experiences of

organizational politics. Participation in decisions such as how technology is developed has also been found to

affect employee’s attitudes toward the technology and how they use it. In addition, participative management

has been found to increase employee creativity, job satisfaction, and productivity. GE Capital is one company that believes in participation. Each year it holds so-called dreaming sessions, in which employees from all levels of the company attend strategy and budget meetings to discuss where the company is heading.

As our economy becomes increasingly based on knowledge work and as new technologies make it easier for

decentralized decision makers to connect, participative decision making will undoubtedly increase. Consider the city and county of San Francisco, a combined city/county government organization. Needing to adopt a single messaging system to meet the requirements of more than 20,000 employees, it faced a huge challenge in getting all the users to provide input into the decision. Technology helped craft a system that balanced the needs of all the groups involved, and IT planners developed a twenty-eight-page spreadsheet to pull together the needs and desires of all sixty departments into a focused decision matrix. Within two years, 90 percent of the users had agreed on and

moved to a single system, reducing costs and complexity.

10-6b Foundations for Participation and Empowerment

What conditions must be in place in order for participative decision making to work? The organizational foundations include a supportive organizational culture and a team-oriented work design. A supportive work environment is essential because of the uncertainty within the organization. Lower-level organizational members must be able to make decisions and take action on them. As operational employees are encouraged to take part in making decisions, however, fear, anxiety, or even terror can be created among middle managers in the

organization. Thus, senior leadership must create an organizational culture that is supportive and reassuring for these middle managers as the power dynamics of the system change.

A second organizational foundation for participative decision making concerns the design of work. A team-oriented work design is a key organizational foundation because it leads to broader tasks and a greater sense of responsibility. For example, Volvo builds cars using a team-oriented work design in which each person does many

different tasks; therefore, each person retains direct responsibility for the finished product. These work designs create a context for effective participation.

If participative decision making is to work, employees must be able to comprehend how it provides a personal benefit to them.

The three individual prerequisites for participative decision making are

1. the capability to become psychologically involved in participative activities, 2. the motivation to act autonomously, and

3. the capacity to see the relevance of participation for one’s own well-being.

First, people must be psychologically equipped to become involved in participative activities if they are to be effective team members. Not all people are so predisposed. For example, Germany has an authoritarian tradition that runs counter to participative decision making at the individual and group levels. As a result, General Motors encountered significant difficulties implementing quality circles in its German plants because workers expected to be directed by supervisors, not to engage in participative problem solving. New initiatives to establish supervisory/worker boards in German corporations are intended to change this authoritarian tradition.

The second individual prerequisite is the motivation to act autonomously. People with dependent personalities are

predisposed to be told what to do and to rely on external motivation rather than internal, intrinsic motivation. These dependent people are not often effective contributors to decision making.

Finally, if participative decision making is to work, employees must be able to comprehend how it provides a personal benefit to them. The personal payoff for the individual need not be short term. It may be a long-term benefit that results in workers receiving greater rewards through enhanced organizational profitability.

10-6c What Level of Participation?

Participative decision making is complex, and one of the things managers must understand is that employees can be involved in some, or all, of the stages of the decision-making process. For example, employees could be variously involved in identifying problems, generating alternatives, selecting solutions, planning implementations, or evaluating results. Research shows that greater involvement in all five of these stages has a cumulative effect. Employees who are involved in all five processes have higher satisfaction and performance levels. And, all decision processes are not created equal. If employees can’t be provided with full participation in all stages, they should be involved in the stages that seem to have the highest payoffs: generating alternatives, planning implementations,

and evaluating results. Styles of participation in decision making may need to change as the company grows or as its culture changes.

In Review

Learning Outcomes

10-1

Identify the steps in the decision-making process.

 The decision-making process involves programmed decisions and nonprogrammed decisions. The first step is recognizing the problem or realizing a decision must be made. Second, the objective of the decision is identified. The third step is gathering information relevant to the problem. The fourth step is listing and evaluating alternative courses of action. Finally, the manager selects the alternative that best meets the decision objective.

10-2

Describe various models of decision making.

 The rational model of decision making contends that the decision maker is completely rational in his or her approach. Bounded rationality theory suggests that constraints force decision makers to be less rational and assumes that managers satisfice and develop heuristics. The Z problem-solving model capitalizes on the strengths of four separate preferences (Sensing, Intuiting, Thinking, and Feeling), allowing managers to use preferences and nonpreferences to make decisions.

10-3

Discuss the individual influences that affect decision making.

 Decisions reflect the people who make them. The individual influences that affect decision making are comfort with risk, cognitive style, personality, intuition, and creativity.

10-4

Explain how groups make decisions.

 Group decisions are utilized for several reasons: to achieve synergy, to gain commitment to a decision, and to maximize knowledge and experience in problem-solving situations. Seven techniques utilized in group decisions are brainstorming, nominal group technique, devil’s advocacy, dialectical inquiry, quality circles and quality teams, and self-managed teams.

10-5

Describe the role culture plays in decision making.

 Styles of decision making vary greatly among cultures and affect the way people view decisions. The dimensions proposed by Hofstede in Chapter 2 that affect decision making are: uncertainty avoidance, power distance, individualism/collectivism, time orientation, masculinity/femininity, cultural diversity, functional background, and strategic decision making.

10-6

Explain how organizations can improve the quality of decisions through participation.

 Participative decision making can include employees identifying problems, generating alternatives, selecting solutions, planning implementations, and/or evaluating results. Participative management can increase employee creativity, job satisfaction, and productivity, and improve a company’s economic performance.

In Review

Key Terms

 programmed decisionprogrammed decisionA simple, routine matter for which a manager has an established decision rule.

 nonprogrammed decisionnonprogrammed decisionA new, complex decision that requires a creative solution.

 effective decisioneffective decisionA timely decision that meets a desired objective and is acceptable to those individuals affected by it.

 rationalityrationalityA logical, step-by-step approach to decision making, with a thorough analysis of alternatives and their consequences.

 bounded rationalitybounded rationalityA theory that suggests that there are limits to how rational a decision maker can actually be.

 satisficesatisficeTo select the first alternative that is “good enough,” because the costs in time and effort are too great to optimize.

 heuristicsheuristicsShortcuts in decision making that save mental activity.

 escalation of commitmentescalation of commitmentThe tendency to continue to support a failing course of action.

 cognitive stylecognitive styleAn individual’s preferred method for gathering information and evaluating alternatives.

 risk aversionrisk aversionThe tendency to choose options that entail fewer risks and less uncertainty.

 intuitionintuitionA fast, positive force in decision making that is utilized at a level below consciousness and involves learned patterns of information.

 creativitycreativityA process influenced by individual and organizational factors that results in the production of novel and useful ideas, products, or both.

 synergysynergyA positive force that occurs in groups when group members are stimulated to produce new solutions to problems through the process of mutual influence and encouragement within the group.

 social decision schemessocial decision schemesSimple rules used to determine final group decisions.

 groupthinkgroupthinkA deterioration of mental efficiency, reality testing, and moral judgment resulting from pressures within the group.

 group polarizationgroup polarizationThe tendency for group discussion to produce shifts toward more extreme attitudes among members.

 brainstormingbrainstormingA technique for generating as many ideas as possible on a given subject while suspending evaluation until all the ideas have been suggested.

 nominal group technique (NGT)nominal group technique (NGT)A structured approach to group decision making that focuses on generating alternatives and choosing one.

 devil’s advocacydevil’s advocacyA technique for preventing groupthink in which a group or individual is given the role of critic during decision making.

 dialectical inquirydialectical inquiryA debate between two opposing sets of recommendations.

 quality circlequality circleA small group of employees who work voluntarily on company time, typically one hour per week, to address work-related problems such as quality control, cost reduction, production planning and techniques, and even product design.

 quality teamquality teamA team that is part of an organization’s structure and is empowered to act on its decisions regarding product and service quality.

 participative decision makingparticipative decision making

In Review

What about You? Which Side of Your Brain Do You Favor?

There are no “right” or “wrong” answers to this questionnaire. It is more of a self-assessment than a test. Do not read the questions more than once. Don’t overanalyze. Simply circle “a” or “b” to indicate which answer is more typical of you.

1. Typically, when I have a problem to solve,

Answer

1. I make a list of possible solutions, prioritize them, and then select the best answer. 2. I “let it sit” for a while or talk it over with someone before I attempt to reach a solution.

2. When I sit with my hands clasped in my lap (FOLD YOUR HANDS THAT WAY RIGHT NOW BEFORE GOING ON, THEN LOOK AT YOUR HANDS), the thumb that is on top is

Answer

1. my right thumb. 2. my left thumb.

3. I have hunches

Answer

1. sometimes, but do not place much faith in them. 2. frequently and I usually follow them.

 4.

If I am at a meeting or lecture, I tend to take extensive notes.

Answer

True

False

 5.

I am well organized, have a system for doing things, have a place for everything and everything in its place, and can assimilate information quickly and logically.

Answer

True

False

 6.

I am good with numbers.

Answer

True

False

 7.

Finding words in a dictionary or looking up names in a telephone book is something I can do easily and quickly.

Answer

True

False

 8.

If I want to remember directions or other information,

Answer

1. I make notes. 2. I visualize the information.

 9.

I express myself well verbally.

Answer

True

False

 10.

To learn dance steps or athletic moves,

Answer

1. I try to understand the sequence of the steps and repeat them mentally. 2. I don’t think about it; I just try to get the feel of the game or the music.

Interpretation:

 Four, five, or six “a” answers indicate lateralization—an ability to use either hemisphere easily and to solve problems according to their nature rather than according to a favored manner.

 One, two, or three “a” answers indicate right-hemisphere dominance; corresponding traits include inventiveness, creativity, innovation, risk taking, whimsy, and an ability to see the “big picture.”

 Seven, eight, or nine “a” answers indicate a left-hemisphere dominance—a tendency toward attention to detail, the use of logic, and traits of thoroughness and accuracy.

SOURCE: “Which Side of the Brain Do You Favor?” in Quality Driven Designs (San Francisco: Pfeiffer/Jossey-Bass, 1992). Copyright 1992 Pfeiffer/Jossey-Bass. Reprinted by permission of Jossey-Bass, Inc., a subsidiary of John Wiley & Sons, Inc.

In Review

Test your knowledge

1. List and describe Jung’s four cognitive styles. 2. What are the individual and organizational influences on creativity? 3. What are the individual and organizational foundations of empowerment and teamwork? 4. Describe the advantages and disadvantages of group decision making. 5. Describe the symptoms of groupthink, and identify actions that can be taken to prevent it.