MBA 635 chapter 10

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part.
Decision Making
by Individuals and
Groups

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Learning Objectives
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1 Explain the assumptions of bounded
rationality.
2 Describe Jung’s cognitive styles and how they
affect managerial decision making.
3 Describe and evaluate the role of intuition and
creativity in decision making.
4 Critique your own level of creativity and list
ways of improving it.
5 Compare and contrast the advantages and
disadvantages of group decision making.
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Learning Objectives continued
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6 Discuss the symptoms of groupthink and
ways to prevent it.
7 Evaluate the strengths and weaknesses of
several group decision making techniques.
8 Explain the emerging role of virtual
decision making in organizations.
9 Utilize an “ethics check” for examining
managerial decisions.
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The Decision-Making Process
Programmed decisions: decisions made on
simple, routine matters with an established
decision rule
Nonprogrammed decisions: decisions made on
new and complex decisions that require
creative solutions
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Models of Decision Making
• Models of decision making
• Rational model
• Bounded rationality model
• Garbage can model
• Effective decisions
• Are timely
• Are acceptable to those affected
• Meet the desired objective
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Rational Model
• Rationality refers to a logical, step-by-step
approach to decision making with a thorough
analysis of alternatives and their consequences
• Assumptions
• The outcome will be completely rational
• The decision maker has a consistent system of
preferences which is used to choose the best
alternative
• The decision maker is aware of all the possible
alternatives
• The decision maker can calculate the probability of
success for each alternative
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Bounded Rationality Model
• Constraints force a decision maker to be less
than completely rational
• Assumptions:
• Managers select the first alternative that is
satisfactory
• Managers recognize that their conception of the
world is simple
• Managers are comfortable making decisions
without determining all the alternatives
• Managers make decisions by rules of thumb or
heuristics
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Key Concepts in Bounded Rationality
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• To select the first alternative that is “good
enough,” because the costs of optimizing
in terms of time and effort are too great
Satisfice
• Rules of thumb that allow managers to
make decisions based on what has worked
in past experiences
Heuristics

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Risk in Decision Making
Successful managers take more risks
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Risk
averse
Risk
taker

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Escalation of Commitment
• Escalation of commitment: continuing to
support a failing course of action
• Why do people hold fast to poor decisions
even when substantial costs are incurred?
• Dislike for cognitive dissonance
• Optimism
• Illusion of control
• Sunk costs
• Anger
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Jung’s Cognitive Styles
• Cognitive style: an individual’s preference for
gathering information and evaluating
alternatives
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Individual’s
perceiving
style
Individual’s
judging
style
Cognitive
style

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Cognitive Styles
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Style Ideal Organization
ST Sensing/thinking
Facts and impersonal
analysis
SF Sensing/feeling
Facts and interpersonal
relationships
NT Intuiting/thinking
Initiate ideas and
analyze alternatives
NF Intuiting/feeling
Participative decision
making and humanistic
values

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Z Problem-Solving Model
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.
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Influences on Decision Making: Intuition
Rapid
response
Below
consciousness
Learned
patterns of
information
Positive force
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Intuition

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Influences on Decision Making: Creativity
• Creativity: a process influenced by individual
and organizational factors that results in the
production of novel and useful ideas,
products, or both
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Preparation
Incubation
Illumination
Verification

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Stages of the Creative Process
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Preparation – experience or
opportunity to build
knowledge base
Incubation – reflective
thought, often unconscious
Illumination – insight into
solving a problem
Verification – thinking,
sharing, testing the decision

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Individual Influences on Creativity
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Cognitive Processes Personality Factors
Divergent thinking
Associational abilities
Use of imagery
Dreams
Intellectual values
Artistic values
Breadth of interests
High energy
Concern with
achievement
Independence of
judgment
Intuition
Self-confidence

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Organizational Influences on Creativity
• Creativity killers
• Focusing on
evaluation
• Being closely
monitored
• Win-lose competition
• Political problems
• Harsh criticism
• Risk avoidance
• Creativity boosters
• Feelings of autonomy
• Being on a diverse
team
• Having creative
supervisors and
coworkers
• High-quality,
cohesive social
networks
• Flexible structures
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Promoting Organizational Creativity
Organizations can promote creativity by
 Rewarding creativity
 Allowing employees to fail
 Making work more fun
 Providing creativity training
 Exposing employees to new ideas by
◦ Rotating jobs
◦ Working with outside groups
◦ Using creativity stimuli (music, art, etc.)
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Four Types of Creativity
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 you are expected
to by the organization
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
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Foundations for Participative Decision Making
• Participative decision making occurs when
individuals who are affected by decisions
influence the making of those decisions
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Supportive
culture
Team-
oriented
work design
Participative
decision
making

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Prerequisites for Participative Decision Making
• The capability to become psychologically
involved in participative activities
• The motivation to act autonomously
• The capacity to see the relevance of
participation for one’s own well-being
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Reasons for Group Decision Making
• Create synergy, stimulating new solutions to
a problem through mutual influence and
encouragement
• Increase commitment to a decision
• Bring more knowledge and experience to
problem solving
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^ Advantages and Disadvantages of Group Decision
Making
• Advantages
• More knowledge and information through the
pooling of group member resources
• Increased acceptance of, and commitment to,
the decision
• Greater understanding of the decision
• Disadvantages
• Groupthink
• Domination and group polarization
• Amount of time required
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Groupthink
• Groupthink : a deterioration of mental
efficiency, reality testing, and moral
judgment resulting from pressures within
the group
• Conditions that favor groupthink:
• High cohesiveness
• High-ranking teams
• Group homogeneity
• Decisions with high consequences
• Time constraints
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Group Polarization
• Group polarization: the tendency for group
discussion to produce shifts toward more
extreme attitudes among members
• Groups whose initial views lean a certain
way can be expected to adopt more extreme
views following interaction
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Techniques for Group Decision Making
• Brainstorming: a technique for generating as
many ideas as possible on a given subject,
while suspending evaluation until all the
ideas have been suggested
• Delphi technique: gathering the judgments
of experts for use in decision making
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Techniques for Group Decision Making
• Nominal group technique: a structured
approach to decision making that focuses on
generating alternatives and choosing one
• Individuals silently list their ideas
• Ideas are written on a chart one at a time until
all ideas are listed
• Discussion is permitted but only to clarify the
ideas; No criticism is allowed
• A written vote is taken
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Techniques for Group Decision Making
• Devil’s advocacy: a technique for preventing
groupthink involving the role of critic during
decision making
• Dialectical inquiry: a debate between two
opposing sets of recommendations
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Techniques for Group Decision Making
Quality Circles
• Voluntary—rewards are intrinsic
• Generate ideas
• Advisory
Quality Teams
• Part of organization structure
• Data-based decisions
• Authority to implement their decisions
Self-Managed Teams
• Have decision-making authority
• Make decisions once reserved for managers
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Decision Making Across Cultures
• Styles of decision making vary greatly among
cultures based on factors such as
• Uncertainty avoidance
• Power distance
• Individualist/collectivist dimension
• Time orientation
• Masculine/feminine dimension
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Decision Making in the Virtual Workplace
Desktop
videoconferencing
systems
Group decision
support systems
Internet/intranet
systems
Expert systems
Agent-based
modeling
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Ethical Decision Making
• Is it legal? (Will I be violating the law or
company policy?)
• Is it balanced? (Is it fair to all concerned in
the short term and long term? Does it
promote win–win relationships?)
• How will it make me feel about myself?
(Will it make me proud of my actions? How
will I feel when others become aware of the
decision?)
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Chapter 10: Reflect & Discuss
Failure to Launch Video Clip
• Does “The Bird Problem” present Kit and Ace with a
programmed or nonprogrammed decision? What
features of their decision problem led to your choice?
• Review the earlier section describing the decision-
making process. Which steps in that process appear in
“The Bird Problem?” Note the examples of each step
that you see.
• Assess the degree of certainty, uncertainty, and risk that
Kit and Ace face in this decision problem. What factors
set the degree of certainty, uncertainty, and risk?
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