Management and Organizational Behavior Dr.

Leigh Stelzer Reference Guide, Decision Making, W&N, Chapter13 Objectives: Know models and vocabulary of decision making. Understand the issues (questions) that need to be addressed when making decisions. Decision-making is a recurrent human and organizational activity. People in organizations are always making decisions. We characterize decisions as routine v. non-routine. Routines, programmed decisions v. non-routine, non-programmed. Programs are predetermined solutions to anticipated problems. Routine is developed around certainties. Note in talking about systems we said that certainty exists when resources meet demands. When the supply of information in the organization meets the demands for a decision. A system is most likely to develop certainties in a simple (only a few elements), uniform (all elements the same or similar), stable (no change) environment. The more complex, diverse, and unstable the environment, the greater the need for non-programmed, creative decisions. If you want to think of computer programming analogy, before you can write the program you have to know all the variables or at least account for all the variability that the program is going to confront. There are two traditional models of decision making. 1. The rational man model is associated with economics. The rational decision-maker systematically searches for the decision that will maximize results. Goal is to optimize or maximize. A. Know the goals, know the goal that optimizes. B. Know all the alternative courses of action. C. Know the relation of courses of action to goals, this is you can predict consequences of actions, i.e. can predict outcomes of actions. 2. Alternative model called the administrative model associated with Herbert Simon. Actually a critique of the rational man model. Simon says the rational man model is prescriptive or normative, the way it is supposed to be, rather than the way it is. Simon

presented the administrative man model as a realistic antidote, the way it really is. Administrative man he says is the way decisions are actually made. He says there are limits on decision making: 1. Bounded rationality: imperfect information about goals and courses of action and relation of means to ends. Only perceive a few of the possible decisions, courses of action, dimly perceive means end relation. 2. Bounded discretion: constraints on optimizing, prior commitments, moral and ethical standards, laws, and social standards. Forced to make decisions that are just good enough. Called satisficing. Search for a needle in the haystack. Optimize is to look for the sharpest. Satisfied is to search until you find the needle that is just sharp enough to do the job. Confirmation model After you find one that is good enough, you continue looking for a time to confirm that you made the right decision. Political model. Traditional textbook approach to decision making is in the rational man mold. The W&N text says begin with goals and objectives. Frankly, I think this and their example miss the point. So: 1. Define the problem 2. Generate alternative solutions 3. Evaluate alternatives 4. Implement preferred decision 5. Evaluate result, alter if necessary Elaborate 1. Define the problem a. What is wrong? Not the systems, manifestations, but causes, roots b. Data that support this belief. c. Deviation from desirable state. If this is wrong, what is right?

d. What accounts for things being wrong rather that right, what are the constraints that keep things wrong and prevents from making them right. 2. Generate alternative solutions. 3. Evaluate alternatives Take into consideration the problem and the constraints on achieving any ideal solution come up with acceptable alternatives. Issues in decision making 1. Who should make the decision? Review Vroom et.al. Decision Tree, W&N:p.410. The issues that go into "who", include the following: a. Where in the organization to make decision? This is the issue of centralization v. decentralization and addresses the issue of where decisions are made. Should they be made by central administration, the top of the hierarchy, or should they be made at the peripheries, on the edges of the organization. Should all participate? Traditionally, empirically, higher-ups make non-programmed decisions. Lower management tends to confront a more certain environment and make more routine decisions. Normally the top delegates to lower downs a restricted area of decision. Which may mean that although they appear to be making decisions they are just applying a present program to anticipate demands. Empowerment of lower level alters this. b. Red or expert: Is it a moral or ideological issue - a matter of preference - where my opinion is as good or better than yours is? Or does it involve an issue that requires technical expertise, facts, and knowledge? Is it a staff issue? c. Acceptance: If there is any question about the willingness of those who will be responsible to implement the decision, then they ought to participate. You want them to buy into the decision. Participation aids this process. 2. What process should be used to make decision: should individual make decision, should groups-committee, (nominal group techniques), and should outsidersconsultants. Should the process be formal or informal? Should you require consensus before you make decision, should you allow someone to veto a decision, use majority rules criteria? There are advantages and disadvantages of each process. The effectiveness of a process is related to type of decision or the characteristics of decision. This is true for issue of who should make the decision as well. 3. Implementation: Who should implement decision or how should it be implemented? It is a mistake to think that because you made a decision it is now in effect. Is the decision self-implementing? Is there a need for directive implementation from an external source? What does this entail?

To analyze decision-making is to fall into the rationalist trap. Many decisions just happen: Incrementalism of most decisions. One small decision builds on another until you have a major decision. Decisions are made on the fly. Executives are at the center of a communications web; information comes into them that supports a step and subsequent steps. An off-the-topof-the-head remark can start a snowball rolling. Incremental. Often without even knowing it the decision is made. The alternative is zero based decisions: you start fresh each time. But the lack of time and information means you cant start fresh. Also, you have become committed: reduced your options, reduced your flexibility. This only underscores the need for planning and foresights. Should we distinguish important, really big decisions? How do you know what is really big? Cost to implement. Drucker says: cost (time, money, effort, and political capital) to reverse.