Decision Making Models

1. 1
Organizational
Decision-Making Making

2. 2
Organizational Decision Making
 Decisions: Choices made amongst two or more
alternatives
 Is defined as the process of identifying and solving problems
(e.g. “Toyota-sticky accelerator” , “Amazon-Kindle e-reader”)
 Has two stages: problem identification and problem
solution
 Decisions vary in complexity continuum and are categorized as
programmed (routine) or non programmed (non-routine)

3. 3
Individual Decision Making
 Rational Model: consistent, value-maximizing choices within
specified constraints (e.g. Pro-Con)
 Bounded Rational Perspective: constructing simplified
models that extract essential features from problems without
capturing all their complexity
 Satisficing Vs Optimizing: seek solutions that are satisfactory
and sufficient
 Combine rationality with intuition (distilled experience leads to
unconscious prompting)!

4. 4
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
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5. Bounded Rationality
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 People do not optimise in the “rational” manner described by
economists.
 They conduct a less than complete search for alternatives.
 They then choose an option that meets a certain threshold of
satisfaction.
 That is, they Satisfice, not Optimise.
 This may be a generally efficient strategy, given time &
resources.

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Trade-off
Trade-off
Trade-off
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

7. 7
Organizational Decision Making
 Management Science Approach
 Carnegie Model
 Incremental Decision Process Model
 Garbage Can Model

8. 8
Management Science Approach
 Is the analog to rational model of individual decision making
 Came in to being during WW II: Used mathematical and
statistical techniques to urgent and large scale military problems
e.g. Missile trajectory, aiming battleship guns
 Same approach diffused in to corporations and big businesses
 Used in quantitative data analysis, operations research
 Use in situations where variables are measurable

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Carnegie Model
 Based on bounded rationality approach to individual and
organizational decision making
 Organizational level decisions involved many managers and
final choice was based on a coalition (alliance) among
managers
 Reason being organizational goals are ambiguous and operative
goals are inconsistent
 Managers tend to be rational but are constraint by time, resources
and mental capacities. So they form coalition

10. 10
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

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The Incremental Decision Process Model
 Places emphasis on structured sequence of activities
undertaken from the discovery of the problem to its solution.
 Major organization choices are usually a series of small choices
that combine to produce the major decision.
 Organizations move through several decision points and may hit
barriers along the way called ‘decision interrupts’ which means
organization has to look for new alternatives.
 Example: Gillette-Mach3

12. 12
The Incremental Decision Process Model
· Identification Phase: problem recognition
– Recognition (becoming aware of the problem & the
need to take the decision)
– Diagnosis (systematic & detailed if time permits or
quick & immediate)
 Development Phase: solution identification
– Search (look for alternatives within the organizations
repertoire of solutions)
– Screen (eliminate what does not apply)
– Design (if the above is not applicable design a custom
made solution)

13. 13
The Incremental Decision Process Model cont.
 Selection Phase: choosing the solution
– Judgment: (when final choice falls on a single decision maker
& judgment is based on experience)
– Analysis: (alternatives evaluated in a more systematic
manner like management science techniques)
– Bargaining: (happens when selection involves group of
decision makers, so conflict happens, solved through coalition
of carnegie model)
– Authorization: (when decision is finally accepted
authorization takes place)
 Dynamic Factors: (refer to the feedback loops as a result of
decision interrupts

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Garbage Can Model of Decision-Making
 Deals with the pattern or flow of multiple decisions as opposed to how a
single decision is made (as in Incremental and Carnegie models)
 Are applied to organic structures operating in highly uncertain environment
 Termed as organized anarchies

15. 15
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

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Garbage Can Model: Characteristics
 Decision process is not seen as a sequence of steps
beginning with a problem and ending with a solution
 A solution may be around when there is no problem
 A problem may have no solution
 Garbage can is a mix of problems, potential solutions,
capabilities of participants and choice opportunities

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Garbage Can Model: Consequences
 Solutions may be proposed even when problems
do not exist
 Choices are made even without solving problems
 Problems may persist without being solved
 A few problems are solved

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