Chapter 14 DecisionMaking and ProblemSolving Processes Learning Goals

Chapter 14 Decision-Making and Problem-Solving Processes

Learning Goals • Understand the nature of decision making in organizations • Describe several decision-making models and the perspectives they bring to the decision process • Distinguish between individual and group decision making and identify the situations for which they are best suited

Learning Goals (Cont. ) • Discuss how framing a decision affects the results of decision making • Understand the process of escalation of commitment to a losing course of action • Recognize groupthink and how to avoid it during group decision making • Explain several methods of improving decision processes in organizations

Overview • • • Introduction Types of Decision Strategies The Decision-Making Process Decision-Making Models Assets and Liabilities of Group Decision Making • Choosing between Individual and Group Decision Making

Overview (Cont. ) • • Framing Effects Escalation of Commitment Groupthink International Aspects of Decision Making and Problem Solving • Ethical Issues in Decision Making and Problem Solving

Introduction • Basic issue: pick the right decision from a set of alternatives • Decision-making process – Define decision problem – Create alternatives – Choose an alternative using decision criteria

Introduction (Cont. ) • Problem solving versus decision making – Problem solving: finding the root cause of a deviation (cause analysis) – Decision making: choosing from alternative courses of action (choice analysis) Problem solving Decision making

Introduction (Cont. ) Problem solving Decision making Overlap between problem solving and decision making.

Introduction (Cont. ) Problem-solving process Identify problem Find root causes Develop alternatives Decision-making Process

Introduction (Cont. ) • Individual and group decision making – Individual decision making • Use for well-structured problems with several tightly coupled parts • Example: stop sign decision – Group decision making • Use for ill-defined problems with loosely coupled parts • Example: buying your mother-in-law’s birthday gift – Exceptions: individual’s dispositions and time

Types of Decision Strategies • Programmed decision strategies • Unprogrammed decision strategy

Types of Decision Strategies • Programmed decision strategy – Routine, recurring, predictable decisions – Apply existing rules and standard procedures – Example: electric service to a new customer

Types of Decision Strategies (Cont. ) • Unprogrammed decision strategy – Nonroutine, nonrecurring, unpredictable decisions – Events are novel and unusual – Decision makers often have not seen such events in the past – Do not have experience with them

Types of Decision Strategies Defined by Three Dimensions Routine Recurring Certainty Nonroutine Programmed decisions Unprogrammed decisions Nonrecurring Uncertainty

Some Common Decisions • • • Stop sign decision Cereal decision Supermarket checkout line decision Potato chip decision Pepperidge Farm cookie decision

Some Not So Common Decisions • • • Your mother-in-law’s birthday gift Car purchase decision Choosing a job after graduation New apartment/house decision Vacation decision

Decision-Making Models Rational Bounded rationality Decision making Political Unstructured Garbage can

Decision-Making Models (Cont. ) • The Rational Model – Closed system – Maximizing or minimizing a goal – Knows alternatives, results, risks – Has preference ordering function – Applies that function to alternatives and decides

Decision-Making Models (Cont. ) • The Bounded Rationality Model – Human limitations constrain rationality in decision process – Does not try to maximize a goal – Does not know all alternatives – Features satisficing behavior – Open, dynamic, changes Satisficing: “An example is the difference between searching a haystack to find the sharpest needle in it and searching the haystack to find a needle sharp enough to sew with. “

Decision-Making Models (Cont. ) • Unstructured decision-making models – Unprecedented, significant, complex decisions – Feature uncertainty and ambiguity – Break problems into manageable parts – Then apply more structured approaches – Uses satisficing behavior – Vulnerable to factors that disturb orderly movement

Decision-Making Models (Cont. ) • Unstructured decision-making models (Cont. ) – Affected by political forces trying to stop a decision – False starts; hit blank walls – Dynamic process – Can feature an emerging "implicitly favored" alternative – Perceptual processes operate while trying to confirm the "implicitly favored" choice

Decision-Making Models (Cont. ) • The Garbage Can Model of decision making – Decision making under high ambiguity – Meeting of four streams in a decision-making garbage can – Streams: problems, solutions, participants, choice opportunities

Decision-Making Models (Cont. ) • The Garbage Can Model of decision making (cont. ) – Problem streams: issues or problems facing the organization at a particular time – Solutions streams: available solutions to a decision maker. Not always directly connected to present problem – Participant streams: decision makers and others who are available to decide – Choices streams: opportunities or chances to decide

Decision-Making Models (Cont. ) • The Garbage Can Model of decision making (cont. ) – Streams constantly move through an organization – Confluence of streams results in a decision Solutions look for problems to solve, and decision makers make choices based on the arbitrary mix of the four streams in the garbage can.

Decision-Making Models (Cont. ) • Political models of decision making – People and groups pursuing self-interests – Power-based and conflict-based process – Bargaining and compromise; conflict management – Especially true of resource allocation decisions

Decision-Making Models and Decision Strategies Programmed decisions Political models Rational Garbage Can Decision-making process Bounded Rationality Unstructured Political models Unprogrammed decisions

Assets and Liabilities of Group Decision Making • Assets – Increased information and knowledge – Acceptance of decision – Understanding the decision – Job satisfaction – Personal development

Assets and Liabilities of Group Decision Making (Cont. ) • Liabilities – Pressure for conformity – Dominant individual – Favored alternative – Winning the argument – More time to reach decision

Choosing Between Individual and Group Decision Making • Alternative social processes for decision making – “A” approaches: authoritative, decision maker decides a course of action – “C” approaches: consultative, decision maker gets information from others but decides a course of action – “G” approaches: group-based processes; consensus See text book Table 14. 1

Choosing Between Individual and Group Decision Making (Cont. ) Continuum of social processes of decision making Individuals AI AII Groups CI CII GII More social interaction Longer time to decision Higher potential conflict More information Greater involvement in decision process Increasing acceptance of decision Consensus

Choosing Between Individual and Group Decision Making (Cont. ) • The Vroom-Yetton Model – Normative model – Uses a set of rules • Protect the acceptance of the decision • Protect the quality of the decision – Selects one of the five decision approaches that satisfies the underlying rules

Choosing Between Individual and Group Decision Making (Cont. ) • Problem characteristics used by model – Information available to decision maker – Degree of structure of problem – Importance of subordinates’ acceptance of decision – Likelihood of acceptance – Subordinates’ acceptance of goals of organization and decision – Amount of conflict among subordinates during the decision process

Contaminants of the Decision-Making Process Framing effects Escalation of commitment Decision process Groupthink

Framing Effects • Differences in presentation or framing of problem can affect choices – Framed as gain: people prefer to avoid risks (risk-averse behavior) – Framed as loss: people prefer to take risks (risk -seeking behavior) • View decision problem from different frames

Escalation of Commitment • Abandon a losing course of action or • Increase commitment to it – Hope of recovering losses – Getting positive future results • People will likely commit more resources • Result: escalation of commitment to a losing course of action • Ignore sunk costs; use future costs and benefits

Groupthink • Ugly disease that can infect cohesive decision-making groups • Excessive conformity to group norm that supports agreement among members • Such decision-making groups have lost the ability to critically assess alternatives

Groupthink (Cont. ) • Also have lost the ability to critically examine the effects of past decisions • Typically have little ethical concern for their decision’s effects • Groups that support critically examining alternatives will not suffer from groupthink

Groupthink (Cont. ) • Preventing groupthink by a group leader – Encourage critical evaluation of issues, ideas, alternatives – Deliberately stimulate conflict during decision process – Assign one member to play a devil’s advocate role for each group meeting – Ask for outsider critique and comment about the group’s deliberations

Methods of Improving Decision Making in Organizations • Human-based methods – Generate more alternatives – Increase criticism of alternatives – Increase conflict: offset liabilities of decisionmaking groups

Methods of Improving Decision Making in Organizations (Cont. ) • Computer-based methods – Management information systems – Decision support systems – Expert systems – End-user computing

Methods of Improving Decision Making in Organizations (Cont. ) • Brainstorming – Spontaneously generate ideas – Deferring critical evaluation of ideas – Role in the decision process: create a set of alternatives, not select the final one

Methods of Improving Decision Making in Organizations (Cont. ) • Brainstorming (cont. ) – Four rules • • Freewheeling generation of ideas No criticism of an idea Desire many ideas. Assumption: some good ideas Group members encouraged to suggest ways to combine or improve them

Methods of Improving Decision Making in Organizations (Cont. ) • Brainstorming (cont. ) – Electronic brainstorming: a new approach • Lack of anonymity in face-to-face groups can inhibit some people • Computer linkage of people; do not interact directly

Methods of Improving Decision Making in Organizations (Cont. ) • Nominal Group Technique (NGT) – Procedure to generate, evaluate, and choose decision alternatives • Members of decision group do not interact during early stages • Write ideas about decision problem • After about 20 minutes, each person reads one idea from her or his list • Another person records ideas on a flip-chart

Methods of Improving Decision Making in Organizations (Cont. ) • Nominal Group Technique (cont. ) – Procedure to generate, evaluate, and choose decision alternatives (cont. ) • Each person presents one idea at a time until all ideas are recorded • No discussion during reading and recording phase • Group discusses ideas on flip-chart • After discussion, each member votes privately on ideas • Pool individual votes to arrive at decision

Methods of Improving Decision Making in Organizations (Cont. ) • Delphi Method – Structured technique for decisions surrounded by uncertainty or heavily value laden – Also used when group members are geographically scattered – Examples: forecasting future events and public policy questions

Methods of Improving Decision Making in Organizations (Cont. ) • Delphi Method (cont. ) – Anonymous contributions to group's decision • Often by experts • No face-to-face interaction

Methods of Improving Decision Making in Organizations (Cont. ) • Delphi Method (cont. ) – Interact through paper-and-pencil questionnaires or computers – Multiple step process – The Delphi manager statistically summarizes each step's result – Becomes the input to the next step

Methods of Improving Decision Making in Organizations (Cont. ) • Delphi Method (cont. ) – Avoids some liabilities of group decision making – Lack of face-to-face interaction decreases chance of dominant individual – Controlled feedback helps ensure accuracy of information

Methods of Improving Decision Making in Organizations (Cont. ) • Devil's advocate technique – Person or group advocates a decision alternative; forcefully argues for it – Another person or group criticizes the alternative; argues for its rejection – Assumes a good decision alternative will withstand harsh criticism – Research evidence suggests the technique helps get high-quality decisions

Methods of Improving Decision Making in Organizations (Cont. ) • Dialectical inquiry – Structured, logical, analytical method of examining decision alternatives • Describe the favored decision alternative and data used to select it • Analyze assumptions held by decision makers when choosing the alternative

Methods of Improving Decision Making in Organizations (Cont. ) • Dialectical inquiry (cont. ) – Structured, logical, analytical method of examining decision alternatives (cont. ) • Pick another alternative for consideration; new one or one rejected earlier • Logically derive the assumptions underlying the choice of the counter alternative • Research evidence suggests this technique also helps get high-quality decisions

Methods of Improving Decision Making in Organizations (Cont. ) • Other human-based methods – Appreciative management and Technology of Participation – Recognize the increasing diversity of decisionmaking groups – Goals • Harness differences • Decrease dysfunctional conflict • Focus diverse members on organization's goals

Methods of Improving Decision Making in Organizations (Cont. ) • Computer-based methods – Management information systems • Information processing systems support daily operating activities and decision-making functions • Integrate different subsystems according to a general information management plan • Data conform to specifications of integrated system. Allow easy sharing • Multiple users access a wide range of data, decision models, and methods of querying databases

Methods of Improving Decision Making in Organizations (Cont. ) • Computer-based methods (cont. ) – Decision support systems • Designed to aid human judgment • Support decision processes to help get better decisions • Dynamic systems that evolve as they are used • Can tailor to individual decision maker • Several systems for different decision makers and classes of decisions

Methods of Improving Decision Making in Organizations (Cont. ) • Computer-based methods (cont. ) – Expert systems • Simulates knowledge and decision process of experts • Example: medical diagnosis, a database of symptoms and a set of decision rules to guide a user through a diagnosis • Interactive systems using computer access

International Aspects of Decision Making and Problem Solving • Decision process phases earlier apply mostly to the United States, Canada, and some European countries • Cultural variations in decision behavior • Difficulties in multi-cultural decision groups

International Aspects of Decision Making and Problem Solving (Cont. ) • Differences in decision orientations – U. S. decision makers: attack and solve problems – Malaysian, Thai, Indonesian decision makers: adjust to problem; accept situation

International Aspects of Decision Making and Problem Solving (Cont. ) • Differences in decision-making behavior – Centralized: Philippine and Indian organizations – Decentralized: Swedish and Austrian organizations – Proceeds slowly in Egyptian organizations; quickly in U. S. organizations – Decision makers in Singapore and Denmark take bigger risks than decision makers in Portugal and Greece

International Aspects of Decision Making and Problem Solving (Cont. ) • Differences in decision-making behavior (cont. ) • Decision makers in Japan and China usually consider all alternatives before choosing • Decision makers in the United States, Germany, and Canada – Typically use a serial process – Reject alternatives on the way to a final choice

Ethical Issues in Decision Making and Problem Solving (Cont. ) • Ethical decision maker – Open, fair dialogue with all parties potentially affected – Freely gives information – No deception during dialogue – Does not always know the ethical answer, but freely discusses all issues with affected parties

Ethical Issues in Decision Making and Problem Solving (Cont. ) • Ethical decision-making model – Decision makers who face ethical issues proceed in two phases • Applies decision rule that states a minimum cutoff for each dimension • Example: reject any alternative that creates a conflict of interest • Assess the decision alternative's benefits or costs weighted by its importance

Ethical Issues in Decision Making and Problem Solving • Ethical decision-making model (cont. ) – Decision makers consider the ethical dimension with other dimensions – Positive benefits of dimensions other than ethical one can overwhelm an undesirable ethical dimension – Ethical dimension can have negative effects with little likelihood of happening • Large fine but unlikely to be caught • Decision makers then pick an unethical decision