B5301_w09_week11
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Decision Making Processes
Definition Individual Decision Making Organisation Decision Making The Learning Organisation Contingency Decision-Making Framework Special decision circumstance
Today’s Business Environment • New strategies • Reengineering • Restructuring • Mergers/Acquisitions • Downsizing • New product/market development • . . . Etc.
Business 5301
Decisions Made Inside the Organization
• Complex, emotionally charged issues • More rapid decisions • Less certain environment • Less clarity about means/outcomes • Requires more cooperation Business 5301
A New Decision-Making Process • Required because • no one person has enough info to make all major decisions • No one person has enough time and credibility to convince many • Relies less on hard data • Guided by powerful coalition • Permits trial and error approach
Business 5301
Definition
Organisational Decision Making – process of identifying and solving problems Two major stages: 3. Problem identification 4. Problem solution (also includes alternative forms of action)
Two types of decision •
Programmed
•
Non-programmed
Business 5301
Definition
• Non-programmed decisions usually involve strategic planning • Today’s managers and organisations are dealing with a higher percentage of non-programmed decisions because of rapidly changing business environment • See Exhibit 12.1
Business 5301
Steps in the Rational Approach to Decision-Making
Implement Chosen Alternative Choose Best Alternative
Evaluate Alternatives
7 6
8
5
Develop Alternative Solutions
Business 5301
Monitor Decision Environment
1
4
2 3
Define Decision Problem
Specify Decision Objectives
Diagnose Problem
Individual Decision Making
Two ways of describing: •
Rational – which suggests how managers should try to make decisions
•
Bounded rationality perspective – which describes how decisions actually have to be made under severe time and resource constraints
•
Rational decision making approach is an ideal that is very difficult to reach
Business 5301
Rational Approach
• Need for systematic analysis of a problem followed by choice and implementation in a logical, step-by-step sequence • Not ideal or fully achievable – but the rational model helps managers think about decisions more clearly and rationally • Steps are 4. Monitor the decision environment 5. Define the decision problem 6. Specify decision objectives 7. Diagnose the problem
Business 5301
Rational Approach
5. Develop alternative solutions 6. Evaluate alternatives 7. Choose the best alternative 8. Implement the chosen alternative
Business 5301
Bounded rationality perspectives
• Try and use systematic procedures to arrive at good decisions • Very difficult to evaluate all the factors • There is a limit to how rational managers can be • Many other constraints impinge on the decision maker (see Exhibit 12.3) • Corporate culture and ethical values also influence decision making – personal constraints also involved • Need for intuitive decision making • Previous experience and judgement
Business 5301
Constraints and Trade-offs During Non-programmed Decision-Making
Bounded Rationality:
Limited time, information, resources to deal with complex, multidimensional issues
Trade-off Trade-off
Trade-off
Decision/ Choice:
Personal Constraints:
Desire for prestige, success; personal decision style; and the need to satisfy emotional needs, cope with pressure, maintain self-concept
Trade-off
Organizational Constraints: Need for agreement, shared perspective, cooperation, support, corporate culture and structure, ethical values
Business 5301
Sources: Adapted from Irving L. Janis, Crucial Decisions (New York: Free Press, 1989); and A. L. George, Presidential Decision Making in Foreign Policy: The Effective Use of Information and Advice (Boulder, Colo.: Westview Press, 1980).
Trade-off
Search for a high-quality decision alternative
Choice Processes in the Carnegie Model
Uncertainty Information is limited Managers have many constraints
Conflict Managers have diverse goals, opinions, values, experience
Coalition Formation Hold joint discussion and interpret goals and problems Share opinions Establish problem priorities Obtain social support for problem, solution
Search Conduct a simple, local search Use established procedures if appropriate Create a solution if needed
Satisficing
Business 5301
Adopt the first alternative that is acceptable to the coalition
The Incremental Decision Process Model
Identification Phase • Recognition • Diagnosis Development Phase • Search • Screen • Design Selection Phase • Judgment (evaluation – choice) • Analysis (evaluation) • Bargaining (evaluation – choice) • Authorization Dynamic Factors Business 5301
Learning Organization Decision Process When Problem Identification and Problem Solution Are Uncertain
PROBLEM IDENTIFICATION
Business 5301
PROBLEM SOLUTION
When problem identification is uncertain, Carnegie model applies
When problem solution is uncertain, Incremental process model applies
Political and social process is needed
Incremental, trial-and-error process is needed
Build coalition, seek agreement, and resolve conflict about goals and problem priorities
Solve big problems in little steps Recycle and try again when blocked
Illustration of Independent Streams of Events in the Garbage Can Model of Decision-Making Problems
Solutions
Middle Management Participants
Problems Solutions Choice Opportunities Participants
Choice Opportunities
Business 5301
Participants
Choice Opportunities
Department A
Solutions
Department B
Problems Solutions Choice Opportunities Participants
Choice Opportunities
Problems Solutions Choice Opportunities Participants
Solutions
Problems
Participants
Problems Participants
Problems
Solutions
Participants
Contingency Framework for Using Decision Models
Certain Certain
Solution Knowledge
Uncertain Business 5301
1
Problem Consensus
Individual: Rational Approach Computation Organization: Management Science
3 Individual: Judgment Trial-and-error Organization: Incremental Decision Process Model
2
Uncertain
Individual: Bargaining, Coalition Formation Organization: Carnegie Model
4 Individual: Bargaining and Judgment Inspiration and Imitation Learning Organization: Carnegie and Incremental Decision Process Models, Evolving to Garbage Can
Special Decision Circumstances
• High-Velocity Environments • Decision Mistakes and Learning • Escalating Commitment
Business 5301
Definition Individual Decision Making Organisation Decision Making The Learning Organisation Contingency Decision-Making Framework Special decision circumstance
Today’s Business Environment • New strategies • Reengineering • Restructuring • Mergers/Acquisitions • Downsizing • New product/market development • . . . Etc.
Business 5301
Decisions Made Inside the Organization
• Complex, emotionally charged issues • More rapid decisions • Less certain environment • Less clarity about means/outcomes • Requires more cooperation Business 5301
A New Decision-Making Process • Required because • no one person has enough info to make all major decisions • No one person has enough time and credibility to convince many • Relies less on hard data • Guided by powerful coalition • Permits trial and error approach
Business 5301
Definition
Organisational Decision Making – process of identifying and solving problems Two major stages: 3. Problem identification 4. Problem solution (also includes alternative forms of action)
Two types of decision •
Programmed
•
Non-programmed
Business 5301
Definition
• Non-programmed decisions usually involve strategic planning • Today’s managers and organisations are dealing with a higher percentage of non-programmed decisions because of rapidly changing business environment • See Exhibit 12.1
Business 5301
Steps in the Rational Approach to Decision-Making
Implement Chosen Alternative Choose Best Alternative
Evaluate Alternatives
7 6
8
5
Develop Alternative Solutions
Business 5301
Monitor Decision Environment
1
4
2 3
Define Decision Problem
Specify Decision Objectives
Diagnose Problem
Individual Decision Making
Two ways of describing: •
Rational – which suggests how managers should try to make decisions
•
Bounded rationality perspective – which describes how decisions actually have to be made under severe time and resource constraints
•
Rational decision making approach is an ideal that is very difficult to reach
Business 5301
Rational Approach
• Need for systematic analysis of a problem followed by choice and implementation in a logical, step-by-step sequence • Not ideal or fully achievable – but the rational model helps managers think about decisions more clearly and rationally • Steps are 4. Monitor the decision environment 5. Define the decision problem 6. Specify decision objectives 7. Diagnose the problem
Business 5301
Rational Approach
5. Develop alternative solutions 6. Evaluate alternatives 7. Choose the best alternative 8. Implement the chosen alternative
Business 5301
Bounded rationality perspectives
• Try and use systematic procedures to arrive at good decisions • Very difficult to evaluate all the factors • There is a limit to how rational managers can be • Many other constraints impinge on the decision maker (see Exhibit 12.3) • Corporate culture and ethical values also influence decision making – personal constraints also involved • Need for intuitive decision making • Previous experience and judgement
Business 5301
Constraints and Trade-offs During Non-programmed Decision-Making
Bounded Rationality:
Limited time, information, resources to deal with complex, multidimensional issues
Trade-off Trade-off
Trade-off
Decision/ Choice:
Personal Constraints:
Desire for prestige, success; personal decision style; and the need to satisfy emotional needs, cope with pressure, maintain self-concept
Trade-off
Organizational Constraints: Need for agreement, shared perspective, cooperation, support, corporate culture and structure, ethical values
Business 5301
Sources: Adapted from Irving L. Janis, Crucial Decisions (New York: Free Press, 1989); and A. L. George, Presidential Decision Making in Foreign Policy: The Effective Use of Information and Advice (Boulder, Colo.: Westview Press, 1980).
Trade-off
Search for a high-quality decision alternative
Choice Processes in the Carnegie Model
Uncertainty Information is limited Managers have many constraints
Conflict Managers have diverse goals, opinions, values, experience
Coalition Formation Hold joint discussion and interpret goals and problems Share opinions Establish problem priorities Obtain social support for problem, solution
Search Conduct a simple, local search Use established procedures if appropriate Create a solution if needed
Satisficing
Business 5301
Adopt the first alternative that is acceptable to the coalition
The Incremental Decision Process Model
Identification Phase • Recognition • Diagnosis Development Phase • Search • Screen • Design Selection Phase • Judgment (evaluation – choice) • Analysis (evaluation) • Bargaining (evaluation – choice) • Authorization Dynamic Factors Business 5301
Learning Organization Decision Process When Problem Identification and Problem Solution Are Uncertain
PROBLEM IDENTIFICATION
Business 5301
PROBLEM SOLUTION
When problem identification is uncertain, Carnegie model applies
When problem solution is uncertain, Incremental process model applies
Political and social process is needed
Incremental, trial-and-error process is needed
Build coalition, seek agreement, and resolve conflict about goals and problem priorities
Solve big problems in little steps Recycle and try again when blocked
Illustration of Independent Streams of Events in the Garbage Can Model of Decision-Making Problems
Solutions
Middle Management Participants
Problems Solutions Choice Opportunities Participants
Choice Opportunities
Business 5301
Participants
Choice Opportunities
Department A
Solutions
Department B
Problems Solutions Choice Opportunities Participants
Choice Opportunities
Problems Solutions Choice Opportunities Participants
Solutions
Problems
Participants
Problems Participants
Problems
Solutions
Participants
Contingency Framework for Using Decision Models
Certain Certain
Solution Knowledge
Uncertain Business 5301
1
Problem Consensus
Individual: Rational Approach Computation Organization: Management Science
3 Individual: Judgment Trial-and-error Organization: Incremental Decision Process Model
2
Uncertain
Individual: Bargaining, Coalition Formation Organization: Carnegie Model
4 Individual: Bargaining and Judgment Inspiration and Imitation Learning Organization: Carnegie and Incremental Decision Process Models, Evolving to Garbage Can
Special Decision Circumstances
• High-Velocity Environments • Decision Mistakes and Learning • Escalating Commitment
Business 5301
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