Communication and decision making are fundamental aspects of everyday life for all employees
and organizations. Communication in an organization is an evolutionary, culturally, dependent
process of sharing information and creating relationships in environment designed for manageable,
goal-oriented behaviour. More generally we refer to communication as the process by which people
convey and receive information to and from each other. Decision making as a process represent a
means of selecting a particular course of action among the options available. Although it is closely
related to problem-solving, problem-solving refers to the activity of generating a solution to a
recognized problem; thus, it can be part of decision making but the two describe different activities
in organizations.
Both communication and decision-making are essential processes for organizations. Without
communication, organizations as social entities cannot exist, and without decision-making they
cannot function. A central link between communication and decision-making on organizations
appears obvious: both are about information, or more specifically about sending, receiving and
using it. However, not all communication and decision making in organization is deliberate, and not
all of these activities are in the service of organizations.
Communication is generally seen as the process of exchanging information between two entities
that results in a message originating by the sender being received by the receiver. The Shannon-
Weaver model is the best known and most widely used model for communication: its key elements
include sender, message, encoding, transmission, noise, channel, decoding, decoded message and
feedback. This model applies to formal communication; this qualifier, formal, is important because
not all human communication is intentional, and unintentional communication is not deliberately
encoded and transmitted.
The process of communication is a social activity involving two or more people across time. The
process involves the sender initiating a communication sequence with the receiver responding and
providing feedback to the originator, thus beginning an iterative process. An important aspect of this
model of human communication is the notion of error, which refers to any distortion of the
information as it is conveyed from sender to receiver. At any step in the communication process
model, error can be introduced. The steps of encoding and decoding are particularly important.
Encoding of deliberate communication typically includes the conversion of ideas into a form of
suitable transmission. In converting ideas into words, there is inevitably a loss of precision and
richness from the original thought. Words also have shades of meaning and can convey different
things to different people, particularly when they come from different cultures. Similarly, decoding
involves the receipt of signals and the application of prior experience and knowledge for their
interpretation. The human perceptual system is the key mechanism of decoding in human
communication. Such perceptual processes can be automatic, or it can require substantial effort.
Perceptual or cognitive biases and errors often contribute to errors during decoding.
Without communication, organizations cannot exist, as it is the only process by which people
exchange information and a fundamental aspect of any interaction among individuals. Without
interactions, organizations would not and could not exist as social entities.
From an organizational perspective, it is possible to distinguish communication along a number of
different dimensions. We may consider the degree of formality involved or the routes or channels
chosen for exchanging information directly or indirectly, among many others.
Formal communication would be associated with highly structured commercial activities of the
organization, and informal communication with more unstructured information exchange with
external constituents. The second dimension relates to direct and indirect aspects of the purpose of
the communication process. So, for example, the organization would be directly involved in
communicating to its customers, but only indirectly involved with an individual's tax affairs.
Direct
Providing a speaker to a local
Selling
school
Formal Informal
Salary details to the tax
Espionage
authorities
Indirect
Given the complexity involved in organizations, and particularly large ones, the coordinated
management of organizational activities requires immensely complex communication linkages.
Structurally, complexity in communication is an exponential function of the number of people
involved. Clearly, in large organizations the communication process needs to the managed carefully
if total chaos is to be avoided. There are many ways in which organizations seek to achieve this
practice, including:
• limitation, not every employee would be expected to interact with every other member of
the company;
• procedure, the development of appropriate procedural arrangements sets out to ensure that
information is circulated only to those individuals needing it;
• teamwork, the use of teams and committees allows a degree of informality to facilitate
communication between members; also, the use of group representatives ensures that not
every member is involved in communicating with every other group;
• automation, the use of electronic media should increase the opportunity for easier
communication;
• separation, the identification of activities that require communication and those which can
be designated as information flow (e.g. Newsletters vs. Meetings);
• jargon, specific terminology can help the speed and accuracy of communication among and
sensemaking by members of organizations or specific units or groups.
Interpersonal communication involves two people in a dyadic interaction that involves a number of
elements; of the communication channels open to individuals, nonverbal signals are the least
obvious and yet carry much information. Such elements include:
• body language, signals sent through gesture, touch, posture, facial expression and eye
contact;
• paralanguage, such as vocal quality (pitch, range, resonance etc), vocal characteristics
(whispering, groaning etc), vocal qualifiers (momentary variations in volume or pitch) and
vocal segregates (pauses, interruptions etc);
• proxemics, the spatial needs of people and their environment. This links together
communication distance and the type of message (e.g. Seeing two people physically very
close, heads almost touching would suggest that a secret was being shared);
• environment, the layout of a room can have a powerful effect on the communication
process (e.g. Meetings taking place in the boss's office, own territory);
• temporal, the use of time to create an impression is well understood by most effective
communicators. Calling all employees together for a meeting at a time which requires them
to interrupt their normal work give the message greater impact. A manager making someone
wait outside their office a few minutes before a meeting creates pressure and can destabilize
the person kept waiting.
Interpersonal communication is effective if it helps convey the relevant messages and helps
maintain or improve the relationship between sender and receiver. A number of potential barriers to
effective interpersonal communication exists. When such barriers go beyond the difficulties related
to error, they are typically related to psychological reactions to communication. Such reactions
include psychological reactance which occurs when messages appear to try and influence or
otherwise limit the freedom of receivers. Other reactions include defensiveness, especially in
response to messages that appear to affect the receiver's self-image in negative ways, as well as
aggressive or withdrawal behaviours. Defensive behaviour in organizations in response to
communication happens frequently because many time the content is evaluative or because it is
construed as such. Hierarchical differences between sender and receiver as well as competitive
environments can increase such effects. The specific problem with patronizing communication is
that receivers will attempt to re-establish self-worth. Such efforts to portray self-importance take
precedence over listening, and showing off, self-centred behaviour, withdrawal and/or loss of
motivation are common reactions. Listening skills such as reflective listening, paraphrasing, reading
body language and supporting communication with consistent body language, empathy, as well as
the more commonly found skills in logic, reasoning and content-oriented message design can help
avoid these and other barriers to effective interpersonal communication.
A particularly important type of communication is feedback. In organizations, much of the
feedback people receive is performance feedback which contains evaluative information focused
on their performance. The purpose of performance feedback is to maintain and enhance work
performance. As such, it has an instructional function and a motivational function. To be effective,
such performance feedback should generally be clear and unambiguous, be linked to relevant
activities and goals, clearly indicate the actual performance achieved, be given during or
immediately after task performance, be evaluative of the work done or not done rather than the
person doing it, and be provided in a socially acceptable manner and setting.
Interpersonal feedback conveys information about subjective experiences and reactions to others'
behaviour. Its purpose is to build and maintain relationships, and to provide input to others on the
impact and perceptions of their behaviour. Thus, interpersonal feedback has a relationship function
and a developmental function. In organizations, provision of interpersonal feedback tends to depend
on local norms as well as on the particular relationship between people involved. Receiving
interpersonal feedback can be tremendously valuable for individuals' understanding about how their
own behaviour affects others. Also, the impact that managers and leaders have on others is an
important aspect of their overall performance. The higher up in the hierarchy individuals are, the
less they receiver direct and honest interpersonal feedback.
A graphic model of interpersonal awareness is the Johari Window, which is based on the premise
that knowledge of self and others is an important aspect of interpersonal relations. The Johari
Window reflects the notion that we ourselves and others are aware of some of our behaviour but not
all, and that our knowledge and the one of others may differ. Combining these two dimensions
creates a 2-by-2 matrix with four different combinations of self- and other-knowledge:
It has long been realized within organizations that information is a source of power and that there is
unequal access to it between managers and employees. Indeed, there also exists unequal access to
information between levels of management and across functions. Law has been brought in to
regulate access to information within organizations and to ensure that those with access to
privileged information do not exploit it for unfair purposes (e.g. Insider trading).
Decision-making is usually described, discussed and evaluated in relation to an abstract ideal, the
rational decision model, also called the rational economic model because it reflects the traditional
economic view of behaviour. In short, the rational decision model posits that selecting the optimal
choice is a rational process that involves three main steps:
1. identifying and defining the decision problem;
2. inventing and designing alternatives;
3. selecting the best course of action.
According to this model, rational decision makers are optimizers which means that they select the
optimal alternative and thus maximize the value that can arise from their decision. However, this
model is based on a number of assumptions such as:
• that decision makers appropriately recognize and define the decision problem;
• that they have all needed information, including full knowledge of all possible options and
their costs and benefits for all stakeholders;
• that they are perfectly rational and use the same objective criteria to evaluate all options
consistently and wihout changing such evaluations;
• that they can successfully process all relevant information and make an unbiased choice;
• that they do not incur information acquisition and processing costs.
These assumptions do not typically apply to real organizational decision-making situations. Many
aspects of the organizational context influence decision making, among them the facts that
information search and processing takes time and has related costs. From a behavioural perspective,
it is the limitations of humans as decision makers that provide particularly obvious challenges to the
rational decision model. Real decision makers are neither always rational, objective and unbiased,
nor are they capable of processing all relevant information for even relatively simple decision
situations.
Bounded rationality describes the ways in which both internal and situational factors limit human
decision makers' efforts to behave perfectly rationally. Fundamentally, bounded rationality describes
the ways in which humans make decisions when trying to be rational, but having to content with
distractions, biases, limited cognitive capacity, incomplete information as well as with potential
errors in information processing. As a result, bounded rational decision makers will not typically act
as maximizers or optimizers, but rather will display satisficing in their decision making. This means
they will follow a process similar to that described by the rational decision making model but
evaluate each alternative as it becomes known and select the first alternative that satisfies their
internal threshold for acceptance. Given their cognitive limitations, decision makers in complex,
real-life situations typically reduce the demands and the complexity of the decision-making process
by employing heuristics, mental shortcuts or cognitive rules of thumb such as considered guessing,
rough estimates, intuitive preferences, simplifying assumptions or common sense judgements.
Heuristics are based on past experience and once developed and established are invoked almost
automatically. While they can result in automatic and appropriate behaviour, heuristics can also lead
to a lack of reflective and critical thinking and can result in poor judgement and decision making.
The behavioural model of decision making recognizes real limitations in human cognition as well as
the influence of past experience and situational factors in decision making. It is not a normative
model that attempts to guide or prescribe decision making approaches, rather it is a descriptive
model that tries to aid understanding of how decisions are made by individuals in organizations and
can be used in understanding limitations and shortcomings to help identify remedies and strategies
to improve real organizational decision making.
Heuristics in decision making are like a double-edged sword: they can work both for and against the
decision maker. On the positive side, heuristics help to reduce complexity and simplify the situation
to be considered; they help to quickly and easily deploy prior experience in considering problems
and finding solutions and they often lead quickly to correct or at least acceptable answers to the
problems addressed. On the negative side, however, they can introduce systematic errors in
judgements: most people are not aware of the heuristics they use or even that they are using them.
The availability heuristic relates to the ease with which a person can access a particular object or
event through memory or imagination. The degree to which an even or object is particularly salient,
evokes strong emotional responses, is easy to imagine, and is concrete and specific will influence its
availability. This heuristic is useful because it focuses decision makers' minds on aspects that occur
more frequently and hence are likely to be more relevant for the decision at hand.
The representativeness heuristic refers to the degree of similarity perceived between people or
objects. If a person or object appears to be representative of a category we have experience with or
simply preconceptions about, we are likely to assume in our decision making that that person or
object possesses the central characteristics of their respective category; this heuristic is very similar
to stereotyping.
Framing effects refer to the distinctly different choices people make depending on the way their
alternative options are described. If options are framed as potential savings or gains, people tend to
favour risk-avoiding choices. In contrast, if they are framed in terms of losses, then risk-seeking
behaviour results. Prospect theory also indicates that people's negative response to a loss is more
pronounced than their positive response to equal gains. This is also related to the endowment
effect, the phenomenon whereby people tend to value an item higher if it is in their possession
compared to their valuations if it is not.
Anchoring and adjustment effects occur because after being exposed to a particularly positive or
negative experience or after receiving reference information, however relevant and legitimate it
appears, people do not adjust their expectation for future events accordingly. A related bias is the
status quo bias which describes the tendency of decision makers to favour stability over change in
their choices.
Another decision making bias is refers to the illusion of control, the tendency of people to
overestimate the influence they can have on uncontrollable events such as lotteries. Much
superstitious behaviour is based on the irrational illusion of control. A bias that makes learning from
experience difficult is the hindsight bias which refers to the tendency of people to exaggerate the
likelihood of events that they know have occurred. This bias is closely related to the confirmatory
bias as well as to the prior belief bias which states that logical conclusions in line with prior beliefs
are more likely to be accepted. Similarly, the implicit favourite bias describes often subconscious
tendencies of decision makers to evaluate information and make choices that lead to their preferred
outcomes. The implicit favourite bias is influenced by motivation (valued goals and preferences)
while the confirmatory bias and belief bias are perceptual and cognitive biases respectively.
Nonrational escalation of commitment occurs when people continue and even increase their
commitment to a failing course of action despite strong feedback that shows the negative
consequences of their decisions. Commercial lenders and investors are advised to ignore any
previous commitments and judge any follow-on decision from a neutral vantage point. This means
that the consideration of sunk costs must be excluded from the analysis of decision maker. There are
several causes that contribute to the occurrence of nonrational escalation of commitment, such as
perceptual biases like the confirmatory bias, motivational biases such as ego-defensiveness which
makes people try to appear consistent to themselves, judgemental biases and erros such as framing
effects and illusion of control, impression management considerations and competitive
irrationality, which occurs when it appears that other people's actions benefit them to the detriment
of oneself. Price wars are an example of competitive irrationality. The hero effect refers to
employees' favourable attributions regarding managers which have shown consistency in their
decision making despite negative feedback – but only if they end up being successful.
Commitment occurs when there is a voluntary choice, when the choice or aspects associated with it
such as sunk costs are irrevocable, when it is made in public and when it is or can be made explicit.
Many organizational decisions are made by groups and this tends to have both advantages and
disadvantages compared to individual decision making. The Concordet Jury Theorem states that
groups voting on decisions will improve their decision quality if they add members who on average
are right in their votes more often than they are wrong. Concordet also showed that majority
preferences can be intransitive. This is known as Concordet's Paradox and highlights potential
problems with group decision making because the outcome because the outcome of group decisions
may depend on the order of options considered. This shows that structurally, group decision making
has distinct characteristics that need to actively managed to prevent bad decisions. Research has
shown that groups are particularly effective in dealing with complex issues that require the
deployment of varied knowledge and expertise, provided that the group has the appropriate kind
and level of diversity, and that it can manage the difference among its members as well as the
challenges of group development and collective task performance sufficiently. Drawbacks arising
from group decision making arise from social loafing or from group norms and objectives that may
not be aligned with organizational goals. Moreover, group decision making needs more time and
coordination effort than individual decision making, especially if individual agendas interfere and
when either the decision problem or relevant information is ambiguous. Group polarization refers
to the tendency of individuals to amplify shared individual attitudes and reach decisions that are
more risky than the ones individuals would be prepared to take on their own. This is in part due to
social comparison and social control mechanisms operating in groups based on the logic that
individual members want to be seen in a positive light by other group members. Deviance from
expected behaviour and expression of nonfavoured attitudes will likely result in negative
consequences so individuals will try to adhere to what they consider the appropriate responses,
which explains why groups may overshoot the average of individual members' attitudes. Persuasive
argument theory explains group polarization on the basis of the impact of the relative frequency
and persuasiveness of arguments for or against a particular issue: a risky shift will occur if group
members perceive a larger number of risk-favorunig arguments in group discussions and also if they
judge them to be more persuasive than counterparts. Interestingly, group polarization also occurs in
groups that interact only electronically.
A potentially serious problem with group decision making is the so-called groupthink which refers
to a particular pattern of dynamics that lead to seriously flawed decision making processes in
cohesive groups. It occurs when group norms for compliance and consensus affect realistic option
appraisal and reasoned decision making. Its symptoms include:
• illusion of invulnerability;
• collective rationalization, whereby any evidence or suggestion contrary to the accepted
thinking is conclusively countered irrespective of the relative merit of the challenging
arguments;
• moral superiority belief;
• stereotyping of others;
• pressure on dissenters;
• self-censorship;
• illusion of unanimity;
• emergence of mind-guards who filter information flows and protect the group from adverse
comments.
The dynamics leading to groupthink are serious threats to the quality of decision making and lead to
self-reinforcing errors in the decision making process used in cohesive groups. Groupthink can also
be seen as closely related to the nonrational escalation of commitment at the group level.
Mechanisms that can help prevent groupthink from arising include encouragement to voice doubts,
the use of subgroups to broaden the search for ideas and to serve as cross-check on ideas and
analysis and encouraging self-criticism among the group.
The role of the devil's advocate is based on the idea that someone should be specifically appointed
within the group to explore an opposing point of view, as a means of preventing groups from simply
going along with the accepted case by being forced to consider alternative perspectives. Status
differentials and differences in hierarchical positioning can also lead groups to suboptimal decision
making. Another way to counter some of the dysfunctional effects of cohesion in decision making
groups is to prime group members with counterfactual mind-sets, which refers to mental
orientations that encourage people to consider what could be instead of what just is. Primed to
consider such alternatives, groups were found to increase the search for disconfirming information
and ultimately make more accurate decisions.
A vigilant decision making approach involves the following steps:
• identifying decision objectives and the requirements that make the decision successful;
• developing as complete a set of well defined option as possible;
• searching out extensive information regarding the relative merit of different options;
• engaging in critical and reflective assessment of options;
• reconsidering and reexamining all the pros and cons of the alternatives;
• assessing and if possible improving the costs, benefits and risks associated with the
preferred choice;
• developing implementation plans, monitoring of progress and appropriate action of risk
factors that interfere with decision implementation.
Groups that have very high or very low self-efficacy regarding decision-making tasks appear less
likely to use these processes. This may be explained by the negative effect of prior group successes
which may reduce the likelihood that groups try to use the most comprehensive and demanding
decision-making processes, and those groups with little collective confidence, possibly due to
previous bad performance, who tend to fail to engage seriously with a decision making task.
The dialectical enquiry approach uses subgroups that sequentially develop assumptions and
decision options, with a second subgroup charged to deliberately develop assumptions that differ
from and even challenge the first subgroup's work. The subgroups then debate the different
assumptions until they agree on a jointly accepted version which will then be used in finalizing the
decision. Reflexivity refers to the degree to which group members overtly refers on the group
decision process or content; it helps to avoid the production paradox which refers to the fact that
groups, especially in complex tasks that would benefit from planning and the development of an
appropriate decision making strategy, show particular tendencies to act immediately instead of
analyzing and planning. Other techniques used in group decision making include brainstorming and
the nominal group technique, which allows people to brainstorm on their own for a while before
sharing ideas with the group; these techniques aim to counter the creativity inhibition that often
affects groups.
Further factors that may impact the quality of organizational decision making arise from the
political nature of organizations which may lead to the formation of coalitions and opportunistic
behaviour.
The Management Science model describes analysis-based decision making under conditions of
little uncertainty, in fields such as industrial production, logistics and transports and manufacturing.
It is a valid, appropriate and often highly valuable approach to decisions where the relevant
problems can be fully understood and information about all relevant variables is available.
The Carnegie model of organizational decision making highlights the role of political dynamics
such as coalition formation and the use of power in decision making. Coalitions are groups of
managers whose views of organizational goals and relative problem importance are aligned. They
arise because in organizations there is typically uncertainty which means that many different
interpretations and evaluations of both problems and solutions are possible. Also, because it is not
possible to make decisions rationally or to follow programmed decision making processes,
individual interests and goals can often be pursued by those involved in organizational decisions.
Creating an alliance with others under the guide of pursuing organizational goals can given
individuals opportunities for such opportunistic behaviour. The Carnegie model also considers the
implications of bounded rationality at the level of organizational decision making processes. Just
like for individuals, decision making in organizations aims to find satisfactory rather than perfect
solutions. Moreover, managers in organizations engage in problemistic search which refers to the
tendency to look in the immediate situation for a solution that will quickly address the problem or at
least help manage the problem's symptoms. This approach of choosing satisficing local solutions
contrasts substantially with the comprehensively analyzed, rational choice prescribed by the
management science model. Another important difference between these approaches is the way in
which the agreement necessary to get the support for important organizational decisions is
developed. In the management science model, the analysis of valid data through sound logic and
appropriate analytical methods would lead to agreement for action, while the Carnegie model
describes a much more political process.
The garbage can model suggests a much less clear, rational or structured process than that
described by the other models of organizational decision making; the process leading to a decision
is uncertain, unstructured and anarchical, filled with all kinds of problems, decision makers,
resources and solution. A decision is made if and when the right combination of these elements
happens to come together. Consequences of the garbage can model for organizational decision
making include:
• solutions are offered where no problems exist;
• decisions made may not solve any problems;
• problems may persist without ever being solved or even addressed;
• some problems are solved, even if the decision quality can vary.
Goal consensus
High Low
Problem identification: low uncertainty Problem identification: high uncertainty
Technical High
Problem solution: low uncertainty Problem solution: low uncertainty
knowledge
Problem identification: low uncertainty Problem identification: high uncertainty
Low
Problem solution: high uncertainty Problem solution: high uncertainty