Defining a problem as the gap between an actual and desired situation covers both of these situations: one, something has fallen below standards and needs to be fixed and two, we see an opportunity to improve a process to make it better.Can you identify the problem in this scenario? [Pause.]From this description you may conclude that the rental car company doesn’t have a fleet of economy vehicles for customers to rent. Let’s look at the three primary methods for identifying problems presented on the next slide.
In the first method, identifying trends that are different from the past can indicate a potential problem. In analyzing the car rental company problem, for example, the change in revenue may serve as an indicator of a problem.In the second method, to forecast and anticipate problems, people consider different scenarios and then plan how they would handle those. This prepares companies for a variety of situations that may occur. Referring once again to the car rental company’s problem, if they had forecasted the impact of the hybrid vehicle, they may have been able to plan accordingly by having more inventory of hybrid vehicles to meet the customers’ needs.Finally, and perhaps most obvious, customers may complain about certain aspects of a product or service. If nothing is done in response to these complaints, a company could miss out on an opportunity to prevent a brewing problem. At the car rental company, customer feedback that environmentally friendly cars is desirable provides additional information
Decision making involves identifying and then choosing from a number of alternatives. So first you have to think about the variety of responses or actions you could take to alleviate the problem or improve the process. Then you need to choose the best one based on some pre-determined criteria.Let’s talk about this decision-making process and the factors affect the quality of decisions that are made.
Let’s examine the four steps of the first of two models we’ll be studying, the rational decision-making model.Step 1: Identify the problemAt this stage, we must differentiate fact from opinion; objective data should be considered not perceptions.In addition, we must specify the underlying causes by distinguishing symptoms from the causes of the problem. Let’s consider this example: the owner of an office building was getting complaints from tenants who said “the elevator is too slow.” Some threatened to move out if nothing was done about the slow elevator. Replacing the elevator would be expensive. Rather than accept the problem as the tenants defined it, the owner hired a consultant to look into the problem. The consultant defined the problem differently “tenants are bored while waiting for the elevator.” His recommended solution was not a new expensive elevator; rather it was to place mirrors next to the elevators so that the tenants could look at themselves while waiting. The owner put up the mirrors, and the complaints stopped. By properly defining the problem, through distinguishing symptoms from the cause of the problem, the owner saved a substantial amount of money. A new faster elevator may not have stopped the complaints.Step 2: Generate alternative solutions by matching solutions to goals, getting solutions from everyone involved, building on others’ ideas, specifying short- and long-term solutions, and postponing evaluating alternatives.Step 3: Select a solution. At this stage, it is important to evaluate main effects and side effects: For example, if you have difficulty scheduling as many games as there is demand for on the fields, you may consider making the games shorter to have more games. Possible side effects are the impact on the field, meeting standard regulations, and parking overlap problems. These could all be side effects of the decision to correct the main effect. Step 4: Implement and follow up on the solution. Points to remember at this stage are to implement at the proper time and in the right sequence, provide feedback opportunities, engender acceptance, establish an ongoing monitoring system, and evaluate based on how well the problem was solved.Let’s discuss on the next slide some research findings of this model.
Although research has shown that following these steps improves the decision making and problem solving process quite a bit, managers often circumvent these steps because they are rewarded for being action-oriented and results driven which dissuades some from spending what they may perceive as too much time thinking, which the analytical problem solving approach requires. In fact in complex situations, this model does not describe the way decision makers actually make decisions.The rational model assumes the decision maker’s goal is to optimize or choose the absolute best solution.Also the rational model is based on the following desirable assumptions: you have complete information, emotions are out of the decision making process, you can honestly and accurately evaluate all alternatives, time and resources are abundant and accessible and people are willing to implement and support decisions.
Non rational models of decision making are based on premise that decision making is not rationalThese models assume that:Decision making is uncertainNot all information is available or knownMaking optimal decisions is difficultTwo nonrational models include: Simon’s Normative Model and the Garbage Can Model
In the late 1970s, Herbert Simon put forth a more realistic decision-making model called the Normative Model.This is based on the assumption that decision making is not rational because people are guided by bounded rationality, or the constraints that restrict decision making, such as time, limitations of the human mind, and the complexity of the situation.The model suggests that decision making is characterized by:Limited information processing – There is a limit to the quantity of information managers can process resulting in the tendency to acquire manageable rather than optimal amounts of information. So the reality is that managers are not evaluating all potential alternatives to choose the best one.Satisficing - Satisficing consists of choosing a solution that meets some minimum standard of acceptance.Satisficing occurs because people do not have the time, information, or ability to handle the complexity associated with the rational process and, therefore, stop seeking alternatives when they find one that is good enough.
The garbage can model is based on premise that decision making is sloppy and haphazard and that decisions are made as a result of the interaction between:Problems, solutions, participants, and choice opportunitiesIn other words, solutions and problems are matched often by chance rather than through a step-by-step process.What are the implications of the Garbage Can model?Decisions are often made because of the presence of a salient opportunityPolitical motives frequently guide the decision-making processAs the number of problems increases and time is scarce, less problems get solvedImportant problems are more likely to be solved than unimportant ones.
Snowden and Boone have come with with an integrated model of the rational and non-rational models by defining four kinds of environments and effective methods of decision making for each.
The availability heuristic is the decision maker’s tendency to base decisions on information that is readily available in memory. So events that happened that are salient or recent may disproportionately influence a decision. The representativeness heuristic occurs when people compare a current event or situation to previous situations that they know about. If these situations are not really comparable or if the decision makers knowledge about them is not accurate, it may lead to an inaccurate decision. The confirmation bias occurs when people pre-judge a situation and then seek information that confirms their decision or belief. The anchoring bias affects people’s decision making by the influence of initial information, impressions, data, feedback or stereotypes that anchor subsequent decisions or judgments.
Overconfidence bias – tendency to be overconfident about estimates or forecastsHindsight bias – knowledge of an outcome influences our belief about the probability that we could have predicted the outcome earlierFraming bias – tendency to consider risks about gains differently than risks about lossesEscalation of commitment bias – tendency to stick to an ineffective course of action when it is unlikely that the bad situation can be reversedFactors affecting escalation of commitment include:Psychological and social determinants. We have pressure in our society to stay consistent and once we make a decision we are wedded to it. We become so ego-involved that if the idea doesn’t work we feel it reflects on us as a person. Clearly, we saw in the 2004 elections that being painted as a “flip-flopper” had a negative effect on John Kerry.Organizational determinants. Organizations that don’t have robust communication channels or processes in place to get feedback may continue on courses of action that are no longer appropriate.Project characteristics. When projects don’t have clearly defined goals, people tend to think that obstacles in the course of the project can be overcome with more resources and that the results will be worth it in the end.Contextual determinants. Pressures from outside sources, competitors, and stakeholders who are influential may cause a company to continue down a path that may not reap many benefits.
Set minimum targets for performance, and have decision makers compare their performance with these targets – A, yes, that way they can feel successful because they may have met a target along the way although subsequent targets are not met. Thus the whole project is considered a failure. This reduces ego-involvement effects.Have the same person have decision making authority over all aspects of an on-going project – B, No, an objective eye is important, someone who is not invested in the project will be able to make a more objective assessment of whether it makes sense to continue or not.Tie the person’s reputation to the success of the project – B, NO, this will only fuel one’s eagerness to make it successful no matter what the costProvide more frequent feedback about project completion and costs – A, yes, this is how to overcome the organizational communication breakdown problem, make sure information about the progress is being collected and communicated to key decision makers.Make decision makers aware of costs of persistence – A, Yes, People tend to view the positive potential of continuing on with an approach without looking at the negative aspect of continuing if it doesn’t work out.
On this and the next several slides, we will examine three dynamics of decision making: knowledge management, decision-making styles, and the problem of escalation of commitment. What specific actions can organizations take to facilitate knowledge management?Having a culture of collaborative decision making, flattening organizational structures, and helping people establish social networks throughout the organization through, for example, mentoring and job rotation programs.Better organizations have knowledge management systems because it improves the quality of their decisions.
Knowledge comes in different forms. Let’s take a look at two examples.TacitTroy is very effective at conducting client meetings. He knows what to say when and manages the discussion to maximize the impact of the meeting for all parties.ExplicitSandra has established a process for efficiently and accurately conducting financial analyses. She has established a spreadsheet accompanied with a set of instructions.Which of the following types of information would be easier to share or capture? Why?A is an example of Tacit knowledge: information gained through experience that is difficult to express and formalize. B is an example of Explicit knowledge: information that can be easily put into words and shared with others.Computer programs and systems are good, effective ways to share explicit knowledge. Tacit knowledge is shared more through talking, observing experienced others and through coaching sessions. Research has shown that the effective sharing of tacit knowledge is a way to maintain a competitive advantage for an organization.
Research on individual decision making has revealed that individuals differ on two dimensions: value orientation is the extent to which individuals focus on either the task and technical concerns or people and social concerns when making decisions. Tolerance for ambiguity is the extent to which individuals have a high need for structure and control in their lives.Combining these two dimensions results in four styles that are discussed on the next slide. In addition, you can complete an assessment on pp. 400-401 of your text to determine which style is yours.
People with a directive style have a low tolerance for ambiguity and are task-oriented. They are efficient and action-oriented but tend to be autocratic.People with an analytic style have a higher tolerance for ambiguity and a tendency to overanalyze a situation. They tend to consider more information and take longer to make decisions but can be autocratic.Those with a conceptual style have a high tolerance for ambiguity and tend to focus on the people or social aspects of work. They take a broad perspective and like to consider numerous options, but can be indecisive when making decisions.People with a behavioral style are the most people-oriented of the four possibilities. They are supportive and receptive, but have a tendency to avoid conflict and to be too concerned about others.
You can understand your own strengths and weaknesses and become aware of how you make decisions.You can understand how others make decisions which affects what kind of information is considered important for them in order to make a decision. For example, if you are going to discuss a decision with an analytical person you may want to provide as much data and information as possible. But someone with a more directive approach, who likes simple, fast decisions, would probably be annoyed by that much information.You can understand why different decisions are made with the same kind of information, which can help reduce one source of interpersonal conflict in organizations.
Intuition, also referred to as a hunch or a gut feeling, often plays a role in the decision-making process. The technical definition of intuition is making a choice without the use of conscious thought or logical inference. Intuition is automatic and involuntary and there are two types:A holistic hunch represents a judgment that is based on a subconscious integration of information stored in memory. It just “feels right.”Automated experiences represent a choice that is based on a familiar situation and partially subconscious application of previously learned information related to that situation, such as driving a car and riding a bike.Intuition comes from two sources: expertise and feelingsThe intuitive response is based on an interaction between one’s expertise and feelings in a given situation.Drawbacks with this approach include the difficulty in getting others to agree with you based on known logic or information. It is also susceptible to the availability and representativeness heuristics. On the positive side, however, using intuition is a fast decision-making method.Many people validate their intuitive decisions using the rational process.
Groups are more efficient than individuals? – False, individual are more efficient because there is a lot less time needed to discuss the problem, pose alternatives, come to consensus, etc.Groups are more confident in their choices than individuals? Yes but this doesn’t mean they had the best decision. Sometimes groups overestimate the quality of their decisions especially if they are a particularly harmonious group.The larger the group, the poorer the decision quality. – True, at some point too many people stops adding value, the benefits of diverse perspectives can become less with increasing numbers of people
As an aside, it’s interesting to note that the benefits of group decision making provided the impetus for a movement called Participative Management that is embraced by many organizations today.
Brainstorming is used to help groups generate multiple ideas and alternatives for solving problems.Brainstorming involves convening the group; reviewing the problem, silently generating ideas; soliciting ideas, and writing them for all to see.When brainstorming, freewheeling is encouraged, criticism is discouraged, quantity of ideas is encouraged, and seniority is ignored.Although effective for generating ideas, brainstorming is not appropriate for evaluating alternatives or selecting solutions.
The nominal group technique brings together a small number of individuals (usually 7 to 10) who systematically offer their individual solutions to a problem and share their personal reactions to those solutions.This technique can lead to a group decision in only a few hours, discourages any pressure to conform, requires a trained group leader, and requires only one narrowly defined problem be considered at a time. Traditionally, nominal groups meet face-to-face. Technology enables such groups to meet even when the members are far away from each other.Electronic meeting systems allow individuals in different locations to participate in group conferences via telephone lines or direct satellite transmissions. Automated decision conferences are just nominal groups meeting in a manner that approximates face-to-face contact.
The Delphi technique is a systematic way of collecting and organizing the opinions of several experts into a single decision. This is often used with organizations that need to do forecasting where they need to rely on seasoned, experienced judgments but want to avoid the problems of scheduling face-to-face meetings.
The final topic in this chapter is creativity, defined as the process we use to develop something new or unique. Creativity Involves the use of intuition, ingenuity, and insight. Rather than the decision making being narrowed down to “one best decision,” seeking a solution is open to creating new possibilities and many alternatives.This approach is best to use when there is an ambiguous situation that the decision maker hasn’t dealt with before at all, and it is difficult to predict the outcome of the solution chosen. There are three types of innovation:Creation – creating something entirely newSynthesis – combining or synthesizing two existing thingsModification – improving or changing things.
http://www.excelsior-learning.com/igniteyourimagination.htmlExplore the Challenge Explore, define, and shape challenge(s) and goal(s) Generate challenge and goal statement(s) Prioritize and shape the challenge(s) or goal(s) Visualize the Future Visualize the desired future environment Assess the current environment Identify the gaps that exist between the current and desire future environment Get the Facts Make smart guesses about opportunity areas or causes of problems Identify the essential facts and information; find the real opportunity or problem Analyze the data; see relationships and confirm them with data Clarify the Opportunity Redefine, refocus, and clarify the opportunity or problem Write a well-defined opportunity or problem statementRain IdeasOrganize the ideas and alternatives by themesHit the most promising ideasTake a Break & IncubateStep away from the opportunity or problem Combine, synthesize, and integrate ideas and elementsStrengthen & Select the Best Ideas & Solutions Strengthen the ideas that have the greatest potential Synthesize and integrate the ideas to form a solution(s)Select the solution(s) that best meet your criteria and objectives Get the MomentumDevelop and implement rapid action plansDevelop and implement quicksand avoidance and contingency plansAccelerate the Momentum and AdaptDevelop and implement a performance dashboard Verify performance results Adapt and re-allocate resources Anchor the gains
Which of the following will foster creativity?Punishing mistakes or ideas that fail – No, instead, let employees occasionally try out their pet ideas, provide a margin of errorAllowing time for fun and playing around – Yes, letting people interact in different ways, like playing ping pong or in outdoor social situations can foster creativity, rather than being trapped in an office environmentHolding people accountable for creative ideas – Yes, challenging employees by saying you have to find a different way of doing something and holding them accountable for finding a creative solution motivates creative thought more than not pushing changeEmphasize the importance of taking action or generating output – NO, to be creative you need time to think, people often feel reluctant to sit at their cubicle, where everyone can see them and just think – it looks like they aren’t doing anything and if there is this pressure to be productive, you make take action that is not well thought-through.Encouraging discussion of “half-baked” ideas – Yes, a culture that is not open to new ideas or perfectly though through ideas, will tend to stifle creative thought Rewarding creativity – Yes, people will be motivated to be creative if that is rewarded just like making an already established process better, typically is Establishing a rigid, hierarchical corporate culture – NO, again bureaucracy and constraints placed on employees will not breed creativity
Here are a few tips for making design thinking part of an innovative process:Begin at the beginningInvolve design thinkers before direction has been set so you can explore more ideas more quickly than you would otherwiseTake a human-centered approachFactor in human behavior, needs, and preferencesUse direct observation to capture unexpected insights that will precisely reflect what consumers want.Try early and oftenEncourage rapid experimentation and prototypingSeek outside helpLook for opportunities to co-create with customers and consumers
Blend big and small projectsManage a portfolio of innovation including incremental and revolutionary projectsBudget to the pace of innovationRethink funding approach based on opportunities – don’t let budgeting processes constrain the pace of innovationFind talent any way you canHire from interdisciplinary programs of Design – consider progressive business schools, and maybe even train nondesignersDesign for the cyclePlan assignments so design thinkers go from inspiration to ideation to implementation. Experiencing the full cycle builds better judgment and creates great long-term benefits for the organization.
OB - Decision Making
Ch 12 – Decision Making BUSA 220 – Wallace – Spring 2012
Problem Solving• Problem – gap between an actual and desired situation.A rental car company notices adip in revenue from 12 monthsago. The branch is located in avery congested area and hybridvehicles can travel in expresslanes. Customers complainthat they would likeenvironmentally-friendly carsto choose from to rent. Krietner/Kinicki, 2009
Decision Making• Decision making – Identifying and choosing solutions that lead to a desired end result • First, determine responses or actions necessary to alleviate a problem • Second, choose the best alternativeGraphic Source: http://www.secondaryrti.com/problemSolving/psModel Krietner/Kinicki, 2009
Models • Rational Model logical approach to decision making 1. Identifying the problem 2. Generating alternative solutions 3. Selecting solution 4. Implementing and EvaluatingGraphic Source: www.the-happy-manager.com Krietner/Kinicki, 2009
Rational Model • Do decision makers actually make decisions this way? • What goal does the rational model assume the decision maker has? • What assumptions does the rational decision making model make?http://www.unc.edu/~nielsen/soci410/nm11/m11001.gif Krietner/Kinicki, 2009
Non-Rational Models • Based on premise that decision making is not rational • Assume that: • Decision making is uncertain • Not all information is available or known • Making optimal decisions is difficult • Simon’s Normative Model • Garbage Can Model Krietner/Kinicki, 2009
Simon’s Normative Model• Decision makers are guided by bounded rationality Intelligence • constraints that restrict decision making• Decision making is characterized by Design • Limited information processing • Satisficing • Choosing a standard that meets a minimum Choice standard of acceptance Krietner/Kinicki, 2009
Garbage Can Model • Decision making is sloppy and haphazard • Decisions are made as a result of the interaction between: • Problems, solutions, participants, and choice opportunities • What are the implications of the Garbage Can model?http://www.unc.edu/~nielsen/soci410/nm11/m11006.gif Krietner/Kinicki, 2009
Integrating Normative & Rational • Stable, cause & effect is clear Simple context • RATIONAL MODEL • Cause & effect is clear but multipleComplicated context solutions would work • RATIONAL MODEL; investigate options • One right answer; cause & effect unclear Complex context • EXPERIMENT; test options; seek a creative solution • Cause & effect constantly changing Chaotic context • Act to establish order; then identify patterns to manage the problem Krietner/Kinicki, 2009
Decision Making Bias• Availability heuristic – use information readily available in memory• Representativeness heuristic – using similar situations to predict the occurrence of an event• Confirmation bias – decide before investigating then seek confirming evidence• Anchoring bias – decisions are influenced by initial information, data, stereotypes Krietner/Kinicki, 2009
Decision Making Bias • Overconfidence bias – tendency to be overconfident about estimates or forecasts • Hindsight bias – knowledge of an outcome influences our belief about the probability that we could have predicted the outcome earlier • Framing bias – tendency to consider risks about gains differently than risks about losses • Escalation of commitment bias – tendency to stick to an ineffective course of action when it is unlikely that the bad situation can be reversed Krietner/Kinicki, 2009
What Do You Think?Which of the following will reduce escalationof commitment? (A=Reduce, B=Won’t reduce)1. Set minimum targets for performance, and have decision makers compare their performance with these targets2. Have the same person have decision making authority over all aspects of an on-going project3. Tie the person’s reputation to the success of the project4. Provide more frequent feedback about project completion and costs5. Make decision makers aware of costs of persistence Krietner/Kinicki, 2009
Decision Making Dynamics • Knowledge Management • Implementing systems and practices that increase the sharing of knowledge and information throughout an organization. • What specific actions can organizations take to facilitate knowledge management? Krietner/Kinicki, 2009
Knowledge FormsA. Troy is very effective at conducting client meetings. He knows what to say when and manages the discussion to maximize the impact of the meeting for all parties. (TACIT)B. Sandra has established a process for efficiently and accurately conducting financial analyses. She has established a spreadsheet accompanied with a set of instructions. (EXPLICIT)• Which of the following types of information would be easier to share or capture? Why? Krietner/Kinicki, 2009
Decision Making Styles Two dimensions of individual style: • Value Orientation • Task vs. People/Social • Tolerance for Ambiguity • High vs. Low • Your text has a questionnaire to determine your style Krietner/Kinicki, 2009
Decision Making Styles High Analytical Conceptual Low Directive Behavioral Tasks and Technical People and Social Concerns Concerns Value Orientation Krietner/Kinicki, 2009
What Do You Think?• People often use more than one decision making style.• Is one style better than another?• What is the benefit to you to understanding different decision making styles? Krietner/Kinicki, 2009
What Do You Think? • Which of the following research findings are true? (A-True, B-False) 1. Groups are more efficient than individuals. 2. Groups are more confident in their choices than individuals. 3. The larger the group, the poorer the decision quality. Krietner/Kinicki, 2009
When to use Groups vs. Individuals1) If additional information would increase the quality of the decision2) If acceptance is important3) If people can be developed through their participation Krietner/Kinicki, 2009
Brainstorming • A process to generate a quantity of ideas • Quantity is more important than quality • Criticism is withheld • Build on others ideas • Create status-free environment Krietner/Kinicki, 2009
Nominal Group Technique1. Group meets to discuss a problem2. Individuals generate ideas independently3. Everyone shares an idea from his/her list and they are recorded but not discussed4. Group discusses all ideas5. Group members vote for their top choicesGraphic Source: www.mindspring.com Krietner/Kinicki, 2009
Delphi Technique 1. Manager identifies an issue to investigate 2. Questionnaire is sent to others and returned to manager 3. Manager summarizes responds and sends feedback to participants 4. Participants send their feedback and comments 5. Cycle repeats until issue is resolve or all relevant information is gathered.Graphic Source: Canada Institutes of Health Research Krietner/Kinicki, 2009
Creativity and Innovation• CREATIVITY is thinking up new things. INNOVATION is doing new things. ~ Theodore Levitt• Process of developing something new or uniqueThree types…• Creation: entirely new• Synthesis: combines existing• Modification: improvement Krietner/Kinicki, 2009
What do You Think? Which of the following will foster creativity? (A-Yes, B-No) 1. Punishing mistakes or ideas that fail 2. Allowing time for fun and playing around 3. Holding people accountable for creative ideas 4. Emphasize the importance of taking action or generating output 5. Encouraging discussion of “half-baked” ideas 6. Rewarding creativity 7. Establishing a rigid, hierarchical corporate culture Krietner/Kinicki, 2009
Design Thinking • Involve design thinkers beforeBegin at the beginning direction has been setTake a human-centered • Factor in human behavior, needs, approach and preferences • Encourage rapid experimentation Try early and often and prototyping • Look for opportunities to co-create Seek outside help with customers and consumers Source: Design Thinking, Harvard Business Review, June 2008 Krietner/Kinicki, 2009
Design Thinking • Manage a portfolio of innovationBlend big & small projects including incremental and revolutionary projects Budget to the pace of • Rethink funding approach based on innovation opportunities • Hire from interdisciplinary programsFind talent any way you can of Design • Plan assignments so design thinkers Design for the cycle go from inspiration to ideation to implementation Source: Design Thinking, Harvard Business Review, June 2008 Krietner/Kinicki, 2009
You can’t find the right answers if you’re asking thewrong questions. By John C Maxwell Krietner/Kinicki, 2009