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  1. 1. Thomson Learning © 2004 12-1 Chapter Twelve Decision-Making Processes
  2. 2. Thomson Learning © 2004 12-2 Today’s Business Environment  New strategies  Reengineering  Restructuring  Mergers/Acquisitions  Downsizing  New product/market development  . . . Etc.
  3. 3. Thomson Learning © 2004 12-3 Decisions Made Inside the Organization  Complex, emotionally charged issues  More rapid decisions  Less certain environment  Less clarity about means/outcomes  Requires more cooperation
  4. 4. Thomson Learning © 2004 12-4 A New Decision-Making Process  Required because  no one person has enough info to make all major decisions  No one person has enough time and credibility to convince many  Relies less on hard data  Guided by powerful coalition  Permits trial and error approach
  5. 5. Thomson Learning © 2004 12-5 Steps in the Rational Approach to Decision-Making Monitor Decision Environment Implement Chosen Alternative Define Decision Problem Specify Decision Objectives Diagnose Problem Develop Alternative Solutions Evaluate Alternatives Choose Best Alternative 1 2 3 45 6 7 8
  6. 6. Thomson Learning © 2004 12-6 Trade-off Trade-off Trade-off Constraints and Trade-offs During Non-programmed Decision- Making Personal Constraints: Desire for prestige, success; personal decision style; and the need to satisfy emotional needs, cope with pressure, maintain self-concept Organizational Constraints: Need for agreement, shared perspective, cooperation, support, corporate culture and structure, ethical values Bounded Rationality: Limited time, information, resources to deal with complex, multidimensional issues Decision/ Choice: Search for a high-quality decision alternative Trade-off Trade-off Sources: Adapted from Irving L. Janis, Crucial Decisions (New York: Free Press, 1989); and A. L. George, Presidential Decision Making in Foreign Policy: The Effective Use of Information and Advice (Boulder, Colo.: Westview Press, 1980).
  7. 7. Thomson Learning © 2004 12-7 Choice Processes in the Carnegie Model Hold joint discussion and interpret goals and problems Share opinions Establish problem priorities Obtain social support for problem, solution Adopt the first alternative that is acceptable to the coalition Conduct a simple, local search Use established procedures if appropriate Create a solution if needed Managers have diverse goals, opinions, values, experience Information is limited Managers have many constraints Uncertainty Coalition Formation Search Satisficing Conflict
  8. 8. Thomson Learning © 2004 12-8 The Incremental Decision Process Model · Identification Phase  Recognition  Diagnosis  Development Phase  Search  Screen  Design  Selection Phase  Judgment (evaluation – choice)  Analysis (evaluation)  Bargaining (evaluation – choice)  Authorization Dynamic Factors
  9. 9. Thomson Learning © 2004 12-9 Learning Organization Decision Process When Problem Identification and Problem Solution Are Uncertain When problem identification is uncertain, Carnegie model applies Political and social process is needed Build coalition, seek agreement, and resolve conflict about goals and problem priorities When problem solution is uncertain, Incremental process model applies Incremental, trial-and-error process is needed Solve big problems in little steps Recycle and try again when blocked PROBLEM IDENTIFICATION PROBLEM SOLUTION
  10. 10. Thomson Learning © 2004 12-10 Illustration of Independent Streams of Events in the Garbage Can Model of Decision-Making Problems Solutions Choice Opportunities Participants Problems Solutions Choice Opportunities Participants Problems Solutions Choice Opportunities Participants Choice OpportunitiesChoice Opportunities Participants Participants Middle Management Problems Solutions Solutions Participants ProblemsProblems Solutions Choice Opportunities Problems Participants Participants Solutions Department A Department B
  11. 11. Thomson Learning © 2004 12-11 Certain Uncertain Contingency Framework for Using Decision Models Problem Consensus Individual: Rational Approach Computation Organization: Management Science Individual: Bargaining, Coalition Formation Organization: Carnegie Model Individual: Judgment Trial-and-error Organization: Incremental Decision Process Model Individual: Bargaining and Judgment Inspiration and Imitation Learning Organization: Carnegie and Incremental Decision Process Models, Evolving to Garbage Can Solution Knowledge Certain Uncertain 4 21 3
  12. 12. Thomson Learning © 2004 12-12 Special Decision Circumstances  High-Velocity Environments  Decision Mistakes and Learning  Escalating Commitment
  13. 13. Thomson Learning © 2004 12-13 Decision Styles Workbook Activity Your decisions Approach used Advantages and disadvantages Your recommended decision style 1. 2. Decisions by others 1. 2.