EM 680 Designing and Managing the Development Enterprise

EM 680 Designing and Managing the Development Enterprise Module 11 Decision Making 2/2 Instructor: Luca Iandoli, Ph. D luca. iandoli@stevens. edu Stevens Institute of Technology School of Systems and Enterprises Castle Point on Hudson Hoboken, NJ 07030

Knowledge Objectives Describe the basic steps in decision making. Individual decision making: 1. 2. - 3. 4. Discuss the four decision-making styles, emphasizing the effectiveness of each one. Define cognitive bias and explain the effects of common types of cognitive bias on decision making. Group decision making: pitfalls and techniques Organizational decision making This presentation contains multiple references to your textbook, Hitt, M. A. , C. C. Miller, and A. Colella. (2009). Organizational Behavior: A Strategic Approach. Hoboken, NJ: Wiley & Sons.

Group Decision Making l Decisions often are made by groups of people – May be composed of individuals at different or at the same level in the organization that will have dynamics and interpersonal processes that make group decision making very different from decisions made by an individual Copyright 2014 : Stevens Institute Of Technology

Group Decision Making What do you think: are groups good at making decisions? Are they better than individuals? Copyright 2014 : Stevens Institute Of Technology

Decision-Making Process There is unclear systematic evidence that groups are really good at making decisions. There is instead systematic evidence that group DM may be dysfunctional Diversity-based Infighting Groupthink Risky Shift Common Knowledge (aka hidden profiles) Group decision making Pitfalls Copyright 2014 : Stevens Institute Of Technology

Decision-Making Process Why is it so? • group information processing (exploitation VS exploration) • conflict Techniques Nominal Group Technique Brainstorming Delphi Technique Devil’s Advocacy Dialectical Inquiry Copyright 2014 : Stevens Institute Of Technology

Group Decision Making Think to your recent experience in group DM situations: l What worked? What didn’t? l Was it the same with any group you worked with? If not, what changed? l For the task you were required to solve, was group DM a better option than individual DM?

Group Decision-Making Pitfalls l Groupthink – Group members maintain or seek consensus at the expense of debating honest disagreements: l l l Group members like one another Group members have high regard for the group’s collective wisdom or for their leader Status quo is win-win Groupthink Diversitybased Infighting Risky Shift Common Knowledge (aka hidden profile) Group decision making Pitfalls

Group Decision-Making Pitfalls l Common knowledge bias (Hidden profile) – Group members overemphasize information held by a majority, failing to be mindful of information held by one or a few group members. This reduces: l l Availability of unique information ideas Perspectives possessed by individual group members Diversitybased Infighting Groupthink Risky Shift Common Knowledge Group decision making Pitfalls

Group Decision-Making Pitfalls l Diversity-based infighting – Instead of creating rich discussions and insight, diverse ideas create ill will and fractured groups l l May occur when individuals feel strongly about values No mechanisms exist to channel disagreement in productive ways

Group Decision-Making Pitfalls l Risky Shift – Groups make either riskier decisions than would have been made by individual members acting alone l l l Direction of shift may be affected by diffusion of responsibility Social acceptance -> self-reinforcement Risk oriented leaders

Group Decision-Making Techniques l Brainstorming – Large number of ideas are generated while evaluation is deferred l l l Imagination is encouraged. No criticism, no idea is wrong! Using or building on the ideas of others is encouraged Evaluation is postponed until the group can no longer think of any new ideas Nominal Group Technique Brainstorming Delphi Technique Devil’s Advocacy Dialectical Inquiry

Group Decision-Making Techniques l Nominal group technique 1. 2. 3. 4. l Individuals silently, and without discussion, write down their ideas Each member presents one idea at a time, until all ideas are presented, without discussion Ideas presented on a blackboard and then discussed to clarify and evaluate Silent and independent vote or ranking of alternative choices Delphi technique – Highly structured survey of participants regarding their opinions or best judgments Nominal Group Technique Brainstorming Delphi Technique Devil’s Advocacy Dialectical Inquiry

Group Decision-Making Techniques l l Dialectical inquiry – Debate between very different sets of recommendations and assumptions – Overcomes tendency of group to avoid conflict Devil’s advocacy – Through role-playing an individual or subgroup argues against the recommended actions and assumptions put forth by other members of the group Nominal Group Technique Brainstorming Delphi Technique Devil’s Advocacy Dialectical Inquiry

Who Should Decide? (Vroom-Yetton Method) Exhibit 10 -4 Managerial Approaches to Associate Involvement in Decision Making Approach Level of Associate Involvement in Decision Low High AI—Manager solves problem or makes decision alone, using information to which she has current access. AII—Manager requests information or may not explain the problem to associates. Associates’ role in process is only to provide specific information if requested. CI—Manager explain problem to relevant associates, one by one, requesting input as individuals. After discussion with individuals, manager makes decision along, either using or not using associate’s input. CII—Manager explains problem to associates as a group, obtaining group members’ ideas and suggestions. Later, manager makes decision alone, either using or not using associate’s input. GII—Manager explains problem to associates as a group, working together with them to generate and evaluate alternatives and agree on a solution. Manager acts as facilitator, does not force group to accept his solution, and will accept and implement a solution supported by the group.

Who Should Decide? (Vroom-Yetton Method) l Questions asked to determine level of associate involvement in decision making A. B. C. D. E. F. G. Is there a quality requirement such that one solution is likely to be more rational than any other solution, or will several alternative solutions work reasonably well? Does the manager have sufficient information to make a high-quality decision? Is the problem structured (does the manager know the question to ask and where to look for relevant information)? Is acceptance of the decision by associates critical to effective implementation? If I were to make the decision by myself, is it reasonably certain that it would be accepted by my associates? Do the associates share the organizational goals to be attained in solving this problem? Is conflict among associates likely in preferred solutions?

Who Should Decide? (Vroom-Yetton Method) A B C D E F 1 -AI No Yes 3 -GII Problem 4 -AI No Yes Yes Decision points Recommended strategies 5 -AI No Yes 9 -AII Yes 11 -CII No 10 -AII Yes No 14 -CII No Yes 7 -CII 6 -GII Yes No 2 -AI No Unique best solution Several reasonable solutions G No 8 -CI No 12 -GII Yes 13 -CII

Vroom-Yetton Method: example Case: the development of a new multidisciplinary academic program to improve students’ entrepreneurial skills across existing undergraduate programs in any discipline A. B. C. D. E. F. G. Will any number of solutions work reasonably well? YES Does the management have sufficient information to make a highquality decision? NO Is the problem structured (do they know the question to ask and where to look for relevant information? ) NO Is acceptance of the decision by associates critical to effective implementation? YES If the manager were to make the decision by herself, is it reasonably certain that it would be accepted by her associates? NO Do the associates share the organizational goals to be attained in solving this problem? NO Is conflict among associates likely in preferred solutions? YES

Who Should Decide? (Vroom-Yetton Method) A B C D E F 1 -AI No Yes Problem 2 -AI No 3 -GII Unique best solution 4 -AI No Several reasonable solutions G Yes No Yes 5 -AI Yes 6 -GII 7 -CII Yes No CII—Manager explains problem as a Yes No to associates No Yes 9 -AII group, obtaining ideas and 8 -CI Yes group members’ No suggestions. Later, manager makes decision alone, No 10 -AII Yes 11 -CII input. either using or. Nonot using Yes associate’s 12 -GII No Decision points Recommended strategies No 14 -CII No Yes 13 -CII

Value of Individual vs. Group Decision Making Exhibit 10 -6 Advantages and Disadvantages of Group Decision Making Groups can accumulate more knowledge and facts and thus generate more and better alternatives. Groups take more time to reach decisions than do individuals. Groups often display superior judgment when evaluating alternatives, especially for complex problems. Group social interactions may lead to premature compromise and failure to consider all alternatives fully. Group involvement in decisions leads to a higher level of acceptance of the decisions and satisfaction. Groups are often dominated by one or two “decision leaders” which may reduce acceptance, satisfaction and quality. Group decision making can result in growth for members of the group. Managers may rely too much on group decisions, leading to loss of their own decision and implementation skills.

Wrap-up l l Group VS Individual DM Group DM pitfalls & techniques Who should decide? Individual VS group Advantages an disadvantages of GDM