Organizational Behavior 9E Schermerhorn Hunt and Osborn Prepared

Organizational Behavior, 9/E Schermerhorn, Hunt, and Osborn Prepared by Michael K. Mc. Cuddy Valparaiso University John Wiley & Sons, Inc. Organizational Behavior: Chapter 14

Chapter 14 Study Questions Ø What is the decision-making process in organizations? Ø What are the useful decision-making models? Ø How do intuition, judgment, and creativity affect decision making? Organizational Behavior: Chapter 14 2

Chapter 14 Study Questions (cont. ) Ø How do you manage the decision-making process? Ø What are some of the current issues in decision making? Ø How do you infuse ethics into the decision- making process? Organizational Behavior: Chapter 14 3

Study Question 1: What is the decisionmaking process in organizations? Ø Decision making is the process of choosing a course of action for dealing with a problem or opportunity. Ø Steps in systematic decision making. – Recognize and define the problem or opportunity. – Identify and analyze alternative courses of action, and estimate their effects on the problem or opportunity. – Choose a preferred course of action. – Implement the preferred course of action. – Evaluate the results and follow up as necessary. Organizational Behavior: Chapter 14 4

Study Question 1: What is the decisionmaking process in organizations? Ø Certain decision environments. – Exist when information is sufficient to predict the results of each alternative in advance of implementation. Ø Risk decision environments. – Exist when decision makers lack complete certainty regarding the outcomes of various courses of action, but they are aware of the probabilities associated with their occurrence. Organizational Behavior: Chapter 14 5

Study Question 1: What is the decisionmaking process in organizations? Ø Uncertain decision environments. – Exist when managers have so little information on hand that they cannot even assign probabilities to various alternatives and their possible outcomes. – Described as a rapidly changing setting in terms of: • External conditions. • The information technology requirements needed for analyzing and making decisions. • The people who influence problem and choice definitions. Organizational Behavior: Chapter 14 6

Study Question 1: What is the decisionmaking process in organizations? Ø Uncertain decision environments (cont. ). – Can be described in terms of types of risks encountered by the organization. • Strategic risks are threats to overall business success. • Operational risks are threats inherent in the technologies used to reach business success. • Reputation risks are threats to a brand or to the firm’s reputation Organizational Behavior: Chapter 14 7

Study Question 1: What is the decisionmaking process in organizations? Ø Types of decisions. – Programmed decisions. • Involve routine problems that arise regularly and can be addressed through standard responses. – Nonprogrammed decisions. • Involve nonroutine problems that require solutions specifically tailored to the situation at hand. Organizational Behavior: Chapter 14 8

Study Question 2: What are the useful decision-making models? Organizational Behavior: Chapter 14 9

Study Question 2: What are the useful decision-making models? Ø Classical decision theory assumes the manager faces a clearly defined problem, knows all possible action alternatives and their consequences, and then chooses the optimum solution. Ø Widespread application of classical decision theory is restricted by bounded rationality. Organizational Behavior: Chapter 14 10

Study Question 2: What are the useful decision-making models? Ø Classical decision theory does not appear to fit well in the modern business world, though it can be used toward the bottom of many firms. Ø Behavioral decision theory accepts the notion of bounded rationality. It assumes the manager acts only in terms of what is perceived about a given situation, and then chooses a satisficing solution. Organizational Behavior: Chapter 14 11

Study Question 2: What are the useful decision-making models? Ø The garbage can model. – A model of decision making that views problems, solutions, participants, and choice situations as mixed together in the “garbage can” of the organization. – The garbage can model highlights two important organizational facts of life. • Different individuals may do choice making and implementation. • Many problems go unsolved. Organizational Behavior: Chapter 14 12

Study Question 2: What are the useful decision-making models? Ø Decision making realities. – Decision making information may not be available. – Bounded rationality and cognitive limitations affect the way people define problems, identify alternatives, and choose preferred solutions. Organizational Behavior: Chapter 14 13

Study Question 2: What are the useful decision-making models? Ø Decision making realities (cont. ). – Most decision making in organizations goes beyond step-by-step rational choice. – Decisions must be made under risk and uncertainty. – Decisions should be ethical. Organizational Behavior: Chapter 14 14

Study Question 3: How do intuition, judgment, and creativity affect decision making? Ø Intuition. – The ability to know or recognize quickly and readily the possibilities of a given situation. – A key element of decision making under risk and uncertainty. Organizational Behavior: Chapter 14 15

Study Question 3: How do intuition, judgment, and creativity affect decision making? Ø Judgmental heuristics. – Simplifying strategies or “rules of thumb” used to make decisions. – Make it easier to to deal with uncertainty and limited information. Organizational Behavior: Chapter 14 16

Study Question 3: How do intuition, judgment, and creativity affect decision making? Ø Types of heuristics. – Availability heuristic. • Bases a decision on similarity to past occurrences that are easily remembered. – Representativeness heuristic. • Bases a decision on similarities between an event and stereotypes of similar occurrences. – Anchoring and adjustment heuristic. • Bases a decision on incremental adjustments to an initial value determined by historical precedent or some reference point. Organizational Behavior: Chapter 14 17

Study Question 3: How do intuition, judgment, and creativity affect decision making? 1. General judgmental biases in decision making. – Confirmation trap. • The tendency to seek confirmation for what is already thought to be true and to not search for disconfirming information. – Hindsight trap. • The tendency to overestimate the degree to which an event that has already taken place could have been predicted. Organizational Behavior: Chapter 14 18

Study Question 3: How do intuition, judgment, and creativity affect decision making? Ø Stages in the creative thinking process. – Preparation. – Concentration. – Incubation. – Illumination – Verification. Organizational Behavior: Chapter 14 19

Study Question 3: How do intuition, judgment, and creativity affect decision making? Ø Ways of fostering creativity. – Diversifying teams to include members with different backgrounds, training, and perspectives. – Encouraging analogical reasoning. – Stressing periods of silent reflection. – Recording all ideas so that the same ones are not rediscovered. – Establishing high expectations for creativity. – Developing a physical space that encourages fun, divergent ideas. Organizational Behavior: Chapter 14 20

Study Question 3: How do intuition, judgment, and creativity affect decision making? Ø Creativity is higher when: – Linguistic ability, willingness to engage in divergent thinking, and intelligence are present. – Individuals are motivated by and derive satisfaction from task accomplishment. – There are opportunities for creativity, as many constraints as possible are eliminated, and rewards are provided for creative efforts. Organizational Behavior: Chapter 14 21

Study Question 3: How do intuition, judgment, and creativity affect decision making? Ø Creativity is higher when (cont. ): – The decision maker emphasizes engagement in the creative process and counsels individuals to share their ideas with others. – The decision maker encourages subordinates to recognize ambiguity, contact others with different views, and be prepared to make considerable changes. Organizational Behavior: Chapter 14 22

Study Question 4: How do you manage the decision-making process? Ø In choosing problems to address, ask and answer the following questions: – Is the problem easy to deal with? – Might the problem resolve itself? – Is this my decision to make? – Is this a solvable problem within the context of the organization? Organizational Behavior: Chapter 14 23

Study Question 4: How do you manage the decision-making process? Ø Reasons for decision making failure. – Managers too often copy others’ choices and try to sell them to subordinates. – Subordinates may believe the manager is imposing his or her will rather than working for everyone’s interests. – Managers may focus on the problems they see rather than the outcomes they want. – Managers use participation too infrequently. Organizational Behavior: Chapter 14 24

Study Question 4: How do you manage the decision-making process? Organizational Behavior: Chapter 14 25

Study Question 4: How do you manage the decision-making process? Ø Key problem attributes in the Vroom, Yetton, and Jago decision making framework. – The required quality of the decision. – The commitment needed from subordinates. – The amount of information the leader has. – Commitment probability. – Goal congruence. – Subordinate conflict. – Subordinate information. Organizational Behavior: Chapter 14 26

Study Question 4: How do you manage the decision-making process? Ø Authority decisions in the Vroom, Yetton, and Jago decision making framework. – Manager or team leader uses information that he or she possesses and decides what to do without involving others. – Variant 1 manager solves the problem or makes the decision alone. – Variant 2 manager obtains the necessary information from others and then decides. Organizational Behavior: Chapter 14 27

Study Question 4: How do you manage the decision-making process? Ø Consultative decisions in the Vroom, Yetton, and Jago decision making framework. – Manager or team leader solicits input from other people and then, based on this information and its interpretation, makes a final choice. – Variant 1 manager seeks input from others individually and then makes a decision. – Variant 2 manager seeks input from others collectively and then makes a decision. Organizational Behavior: Chapter 14 28

Study Question 4: How do you manage the decision-making process? Ø Group decisions in the Vroom, Yetton, and Jago decision making framework. – Manager or team leader consults with others and allows them to help make the final choice. Organizational Behavior: Chapter 14 29

Study Question 4: How do you manage the decision-making process? Ø Knowing when to quit. – The natural desire to continue on a selected course of action reinforces escalating commitment. – Escalating commitment is the tendency to continue and renew effort on a previously chosen course of action, even though it is not working. – Tendency to escalate commitments often outweighs the willingness to disengage from them. – Good decision makers are willing to reverse previous decisions. Organizational Behavior: Chapter 14 30

Study Question 5: What are some of the current issues in decision making? Ø Workplace trends affecting organizational decision makers. – Business units are becoming smaller in size. – New, more flexible, and adaptable organizational forms. – Multifunctional understanding is increasingly important. – Workers with both technical knowledge and team skills are increasingly desirable. – The nature of “work” is in a state of flux. Organizational Behavior: Chapter 14 31

Study Question 5: What are some of the current issues in decision making? Ø Information technology and decision making. – Artificial intelligence is the study of how computers can be programmed to think like human beings. – Expert systems support decision making by following “either-or” rules to make deductions. Organizational Behavior: Chapter 14 32

Study Question 5: What are some of the current issues in decision making? Ø Information technology and decision making (cont. ). – Fuzzy logic and neural networks reason inductively. – Computer support for decision making. – Information technology does not deal with issues raised by the garbage can model. Organizational Behavior: Chapter 14 33

Study Question 5: What are some of the current issues in decision making? Ø Cultural factors and decision making. – Culture is “the way in which a group of people solves problems. ” – North American culture stresses decisiveness, speed, and the individual selection of alternatives. – Other cultures place less emphasis on individual choice than on developing implementations that work. – The most important impact of culture on decision making concerns which issues are elevated to the status of problems solvable within the firm. Organizational Behavior: Chapter 14 34

Study Question 6: How do you infuse ethics into the decision-making process? Ø Ways to infuse ethics into decision making. – Develop a code of ethics and follow it. – Establish procedures for reporting violations. – Involve employees in identifying ethical issues. – Monitor ethical performance. – Reward ethical behavior. – Publicize ethical efforts. Organizational Behavior: Chapter 14 35

Study Question 6: How do you infuse ethics into the decision-making process? Ø Morality is involved in: – Choosing problems. – Deciding who should be involved in making decisions. – Estimating the impacts of decision alternatives. – Selecting an alternative for implementation. Ø An effective decision needs to solve a problem as well as match moral values and help others. Organizational Behavior: Chapter 14 36

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