This chapter discusses various models of decision making including rational, bounded rationality, and garbage can models. It describes common decision making biases and evidence-based decision making. Decision styles are analyzed in terms of orientation and tolerance for ambiguity. Intuition and creativity in decision making are modeled. Group decision making techniques like brainstorming and Delphi are outlined along with their advantages and disadvantages.

1. © 2012 The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Making
Decisions
Chapter Ten

2. 10-2
After reading the material in this chapter,
you should be able to:
LO10.1 Compare and contrast the rational model of decision
making, Simon’s normative model, and the garbage
can model
LO10.2 Review the eight decision-making biases.
LO10.3 Discuss the thrust of evidence-based decision making and
its implementation principles.
LO10.4 Describe the model of decision-making styles, the role of
intuition in decision-making and the stages of the creative
process.
LO10.5 Summarize the pros and cons of involving groups in
the decision-making process.
LO10.6 Contrast brainstorming, the nominal group technique,
the Delphi technique, and computer-aided decision
making.

3. 10-3
Models of Decision Making
Decision making
 identifying and
choosing solutions
that lead to a desired
state of affairs

4. 10-4
Models of Decision Making
The Rational Model
 proposes that managers use a logical four-step
approach to decision making.

5. 10-5
Rational Model
Identifying the Problem
 Problem – exists when the actual situation and
the desired situation differ
 Opportunity - represents a situation in which
there are possibilities to do things that lead to
results that exceed goals and expectations
Generating Solutions
 For routine decisions alternatives are readily
available through decision rules

6. 10-6
Rational Model
Selecting a Solution
 Is the potential solution ethical?
 Is it feasible?
 Will it remove the causes and solve the
problem?

7. 10-7
Rational Model
Implementing and Evaluating the
Solution
 After solution is implemented, the evaluation
phase is used to evaluate its effectiveness
 Optimizing – producing the best possible
solution

8. 10-8
Question?
Gloria is never happy with "good enough"
solutions. She is determined to find the
best possible solution in solving her
problems. What Gloria is doing is described
as
A.Optimizing
B.Brainstorming
C.Rationalizing
D.Satisfying

9. 10-9
Summarizing the Rational Model
1. The quality of decisions may be enhanced
2. It makes the reasoning behind a decision
transparent
3. If made public, it discourages the decider
from acting on suspect considerations

10. 10-10
Nonrational Models of Decision
Making
Nonrational models
 Attempt to explain how decisions are actually
made
1.Decision making is uncertain
2.Decision makers do not possess complete
information
3.Difficult for managers to make optimal
decisions

11. 10-11
Simon’s Normative Model
Bounded rationality
 represents the notion that decision makers are
“bounded” or restricted by a variety of
constraints when making decisions
Satisficing
 choosing a solution that meets some minimum
qualifications, one that is “good enough.”

12. 10-12
Simon’s Normative Model
Most frequent causes of poor decision
making
Poorly defined processes and practices
Unclear company vision, mission, and goals
Unwillingness of leaders to take responsibility
Lack of reliable, timely information

13. 10-13
Garbage Can Model
Garbage Can Model
 decision making is sloppy and haphazard
 decisions result from complex interaction of
four independent streams of events: problems,
solutions, participants
and choice opportunities

14. 10-14
Implications of the Garbage Can
Model
1. More pronounced in industries that rely on
science-based innovations
2. Many decisions are made by oversight
3. Political motives frequently influence
decision makers
4. Important decisions are more likely to be
solved

15. 10-15
Integrating Rational and
Nonrational Models
A simple context is stable, and clear cause-
and-effect relationships can be discerned,
so the best answer can be agreed on
In a complicated context, there is a clear
relationship between cause and effect, but
some people may not see it, and more than
one solution may be effective

16. 10-16
Integrating Rational and
Nonrational Models
In a complex context, there is one right
answer, but there are so many unknowns
that decision makers don’t understand
cause-and-effect relationships.
In a chaotic context, cause-and-effect
relationships are changing so fast that no
pattern emerges.

17. 10-17
Decision-Making Biases
Judgmental
heuristics
 rules of thumb or
shortcuts that people
use to reduce
information
processing demands.

18. 10-18
Decision-Making Biases
Availability
heuristic
Representativeness
heuristic
Confirmation bias
Anchoring bias
Overconfidence
bias
Hindsight bias
Framing bias Escalation bias

19. 10-19
Evidence-Based Decision Making
Evidence-based decision making
(EBDM)
 represents a process of conscientiously using
the best available data and evidence when
making managerial decisions

20. 10-20
A Model of Evidence-Based
Decision Making (EBDM)

21. 10-21
Seven Implementation Principles
1. Treat your organization as an unfinished
prototype
2. No brag, just facts
3. See yourself and your organization as
others do
4. Evidence-based management is not just for
senior executives

22. 10-22
Seven Implementation Principles
(cont.)
5. Like everything else, you still need to sell it
6. If all else fails, slow the spread of bad
practice
7. The best diagnostic question: what
happens when people fail?

23. 10-23
Why Is It Hard to be Evidenced
Based?
1. There’s too much evidence.
2. There’s not enough good evidence.
3. The evidence doesn’t quite apply.
4. People are trying to mislead you.
5. You are trying to mislead you.
6. The side effects outweigh the cure.
7. Stories are more persuasive anyway.

24. 10-24
General Decision Making Styles
Value orientation
 reflects the extent to which an individual
focuses on either task and technical concerns
or people and social concerns when making
decisions
Tolerance for ambiguity
 extent to which a person has a high need for
structure or control in his life

25. 10-25
Decision Making Styles

26. 10-26
Question?
Dominick has a low tolerance for ambiguity
and is generally oriented towards task and
technical concerns when making decisions.
Dominick can be described as having which
decision-making style?
A.Directive
B.Analytical
C.Conceptual
D.Behavioral

27. 10-27
Intuition in Decision Making
Intuition
 represents judgments, insights, or decisions
that “come to mind on their own, without explicit
awareness of the evoking cues and of course
without explicit evaluation of the validity of
these cues.”

28. 10-28
A Model of Intuition
Holistic hunch
 judgment that is based on a subconscious
integration of information stored in memory
Automated experiences
 choice based on a familiar situation and a
partially subconscious application of previously
learned information related to that situation

29. 10-29
A Model of Intuition

30. 10-30
Creativity
Creativity
 process of using intelligence, imagination, and
skill to develop a new or novel product, object,
process, or thought

31. 10-31
The Creativity Stages
Preparation
Concentration
Incubation
Illumination
Verification

32. 10-32
Road Map to Ethical Decision
Making: A Decision Tree
Decision tree
 graphical representation of the process
underlying decisions and it shows the resulting
consequences of making various choices

33. 10-33
An Ethical Decision Tree

34. 10-34
Group Involvement
Minority dissent
 extent to which group members feel
comfortable disagreeing with other group
members,
and a group’s level
of participation in
decision making

35. 10-35
Advantages and Disadvantages of
Group-Aided Decision Making

36. 10-36
Group Problem Solving Techniques
Consensus
 reached when all members can say they either
agree with the decision or have had their ‘day
in court’ and were unable to convince the
others of their viewpoint. Everyone agrees to
support the outcome.
Brainstorming
 process to generate a quantity of ideas

37. 10-37
Rules for Brainstorming
1. Defer judgment
2. Build on the ideas of others
3. Encourage wild ideas
4. Go for quantity over quality
5. Be visual
6. Stay focused on the topic
7. One conversation at a time

38. 10-38
Group Problem Solving
Techniques
Nominal Group Technique
 process to generate ideas and evaluate
solutions.
Delphi technique
 process to autonomously generate ideas from
physically dispersed experts

39. 10-39
Group Problem Solving
Techniques
Computer-aided decision making
 reduces consensus roadblocks while collecting
more information in a shorter period of time
 Chauffeur-driven systems, group-driven
electronic meetings

40. 10-40
Video: Leadership: Making
Decisions During Hurricane Katrina
What roadblocks to using a rational decision making model
were placed before the Sister’s in this case? Could
anything have been done to make their decisions easier?
Identify how intuition and creativity helped the Sisters in
the decisions they had to make.
Without the ability to communicate or have the resources
they normally had at their disposal, what did the Sister’s
rely on in making the decisions they needed to make?
Why was timely decision making so essential in this case?