An overview of decision making theory. This guide talks through key concepts relating to decision making within a business context

1. The foundation of
good decision making
Dr Andrew Hirst Room 9339 1

2. What are you trying to achieve?
• True consensus
• Group harmony
• Quick and timely decisions

3. Lecture structure
• The manager as a decision maker
• Types of decision making
• Decision making process
• Practical solutions

4. THE MANAGER AS A
DECISION MAKER
• Decision-Making Conditions
– Certainty - outcome of every alternative
is known
– Risk - able to estimate the probability of
outcomes stemming from each alternative
– Uncertainty - not certain about outcomes
and unable to estimate probabilities

5. Small vs Large Firms
• Small Firm
– Less information, costly and time consuming to collect
– evolving company, rapid pace of change
– changing environment, "law of small numbers"
– potential lack of experience of mangers and staff
– too much information "noise"
• More uncertainty
– leads to short term thinking
– stifles small businesses

6. THE MANAGER AS
DECISION MAKER (continued)
• Bounded Rationality
– Behave rationally within the parameters of a
simplified decision-making process that is limited
by an individual’s ability to process information
– Accept solutions that are “good enough”
– Irrational behaviour
– Escalation of commitment - increased commitment
to a previous decision despite evidence that it may
have been wrong
– cut your losses or stick to your guns? © 2003 Pearson Education Canada Inc.

7. “Good Enough”
versus
Optimizing
Lacks
Complete
Information
Cannot
Assess All
Alternatives
Cannot
Weigh
All Criteria
Bounded
Rationality

8. THE MANAGER AS
DECISION MAKER (continued)
• Role of Intuition
– Intuitive decision making
– Black Box
- subconscious process of making decisions
on the basis of experience and accumulated
judgment
• does not rely on a systematic or thorough
analysis of the problem
• generally complements a rational analysis © 2003 Pearson Education Canada Inc.

9. Gut feel
• +100 Million Brain cells in the gut
• When you die the gut keeps working for a time
• More brain cells in your gut than in a cats head
• Enteric Nervous System
– Vagus Nerves connect to the brain
• Part of our emotional system
TED lecture: Heribert Watzke: The brain in our gut

10. WHAT IS INTUITION?
Managers make
decisions based
on experience
Managers make
decisions based
on feelings and
emotions
Managers make
Decisions based
on ethical values
or culture
Managers make
decisions based
on
subconscious
data
Manager make
decisions based
on skills,
knowledge,
or training
Intuition
Affect-initiated
decisions
Experienced-based
decisions
Values or
ethics-based
decisions
Subconscious
mental
processing
Cognitive-based
decisions

11. Two great films
• 12 Angry Men (1957)
– Courtroom classic. One man goes against the other
11 jurors. One question, is he guilty? Examination of
inner prejudice, emotion and ulterior motives in
decision making.
• Moneyball (2011)
– Conflict between considered wisdom (gut feel or
intuition) and data analysis
– Need to think differently
• Lack of money and past experience
• Economic model based on ON BASE AVERAGE not
conventional wisdom of RUNS

12. What can help us make
decisions?
Models
Processes

13. Rarely used - Decision tree

14. Here's a great model by Steven
Covey - Stress Mgt
• Donut - Identifying the components of a problem
Circle of
influence
Circle of
concern

15. New Product Development
Decision process

16. Decision making Styles
Questionnaire

17. Decision-Making Styles
– Basic Motivational Psychology
Stimulus - Organism - Response
– Scott and Bruce (1995) Decision-making styles
•Rational i.e I make decisions in a logical and systematic way.
•Intuitive i.e When I make decisions, I tend to rely on my intuition.
•Dependent i.e I rarely make important decisions without consulting other
people
•Spontaneous i.e I generally make snap decisions.
•Avoidant i.e I avoid making important decisions until the pressure is on.

18. Impact of different styles
• Data gathering
• Interpretation of data
– importance and relevance
• The number of alternatives
• The way the group interacts
– use frameworks/tools to help your team manage
differences

19. The group decision making
process

20. Some typical behaviours
• Apathy - no interest in the outcome deciding not to
decide
• Plops - decisions without any grounding or authority
• Self Authorised decisions - assertive team member
• Pairing / Minority groups - faction/cliques agreeing for
the group in advance or during meetings
• Topic Jumping - red herrings and "Hand Grenades"
• Majority views - show of hands
• Does anyone disagree? enforced conformity/consensus

21. Impact of decision process

22. Process of decision making

23. Practical Solutions
• Structure meetings and record outcomes
• Follow the 80% rule - be action orientated
– on time and about right is better than late and perfect
• Avoid arguing - presents ideas clearly and logically
• You don't need to win - seek consensus or what is
acceptable
• Don't avoid conflict - be suspicious of easy agreements
• Avoid conflict avoidance - majority voting, averages, coin
flips
• Involve everyone
• Stay focused - make one decision at a time
• Remember that everyone is a leader in the team take
responsibility!

24. Summary
• Using Intuition can be a great way to make
decisions
– Quick and easy to do
– BUT...
• mindful of current experience
• distractions
• black box process
• Models and frameworks can be great too
– Consistent and transparent
– evidence suggest it leads to better decisions

25. Reading
• Effective teambuilding by John Adair
• Watch 12 angry men (1957), Moneyball (2011)
• Scott and Bruce 1995
• Dane and Pratt 2007
• See reading list