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Topic: Decision Making

Developed by Dr. Margaret Heffernan, OAM

Aims of the Decision Making lecture

Levels of decision making

Definitions, roles and processes


Theories and models

Techniques and influences


Escalation of commitment; Group think
http://www.youtube.com/watch?v=Oc3C70p_JVs

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Levels of decision-making behaviour

Organisational
Group

Individual
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Levels of decision-making behaviour


Level of
analysis

Organisation

Group

Individual

Theoretical
Approaches

Key issues

Constraints

Theories of
Effects of power and
organisation power, conflict
conflict and decision
making

1.Multiple ongoing tasks


2.Historical precedents
3.HRM systems
4.Time constraints

Group conformity,
group dynamics,
group size, and
networks

1. Group norms
2. Group think

Effects of group
dynamics, individual
perceptions and
behaviours

1.Informationprocessing theory

1.Information
overload

2. Cognitive
psychology

2.Personal biases

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1.Information processing
failures
2.Perceptual biases
3.Intuition and emotion
4.Escalation of
commitment

Source: Bratton et al. 2010: 409, 411

A decision is often defined as a


product of decision making processes.
..Managers often seek to avoid
making decisions or obscure them,
often to avoid accountability
for courses of action that are
subsequently seen as misguided.
(Linstead & Fulop 2009)

Decision : a definition
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Source: Linstead & Fulop, 2009: 667-708

Decisional Roles

Entrepreneur

Negotiator

Disturbance
Handler

Resource
Allocator
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Source: Wilson 2014: 69

Decisional Roles

Entrepreneur
Disturbance
Handler
Resource
Allocator

Negotiator
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Seek to improve the unit and adapt to


changes
Seek and initiate new ideas

Respond to pressures

Decide what resources go where

A way of life for managers

Source: Wilson 2014:69

Decision making is the ability to take


the right decisions in given situations, to
take responsibility and be accountable
for them and to understand the
consequences of particular courses of
actioninvolves being able to take an
overview or strategic view of the
situation, see the longer term and
take a wider general perspective
(the helicopter view).
(Pettinger 2010)

Decision making
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Types of decision processes

Sporadic

Fluid
decision

Constricted
decision

Informal
Will suffer from
delays

Flow, formally
channelled,
Speedy &
predictable

Narrowly
channelled,
technical
information

Information from
various sources
of expertise
Time delays

Information from
fewer sources
Fewer delays

Decision made
by experts

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Source: Linstead & Fulop, 2009: 672

Traditional decision-making theories and choice

Decision making: a response to a situation requiring


a choice.

Unitary
approach

Pluralist
approach

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A general agreement about


organisational goals and the
best means to achieve
them.

Emphasises conflict & power


struggles between individuals &
coalitions in organisations in
circumstances where participants
have substantial knowledge and
information.

Source: Linstead & Fulop, 2009: 671

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Types of choice

Clear choice
Competing
choice
Choice
avoidance

Choice
suppression
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Which two products to adopt.


Straightforward

Alternatives of improving profitability

Occurs when issues arising require


resolution

When information is distorted or


suppressed

Source: Linstead & Fulop, 2009: 672

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Models of decision Making

Rational

Decisions are made after careful


evaluation of alternative courses of action

Administrative
/ Bureaucratic

Questions whether managers are capable


of making fully rational decisions

Garbage-can

Political
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Introduces the idea that decisions are


really problems looking for solutions
Examines the role of powerful decision
making groups (dominant coalitions) and
why many decisions are really nondecisions
Source: Linstead & Fulop, 2009: 667-708

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The rational decision model


Recognition and
definition of a
problem

Assumptions
Problem clarity

Search for alternative


courses of action

Known options
Clear preferences

Gathering and
analysing data

Constant preferences
Maximum pay-off
No time or cost constraints

Identification and
application of choice
criteria
Evaluation of
alternatives in relation
to choice criteria

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Outcome will be rational

Implementation of decision

Source: Bratton et al. 2010: 411; Linstead & Fulop 2009:674;Nelson et al. 2012:150

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Based on the
actual behaviour
of decision
makers
There are cognitive
or mental limits to
human rationality
Decision making is
governed by
bounded rationality
Influence of nonrational elements in
humans

Satisfices

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Bureaucratic / administrative model

Assumptions
Managers:
Select the first satisfactory alternative
Are comfortable making decisions
without determining the alternatives
Make decisions by short cuts or
heuristics (managers make decisions
on what has worked in the past)
Satisfice because of cost of best
choice

Decision made on best in


the circumstances

Source: Bratton et al. 2010: 411; Linstead & Fulop 2009:676; Nelson et al. 2012:151

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Garbage-can decision model


Difficulty

Organised
anarchy

Failure to account for the


political activity of
participants who encourage
conditions of organised
anarchy, or who exploit
them for particular
advantage.

Not clear if an
issue is a problem,
or a solution to a
problem

Reaction to
circumstances

Total demands on
the decision
makers at the time

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Implementation of decision

Source: Linstead & Fulop 2009:683

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Political decision model

Recognises the
role of conflict and
conflict resolution
in the decisionmaking process

Difficulty

Pluralistic in nature

Recognises the
role of
stakeholders in the
organisation
Decision making is
about reconciling
stakeholders
interests

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The pluralist approach


does not explain how
decisions can be made or
avoided in organisations
because of the influence or
pressure of external groups
who may form part of a
dominant coalition.

Implementation of decision

Source: Linstead & Fulop 2009:685

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Z Model of Decision Making


Look at the facts
and details

Sensing

Intuition

What are the facts?


Be specific and realistic.
List all relevant details.
Be clear.

Can it be
analysed
objectively?
Consider the
# consequences of each
alternative
# cause and effect of each
action
If you were not involved, what
would you suggest?

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What alternatives
do the facts suggest?
Let your imagination
run wild.
Brainstorm.
Consider various solutions

Thinking

Feeling

What impact will it


have on those
involved?
Is it something you
can live with?
How do you feel about the
action?
What hunches do you have
about others reactions?

Source: Nelson et al. 2012: 148-164

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Pfeffers Four Organisational Decision-Making Models

DIMENSION

RATIONAL
(Unitary)

BUREAUCRATIC
(unitary)

GARBAGE CAN
(pluralist)

POLITICAL POWER
(pluralist)

PREFERENCES
&
GOALS

Consistent
among
participants

Reasonably consistent

Unclear, ambiguous,
may be constructed
afterwards
to legitimise actions

Inconsistent, diverse
or conflicting goals
& preferences

POWER
&
CONTROL

Focuses on
hierarchical
authority

Less centralised ,
still legitimate authority

Very decentralised,
anarchic; power is also
recognised

Shifting coalitions
&interest groups who
have power but not
necessarily authority

DECISION

Orderly,
rational

Procedural rationality
embodied in programmes
&standard operating
procedures

EXPECTED
RESULTS
& OUTCOMES

Maximisation
&
optimisation

Follow from
satisficing mode

Unclear, ambiguous

Power & stabilisation


of demands

INFORMATION

Extensive
&systematic
information gathering

Reduced by the use of


rules & procedures
information

Haphazard collection &


use of information

Information used
&
withheld strategically

Stability, fairness

Playfulness

Conflict & power


struggles among
relatively equal
opponents

PROCESS

REQUIREMENTS

RATIONALE

Efficiency
&effectiveness in
achieving agreed-to
performance criteria

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Ad hoc

Source: Linstead & Fulop, 2009

Disorderly, characterised
by push & pull of interest
groups

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Techniques of decision making


Types of decision

Traditional decision-making
techniques

Modern decision-making
techniques

1.Programmed
Routine, repetitive
decisions;
organisation develops
specific processes for
handling them.
Low uncertainty and
low ambiguity

Habit
Clerical routine: standard
operating procedures,
policies, manuals
Organisation structure
know your place
Systems of sub-goals
Well-defined information
channels

Operations research
mathematical models,
computer simulations
Electronic data
processing
Management
information systems

2. Non-programmed
Judgment, intuition ,
One-shot, illcreativity
structured novel policy Rule of thumb (by top
decisions.
management)
Handled by general
non-routine problemsolving processes.
High uncertainty and
ambiguity.
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Heuristic (problem solving)


techniques applied to:
constructing computer
models
brainstorming
counter-planning
simulation

Linstead & Fulop 2009:Table 14.1: 677

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Influences of Decision Making


Individuals differ in
risk behaviour

Risk, risk
aversion

Enablers
and
barriers to
creativity

Personality,
attitudes,
values

Organisation
Environment

Influences

4 stages:
Preparation
Incubation
Illumination
Verification

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Creativity

Intuition

Source: Nelson et al. 2012: 153

Ability to make
judgment about a
situation based on a
hunch.

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Escalation of Commitment

Limitation that all decision


making models share
Unwillingness to
abandon a bad
decision, or continuing The desire to win is a
motivation to continue
to support a failing
course of action, even
to escalate
when substantial costs
are incurred
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Source: Nelson et al. 2012: 151

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Group Decision making


Synergy = 1 + 1 = 3

Advantages

Disadvantages

More knowledge and


information

Pressure to conform

Greater understanding
of the decision

Domination by one
forceful member

Member involvement

Time required to make


a decision

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Source: Nelson et al. 2012: 153

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Negative factors arising from group cohesiveness

Groupthink
Moral
judgment and
reality testing
are
suspended

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Often occurs
with high risk
decisions in
high-status
groups with
dominant
leadership

High stress
conditions and
threats to selfesteem

Source: Thompson & McHugh, 2009: 375

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Symptoms of Groupthink

Conform and
reach consensus
Unpopular ideas
may be
suppressed
Members who
oppose the group
are stereotyped as
weak, evil or
stupid.

Leads members to be
convinced of the
logical correctness of
what
they are dong and
ignore
the ethical or moral
consequences of
decisions.

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Illusion of
invulnerability

Pressure
on
individuals

Group
consensus
Belief in the
inherent morality
of the group

Excessive optimism
and risk taking
Group believes it
cannot make a bad
decision

Leads to discounting
warnings and negative
information.
An illusion of unanimity
emerges
Self-censorships of any
deviation from group
norms.

Source: Linstead & Fulop, 2009: 691

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Avoiding Groupthink

Can be avoided with some effort

Invite
Interaction consultants
Develop
with other and others alternative
to challenge
groups
plans
the group
Leaders need to be reflexive to assess their behaviour and stay impartial

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Source: Linstead & Fulop, 2009: 691

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Group Polarisation

The tendency for group discussion to produce


shifts toward more extreme attitudes among
members.

Can be disastrous

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If individuals are
leaning towards a
dangerous decision they
are likely to support it
more strongly following
discussion.

Source: Nelson et al. 2012: 160

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Minimising Bias and Errors in Decision Making

Brainstorming

Generation of free flowing multiple ideas


Computer mediated brainstorming

Nominal group
technique

Variation of brainstorming , independent


contribution

Stepladder
technique

Discussion with two initial members, then


additional members added until all group
members have joined the discussion

Delphi
technique

Structured team decision-making process of


pooling the collective knowledge of subject
experts

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Source: Bratton et al. 2010 :425

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Current issues
in organisational decision making
Power-distance
Individualism-collectivism

Culture

Technology

Ethics
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Artificial intelligence
Virtual teamwork

Profit making v social responsibility


Actions & values
Source: Wood et al. 2013: 486-493

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References
Bratton, J., Sawchuck, P., Forshaw, C., Callinan, M., and Corbett, M. 2010, Work and
Organization Behaviour, 2nd edn, Palgrave MacMillan, UK. Chapter 15: Decision
Making and Ethics, pp.407-432

Haslam, S.A. 2004, Psychology in organisations: the social identity approach, 2nd edn,
Sage London. Chapter 6: Group decision making, pp.99-119
Linstead S., Fulop, L., and Lilley, S. 2009, Management and Organization: A critical
text, 2nd edn, Palgrave MacMillan, London. Chapter 14: Decision making in
organisations, pp. 667-708
Nelson, D.L., Quick, J.C., Wright, S., and Adams, C. 2012, OrgB Asia-Pacific Edition,
Cengage, Sydney. Chapter 10: Decision making by individuals and groups, pp. 148164
Pettinger, R. 2010, Organizational Behaviour: Performance management in practice.
Routledge, London. Chapter 20
Thompson, P. & McHugh, D. 2009 Work Organisations: A critical approach, Palgrave
Macmillan, London. Chapter 24: From groups to teams, pp. 369-387
Wilson, F.M. 2014, Organizational Behaviour and Work: A critical introduction, Oxford
University Press, London. Chapter 3, p.69
Wood, J. Zeffane, R. Fromholtz, M. Wiesner, Morrison, R. and Seet, P.
2013, Organisational Behaviour: Core Concepts and Applications, Wiley, Brisbane
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