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Chapter 4:
Decision-Making Skills
Decision Making and Problem Solving • Decision making – The process of choosing from among various alternatives.
• Problem solving – The process of determining the appropriate responses or actions necessary to alleviate a problem. 2
Programmed and Non-programmed Decisions • Programmed decisions – Decisions that are reached by following an established or systematic procedure.
• Non-programmed decisions – Decisions that have little or no precedent. – Relatively unstructured. – Generally require a creative approach by the decision maker. 3
Intuitive Decision Making • Emotional attachments that can hurt decision makers: – Fastening on unsubstantiated facts and sticking with them. – Being attracted to scandalous issues and heightening their significance. – Pressing every fact into a moral pattern. – Overlooking everything except what is immediately useful. – Having an affinity for romantic stories and finding such information more significant than other evidence. 4
Rational Decision Making • The Optimizing Approach – Recognize the need for a decision. – Establish, rank, and weigh the decision criteria. – Gather available information and data. – Identify possible alternatives. – Evaluate each alternative with respect to all criteria. – Select the best alternative. 5
The Optimizing Approach • Limitations – People have clearly defined criteria, and the relative weights they assign to these criteria are stable. – People have knowledge of all relevant alternatives. – People have the ability to evaluate each alternative with respect to all the criteria and arrive at an overall rating for each alternative. – People have the self-discipline to choose the alternative that rates the highest.
6
The Satisficing Approach • Principle of bounded rationality – A person’s knowledge of alternatives and criteria are limited. – People act on the basis of a simplified abstraction of the real world. – This abstraction is influenced by personal perceptions and biases. – People do not attempt to optimize but will take the first alternative that satisfies their current aspirations (Satisficing). – Individual aspirations fluctuate upward and downward depending on the value of the most recently identified alternatives. 7
The Satisficing Approach Satisfied with Best alternative Found so far?
Yes
DECISION
No Search for additional alternative Value of best previous alternative
Value of new alternative found
Current level of aspiration 8
Environmental Factors Influencing Decision Making Organizational groups Advisory committees Labor unions Informal groups Individuals within organization Subordinates Superiors
Decisionmaking style Organization itself Position Structure Purpose Tradition
Personal traits Personality Background Experience
9
Uncertainty Approach
How it Works
Optimistic or gambling approach (maximax)
Choose the alternative whose best possible outcome is the best of all possible outcomes for all alternatives.
Pessimistic approach (maximin)
Compare the worst possible outcome of each alternative and select the alternative whose worst possible outcome is the least undesirable.
Risk-averting approach
Choose the alternative that has the least variation among its possible alternatives.
10
George England’s Major Categories of Values Pragmatic mode
Suggest that an individual has an evaluative framework that is guided primarily by successfailure considerations.
Ethical/mor al mode
Implies an evaluative framework consisting of ethical considerations influencing behavior toward actions and decisions that are judged to be right and away from those judged to be wrong.
Affect or feeling mode
Suggests an evaluative framework that is guided by hedonism; one behaves in ways that increase pleasure and decrease pain.
Source: George England, “Personal Value Systems of Managers and Administrators,” Academy of Management Proceedings, August 1973, pp. 81-94.
11
Decision Making The role of values • George England found: – Large individual differences in personal values exist within every group studied. – Personal value systems of managers are relatively stable. – Personal value systems of managers influence the way managers make decisions. – Personal value systems of managers are related to their career success as managers. – Differences exist in the personal values of managers working in different organizational contexts. – Overall, the value systems of managers in the countries studied were similar. 12
Group Decision Making • Positive aspects: – The sum total of the group’s knowledge is greater. – The group possesses a much wider range of alternatives in the decision process. – Participation in the decision-making process increases the acceptance of the decision by group members. – Group members better understand the decision and the alternatives considered.
13
Group Decision Making • Negative aspects: – One individual may dominate or control the group. – Social pressures to conform can inhibit group members. – Competition can develop to such an extent that winning becomes more important than the issue itself. – Groups have a tendency to accept the first potentially positive solution while giving little attention to other possible solutions.
14
Making Creative Decisions The creative process: Preparation – Investigate to fully understand the problem and all relevant issues. Concentration – Commit to solving the problem. Incubation of ideas and information – Allow creative sparks to catch fire. Illumination – Connect the problem with an acceptable solution. Verification – Test the solution and accept the results. 15
Establishing a Creative Environment • Instill trust – eliminate the fear of failure. • Develop effective internal and external communication. • Seek a mix of talent within the organization. • Reward useful ideas and solutions. • Allow for flexibility in the organization’s structure. 16
Brainstorming Four basic rules: 2. No criticism of ideas is allowed. 3. No praise of ideas is allowed. 4. No questions or discussion of ideas is allowed. 5. Combinations of and improvements on ideas that have been previously presented are encouraged.
17
Nominal Group Technique • • • • •
Listing Recording Voting Discussions Final voting
18
Stimulating Creativity • Brainwriting – Group members anonymously record their ideas. – Ideas are shared with others, attempting to build upon each.
• Synectics – Personal analogies: place yourself in the role of the object. – Direct analogies: make direct comparisons. – Symbolic analogies: look at the problem in terms of symbols. – Fantasy analogies: imagine the perfect solution.
19
Model for Creative Decision Making Stage
Activity
1. Recognition
Investigate and eventually define a problem or decision situation.
2. Fact finding 3. Problem finding 4. Idea Finding
Generate possible alternatives or solutions (ideas).
5. Solution finding
Identify criteria and evaluate ideas generated in stage 4.
6. Acceptance finding
Work out a plan for implementing a chosen idea 20
Decision-Making Skills
Decision Making and Problem Solving • Decision making – The process of choosing from among various alternatives.
• Problem solving – The process of determining the appropriate responses or actions necessary to alleviate a problem. 2
Programmed and Non-programmed Decisions • Programmed decisions – Decisions that are reached by following an established or systematic procedure.
• Non-programmed decisions – Decisions that have little or no precedent. – Relatively unstructured. – Generally require a creative approach by the decision maker. 3
Intuitive Decision Making • Emotional attachments that can hurt decision makers: – Fastening on unsubstantiated facts and sticking with them. – Being attracted to scandalous issues and heightening their significance. – Pressing every fact into a moral pattern. – Overlooking everything except what is immediately useful. – Having an affinity for romantic stories and finding such information more significant than other evidence. 4
Rational Decision Making • The Optimizing Approach – Recognize the need for a decision. – Establish, rank, and weigh the decision criteria. – Gather available information and data. – Identify possible alternatives. – Evaluate each alternative with respect to all criteria. – Select the best alternative. 5
The Optimizing Approach • Limitations – People have clearly defined criteria, and the relative weights they assign to these criteria are stable. – People have knowledge of all relevant alternatives. – People have the ability to evaluate each alternative with respect to all the criteria and arrive at an overall rating for each alternative. – People have the self-discipline to choose the alternative that rates the highest.
6
The Satisficing Approach • Principle of bounded rationality – A person’s knowledge of alternatives and criteria are limited. – People act on the basis of a simplified abstraction of the real world. – This abstraction is influenced by personal perceptions and biases. – People do not attempt to optimize but will take the first alternative that satisfies their current aspirations (Satisficing). – Individual aspirations fluctuate upward and downward depending on the value of the most recently identified alternatives. 7
The Satisficing Approach Satisfied with Best alternative Found so far?
Yes
DECISION
No Search for additional alternative Value of best previous alternative
Value of new alternative found
Current level of aspiration 8
Environmental Factors Influencing Decision Making Organizational groups Advisory committees Labor unions Informal groups Individuals within organization Subordinates Superiors
Decisionmaking style Organization itself Position Structure Purpose Tradition
Personal traits Personality Background Experience
9
Uncertainty Approach
How it Works
Optimistic or gambling approach (maximax)
Choose the alternative whose best possible outcome is the best of all possible outcomes for all alternatives.
Pessimistic approach (maximin)
Compare the worst possible outcome of each alternative and select the alternative whose worst possible outcome is the least undesirable.
Risk-averting approach
Choose the alternative that has the least variation among its possible alternatives.
10
George England’s Major Categories of Values Pragmatic mode
Suggest that an individual has an evaluative framework that is guided primarily by successfailure considerations.
Ethical/mor al mode
Implies an evaluative framework consisting of ethical considerations influencing behavior toward actions and decisions that are judged to be right and away from those judged to be wrong.
Affect or feeling mode
Suggests an evaluative framework that is guided by hedonism; one behaves in ways that increase pleasure and decrease pain.
Source: George England, “Personal Value Systems of Managers and Administrators,” Academy of Management Proceedings, August 1973, pp. 81-94.
11
Decision Making The role of values • George England found: – Large individual differences in personal values exist within every group studied. – Personal value systems of managers are relatively stable. – Personal value systems of managers influence the way managers make decisions. – Personal value systems of managers are related to their career success as managers. – Differences exist in the personal values of managers working in different organizational contexts. – Overall, the value systems of managers in the countries studied were similar. 12
Group Decision Making • Positive aspects: – The sum total of the group’s knowledge is greater. – The group possesses a much wider range of alternatives in the decision process. – Participation in the decision-making process increases the acceptance of the decision by group members. – Group members better understand the decision and the alternatives considered.
13
Group Decision Making • Negative aspects: – One individual may dominate or control the group. – Social pressures to conform can inhibit group members. – Competition can develop to such an extent that winning becomes more important than the issue itself. – Groups have a tendency to accept the first potentially positive solution while giving little attention to other possible solutions.
14
Making Creative Decisions The creative process: Preparation – Investigate to fully understand the problem and all relevant issues. Concentration – Commit to solving the problem. Incubation of ideas and information – Allow creative sparks to catch fire. Illumination – Connect the problem with an acceptable solution. Verification – Test the solution and accept the results. 15
Establishing a Creative Environment • Instill trust – eliminate the fear of failure. • Develop effective internal and external communication. • Seek a mix of talent within the organization. • Reward useful ideas and solutions. • Allow for flexibility in the organization’s structure. 16
Brainstorming Four basic rules: 2. No criticism of ideas is allowed. 3. No praise of ideas is allowed. 4. No questions or discussion of ideas is allowed. 5. Combinations of and improvements on ideas that have been previously presented are encouraged.
17
Nominal Group Technique • • • • •
Listing Recording Voting Discussions Final voting
18
Stimulating Creativity • Brainwriting – Group members anonymously record their ideas. – Ideas are shared with others, attempting to build upon each.
• Synectics – Personal analogies: place yourself in the role of the object. – Direct analogies: make direct comparisons. – Symbolic analogies: look at the problem in terms of symbols. – Fantasy analogies: imagine the perfect solution.
19
Model for Creative Decision Making Stage
Activity
1. Recognition
Investigate and eventually define a problem or decision situation.
2. Fact finding 3. Problem finding 4. Idea Finding
Generate possible alternatives or solutions (ideas).
5. Solution finding
Identify criteria and evaluate ideas generated in stage 4.
6. Acceptance finding
Work out a plan for implementing a chosen idea 20
