Decision Making by Individuals & Groups

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

2. Describe various models of decision making.

3. Discuss the individual influences that affect decision making.

4. Explain how groups make decisions.

5. Describe the role culture plays in decision making.

6. Explain how organizations can improve the quality of decisions

through participation.
1 Learning Outcome

Identify the steps in the decision-

making process.
 Types of Decisions

Programmed Nonprogrammed
Decision Decision
a simple, routine a new, complex decision
matter for which a that requires a creative
manager has an solution
established decision
rule
 Recognize the problem and
Decision the need for a decision
Making
Process
Identify the objective of
the decision

Gather and evaluate data

and diagnose the situation

List and evaluate

alternatives
 Select the best
Decision
course of action
Making
Process
Implement
the decision

Gather feedback

Follow up
2 Learning Outcome

Describe various models of

decision making.
Rationality
a logical, step-by-step approach to

decision making, with a thorough

analysis of alternatives and their

consequences
 Models of Decision Making

Effective a timely decision that meets a

desired objective and is acceptable
Decision to those individuals affected by it
 Rational Model

1. The outcome will be completely rational

2. The decision maker uses a consistent system of
preferences to choose the best alternative
3. The decision maker is aware of all alternatives
4. The decision maker can calculate the probability of
success for each alternative
Bounded Rationality
a theory that suggests that there are

constraints that force a decision

maker to be less than completely

rational
 Bounded Rationality
Model

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
Z Problem-Solving Model
Escalation of Commitment
the tendency to continue to commit

resources to a failing course of action

 Escalation of Commitment

• Why it occurs
– people dislike inconsistency
– overly optimistic
– illusion of control
– sunk costs
• How to deal with it
– split responsibility for decisions
– closely monitor decision makers
– provide individuals with a graceful exit
– have groups make the initial decision
3 Learning Outcome

Discuss the individual influences

that affect decision making.
Cognitive Style
an individual’s preference for

gathering information and evaluating

alternatives
Risk Aversion
the tendency to choose options

that entail fewer risks and less

uncertainty
 Risk and the Manager

• Many decisions involve some element of

risk.
• Individuals differ in terms of risk aversion.
• Risk aversion is determined by individual
tendencies and organizational factors.
• To encourage risk taking, must view
failure as “enlightened trial and error.”
Personality, Attitudes, and Values
 Influences on
Decision Making

Intuition – fast, Creativity – a

positive force in process
decision making influenced by
utilized at a level individual and
organizational
below factors that
consciousness, results in the
involves learned production of
patterns of novel and useful
information ideas, products,
or both
 Influences on Creativity
• Individual:
– Cognitive Processes
• Divergent Thinking
• Associational Abilities
• Unconscious Processes Creative performance is
– Personality Factors highest when there is a
• breadth of interests match or fit between the
individual and
• high energy organizational influences.
• self-confidence
• Organizational:
– Flexible organization structure
– Participative decision making
– Quality, supportive relationships with supervisors
Four Types of Creativity

Responsive Proactive

Expected Contributory
4 Learning Outcome

Explain how groups make

decisions.
 Group Decision Making

• Synergy – occurs when group members stimulate

new solutions to problems through the process of
mutual influence and encouragement within the
group.
• Social decision schemes – simple rules used to
determine final group decisions

Truth Wins Majority Wins

Two-thirds Majority
 Group Decision Making
1. more knowledge through pooling of
group resources
Advantages 2. increased acceptance and
commitment due to voice in
decisions
3. greater understanding due to
involvement in decision stages

1. pressure in groups to conform

2. domination by one forceful member
Disadvantages or dominant clique
3. amount of time required, because
group is slower than individual to
make a decision
 Limits of Group Decision
Making

Groupthink – a deterioration of mental

efficiency, reality testing, and moral
judgment resulting from in-group pressures

Group Polarization – the tendency for group

discussion to produce shifts toward more
extreme attitudes among members
 Preventing Groupthink
• Ask each group member to act as critical
evaluator
• Have the leader avoid stating his opinion
prior to the group decision
• Create several groups to work
simultaneously
• Appoint a devil’s advocate
• Evaluate the competition carefully
• After consensus, encourage rethinking
the position
 Special Decision-Making
Groups

• Quality circles – small groups that meet voluntarily

to address work-related problems.

• Quality teams – a team that is part of an

organization, empowered to act on its decisions
regarding quality

• Self-managed teams – more broadly focused than

above two types
5 Learning Outcome

Describe the role culture plays in

decision making.
 Hofstede’s Dimensions
• Styles of decision
making vary by
culture
 Beyond the Book:
Decisions in Japan

“Teamwork” and “Collaboration” look much

different in Japan than in the United States. In
Japanese firms, workers (especially lower
level) tend to remain silent during meetings,
avoid sitting next to upper management, and
rigorously avoid using their boss’ first name.
Upper management, meanwhile, steer clears
of direct feedback or delivering the “hard
truth.” At all levels, harmony and restraint,
rather than independence and risk-taking, are
prized values.
 Decision Making in the Virtual
Workplace
Beyond the Book

Group Decision
Support Systems

Tools
for
Virtual Teams
Desktop
Internet/Intranet
Videoconferencing
Systems
Systems
6 Learning Outcome

Explain how organizations can

improve the quality of decisions
through participation.
 Participative Decision Making

Occurs when individuals who are affected

by decisions influence decision-making

Organizational Individual
Foundation Foundation

Supportive organizational culture People must be psychologically

Team-oriented work design equipped
Motivation to act autonomously
Employees must be able to see benefit
 Beyond the Book:
Ethics Check

• Is it legal?
– Does it violate law
– Does it violate company policy
• Is it balanced?
– Is it fair to all
– Does it promote win–win relationships
• How will it make me feel about myself