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Ch12 - Organisation theory design and change gareth jones


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Ch12 - Organisation theory design and change gareth jones

  1. 1. Organizational Theory, Design, and Change Sixth Edition Gareth R. Jones Chapter 12 Decision Making, Learning, Knowledge Management, and Information Technology
  2. 2. Learning Objectives <ul><li>Differentiate between several models of decision making that describe how managers make decisions </li></ul><ul><li>Describe the nature of organizational learning and the different levels at which learning occurs </li></ul><ul><li>Explain how organizations can use knowledge management and information technology to promote organizational learning to improve the quality of their decision making </li></ul>
  3. 3. Learning Objectives (cont.) <ul><li>Identify the factors, such as the operation of cognitive biases, that reduce the level of organizational learning and result in poor decision making </li></ul><ul><li>Discuss some techniques that managers can use to overcome these cognitive biases and thus open the organization up to new learning </li></ul>
  4. 4. Organizational Decision Making <ul><li>Organizational decision making: the process of responding to a problem by searching for and selecting a solution or course of action that will create value for organizational stakeholders </li></ul><ul><li>Programmed decisions: decisions that are repetitive and routine </li></ul><ul><li>Nonprogrammed decisions: decisions that are novel and unstructured </li></ul>
  5. 5. Models of Organizational Decision Making <ul><li>The rational model: decision making is a straightforward, three-stage process </li></ul><ul><ul><li>Stage 1: Identify problems that need to be solved </li></ul></ul><ul><ul><li>Stage 2: Design and develop a list of alternative solutions and courses of action to solve the problems </li></ul></ul><ul><ul><li>Stage 3: Compare likely consequences of each alternative and decide which course of action offers the best solution </li></ul></ul>
  6. 6. Figure 12.1: The Rational Model of Decision Making
  7. 7. Models of Organizational Decision Making (cont.) <ul><li>The rational model (cont.) </li></ul><ul><ul><li>Underlying assumptions </li></ul></ul><ul><ul><ul><li>Decision makers have all the information they need </li></ul></ul></ul><ul><ul><ul><li>Decision makers can make the best decision </li></ul></ul></ul><ul><ul><ul><li>Decision makers agree about what needs to be done </li></ul></ul></ul>
  8. 8. Models of Organizational Decision Making (cont.) <ul><li>The rational model (cont.) </li></ul><ul><ul><li>Criticisms of the assumptions </li></ul></ul><ul><ul><ul><li>Information and uncertainty: the assumption that managers are aware of all alternative courses of action and their consequences is unrealistic </li></ul></ul></ul><ul><ul><ul><li>Managerial abilities: managers have only a limited ability to process the information required to make decisions </li></ul></ul></ul><ul><ul><ul><li>Preferences and values: assumes managers agree about what are the most important goals for the organization </li></ul></ul></ul>
  9. 9. The Carnegie Model <ul><li>Introduces a new set of more realistic assumptions about the decision-making process </li></ul><ul><ul><li>Satisficing: limited information searches to identify problems and alternative solutions </li></ul></ul><ul><ul><li>Bounded rationality: a limited capacity to process information </li></ul></ul><ul><ul><li>Organizational coalitions: solution chosen is a result of compromise, bargaining, and accommodation between coalitions </li></ul></ul>
  10. 10. Table 12.1: Differences Between the Rational and Carnegie Models
  11. 11. Models of Organizational Decision Making (cont.) <ul><li>The incrementalist model: managers select alternative courses of action that are only slightly, or incrementally, different from those used in the past </li></ul><ul><ul><li>Perceived to lessen the chances of making a mistake </li></ul></ul><ul><ul><li>Called the science of “muddling through” </li></ul></ul><ul><ul><li>They correct or avoid mistakes through a succession of incremental changes </li></ul></ul>
  12. 12. Models of Organizational Decision Making (cont.) <ul><li>The unstructured model: describes how decision making takes place in environments of high uncertainty </li></ul><ul><ul><li>Unstructured model recognizes uncertainty in the environment </li></ul></ul><ul><ul><li>Managers rethink their alternatives when they hit a roadblock </li></ul></ul><ul><ul><li>Decision making is not a linear, sequential process </li></ul></ul><ul><ul><li>Tries to explain how organizations make nonprogrammed decisions </li></ul></ul>
  13. 13. Models of Organizational Decision Making (cont.) <ul><li>The garbage can model: a view of decision making that takes the unstructured process to the extreme </li></ul><ul><ul><li>Decision makers are as likely to start decision making from the solution side as the problem side </li></ul></ul><ul><ul><li>Create decision-making opportunities that they can solve with ready-made solutions based on their competencies and skills </li></ul></ul><ul><ul><li>Different coalitions may champion different alternatives </li></ul></ul><ul><ul><li>Decision making becomes a “garbage can” in which problems, solutions, and people all mix and contend for organizational action </li></ul></ul><ul><ul><li>Selection of an alternative depends on which person’s or group’s definition of the current situation holds sway </li></ul></ul>
  14. 14. The Nature of Organizational Learning <ul><li>Organizational learning: the process through which managers seek to improve organization members’ desire and ability to understand and manage the organization and its environment </li></ul><ul><ul><li>Creates an organizational capacity to respond effectively to the changing business environment </li></ul></ul>
  15. 15. The Nature of Organizational Learning (cont.) <ul><li>Types of organizational learning </li></ul><ul><ul><li>Exploration: organizational members search for and experiment with new kinds or forms of organizational activities and procedures </li></ul></ul><ul><ul><li>Exploitation: organizational members learn ways to refine and improve existing organizational activities and procedures </li></ul></ul>
  16. 16. The Nature of Organizational Learning (cont.) <ul><li>Learning organization: an organization that purposefully designs and constructs its structure, culture, and strategy so as to enhance and maximize the potential for organizational learning to take place </li></ul><ul><ul><li>Employees at all levels must be able to analyze the way an organization performs and experiments with change to increase effectiveness </li></ul></ul>
  17. 17. Levels of Organizational Learning <ul><ul><li>Individual-level learning: managers need to facilitate the learning of new skills, norms, and values so that individuals can increase their own personal skills and abilities </li></ul></ul><ul><ul><ul><li>Employees develop a sense of personal mastery to create and explore what they want </li></ul></ul></ul><ul><ul><ul><li>Employees must develop a commitment and attachment to their job so they will enjoy experimenting and risk taking </li></ul></ul></ul><ul><ul><ul><li>Organizations should encourage employees to assume more responsibility for their decisions </li></ul></ul></ul>
  18. 18. Levels of Organizational Learning (cont.) <ul><ul><li>Group-level learning: managers need to encourage learning by promoting the use of various kinds of groups so that individuals can share or pool their skills and abilities </li></ul></ul><ul><ul><ul><li>Allows for the creation of synergy </li></ul></ul></ul><ul><ul><ul><li>Group routines can enhance group effectiveness </li></ul></ul></ul><ul><ul><ul><li>Group learning is even more important than individual learning in promoting organizational learning </li></ul></ul></ul>
  19. 19. Levels of Organizational Learning (cont.) <ul><ul><li>Organizational-level learning: managers can promote organizational learning through the way they create an organization’s structure and culture </li></ul></ul><ul><ul><li>Cultural values and norms are an important influence on learning </li></ul></ul><ul><ul><ul><li>Adaptive cultures: value innovation and encourage and reward experimentation and risk taking by middle and lower-level managers </li></ul></ul></ul><ul><ul><ul><li>Inert cultures: are cautious and conservative, and do not encourage risk taking by middle and lower-level managers </li></ul></ul></ul>
  20. 20. Levels of Organizational Learning (cont.) <ul><li>Organizations can improve their effectiveness by copying and imitating each others’ distinctive competences </li></ul><ul><ul><ul><li>Encourages explorative and exploitative learning by cooperating with suppliers and distributors to discover new ways to handle inputs and outputs </li></ul></ul></ul><ul><ul><ul><li>Systems thinking: argues that in order to create a learning organization, managers must recognize the effects of one level of learning on another </li></ul></ul></ul>
  21. 21. Figure 12.2: Levels of Organizational Learning
  22. 22. Knowledge Management and Information Technology <ul><li>Knowledge management: a type of IT-enabled organizational relationship that has important implications for both organizational learning and decision making </li></ul><ul><ul><li>Involves sharing and integrating of expertise within and between functions and divisions through real-time, interconnected IT </li></ul></ul>
  23. 23. Knowledge Management (cont.) <ul><li>Codification approach: knowledge is carefully collected, analyzed, and stored in databases where it can be retrieved easily by users who input organization-specific commands and keywords </li></ul><ul><ul><li>Suitable for standardized product or service </li></ul></ul><ul><li>Personalization approach: IT designed to identify who in the organization might possess the information required for a custom job </li></ul><ul><ul><li>More reliance on know-how, insight, and judgment to make decisions </li></ul></ul>
  24. 24. Factors Affecting Organizational Learning <ul><li>Several factors may reduce organizational learning over time </li></ul><ul><ul><li>Managers may develop rules and standard operating procedures to facilitate programmed decision making </li></ul></ul><ul><ul><li>Past success with SOPs inhibits learning </li></ul></ul><ul><ul><li>Programmed decision making drives out nonprogrammed decision making </li></ul></ul>
  25. 25. Factors Affecting Organizational Learning (cont.) <ul><li>Cognitive structure: system of interrelated beliefs, preferences, expectations, and values that predetermine responses to and interpretations of situations </li></ul><ul><ul><li>These shape the way managers make decisions and perceive environmental opportunities and threats </li></ul></ul>
  26. 26. Factors Affecting Organizational Learning (cont.) <ul><li>Types of cognitive biases </li></ul><ul><ul><li>Cognitive biases: systematically bias cognitive structures to cause misperception and misinterpretation of information, thereby affecting organizational learning and decision making </li></ul></ul><ul><ul><li>Cognitive dissonance: state of discomfort or anxiety experienced when there is an inconsistency between one’s beliefs and actions </li></ul></ul><ul><ul><ul><li>Managers seek or interpret information that confirms and reinforces their beliefs and ignore information that does not </li></ul></ul></ul>
  27. 27. Factors Affecting Organizational Learning (cont.) <ul><li>Types of cognitive biases (cont.) </li></ul><ul><ul><li>Illusion of control: causes managers to overestimate the extent to which the outcomes of an action are under their personal control </li></ul></ul><ul><ul><li>Frequency: deceives people into assuming that extreme instances of a phenomenon are more prevalent than they really are </li></ul></ul><ul><ul><li>Representativeness: leads managers to form judgments based on small and unrepresentative samples </li></ul></ul>
  28. 28. Factors Affecting Organizational Learning (cont.) <ul><li>Types of cognitive biases (cont.) </li></ul><ul><ul><li>Projection: allows managers to justify and reinforce their own preferences and values by attributing them to others </li></ul></ul><ul><ul><li>Ego-defensiveness: leads managers to interpret events in such a way that their actions appear in the most favorable light </li></ul></ul><ul><ul><li>Escalation of commitment: leads managers to remain committed to a losing course of action and refuse to admit that they have made a mistake </li></ul></ul>
  29. 29. Figure 12.3: Distortion of Organizational Decision Making by Cognitive Biases
  30. 30. Improving Decision Making and Learning <ul><li>Strategies for organizational learning </li></ul><ul><ul><li>Cause managers to continuously unlearn old ideas and confront errors in their beliefs and perceptions </li></ul></ul><ul><ul><ul><li>Listening to dissenters </li></ul></ul></ul><ul><ul><ul><li>Converting events into learning opportunities </li></ul></ul></ul><ul><ul><ul><li>Experimenting </li></ul></ul></ul>
  31. 31. Improving Decision Making and Learning (cont.) <ul><li>Game theory: tool to help managers improve decision making and enhance learning </li></ul><ul><ul><li>Interactions between organizations are viewed as a competitive game </li></ul></ul><ul><li>Two basic types of game </li></ul><ul><ul><li>Sequential move game: players move in turn, and one player can select a strategy to pursue after considering its rival’s choice of strategies </li></ul></ul><ul><ul><li>Simultaneous move game: the players act at the same time, in ignorance of their rival’s current actions </li></ul></ul><ul><li>Useful for organizations competing against a limited number of rivals that are highly interdependent </li></ul>
  32. 32. Figure 12.4: A Decision Tree for UPS’s Pricing Strategy
  33. 33. Improving Decision Making and Learning (cont.) <ul><li>Nature of the top-management team </li></ul><ul><ul><li>The way the top management is constructed and the type of people who are on it affect organizational learning </li></ul></ul><ul><ul><li>Wheel configuration decreases org learning because managers report separately to the CEO </li></ul></ul><ul><ul><ul><li>Wheel works best when problems are simple and require minimal coordination </li></ul></ul></ul><ul><ul><li>Circle configuration works best for team and organizational learning </li></ul></ul>
  34. 34. Improving Decision Making and Learning (cont.) <ul><li>Learning occurs best when there is heterogeneity of the top- management team </li></ul><ul><ul><li>Groupthink: the conformity that emerges when like-minded people reinforce one another’s tendencies to interpret events and information in similar ways </li></ul></ul>
  35. 35. Figure 12.5: Types of Top-Management Teams
  36. 36. Improving Decision Making and Learning (cont.) <ul><li>Devil’s advocate: a person who is responsible for critiquing ongoing organizational learning </li></ul><ul><ul><li>A method for overcoming cognitive biases and promoting organizational learning by institutionalizing dissent </li></ul></ul><ul><li>Dialectical inquiry: teams of decision makers generate and evaluate alternative scenarios and provide recommendations </li></ul>
  37. 37. Improving Decision Making and Learning (cont.) <ul><li>Collateral organizational structure: an informal organization of managers that is set up parallel to the formal organization structure to “shadow” the decision making and actions of managers in the formal organization </li></ul><ul><ul><li>Allows an organization to maintain its capacity for change at the same time that it maintains its stability </li></ul></ul>
  38. 38. Figure 12.6: How Devil’s Advocacy and Dialectical Inquiry Alter the Rational Approach to Decision Making