Module 2: DECISION MAKING

Let’s apply what you’ve learned in this module to the scenario that we
considered at the beginning. As you will recall, you were assigned to lead a
team to come up with a new data management system for the human resources
department. You started by following the steps in the rational decision-making
model.

1. Identify the Problem: The current data management system of

spreadsheets is ineffective.
2. Establish Decision Criteria: Key criteria were established in the first
meeting related to areas such as what systems need to be run, how many
employees it must handle, compatibility issues, and financial
considerations.
3. Weigh Decision Criteria: With some guidance, the team was able to
settle on which criteria were truly the most important.
4. Generate Alternatives: Only two alternatives were presented by the
team: stay with the current system or use a firm run by the boss’s
daughter.
5. Evaluate Alternatives: The process essentially stalled here because of
the results of Step 4.
6. Select the Best Alternative: Not completed yet.

The process was going well until the group came to Step 4 and only generated
two alternatives: staying with the current, inadequate system or employing a
vendor that also happens to be the boss’s daughter. You realize that these
aren’t enough viable alternatives to generate an ideal solution, but what are
you going to do now?

As you will recall from this module, there are many benefits associated with
group decision making, but there are times when facilitation is required to
realize these benefits. There are options you might select to improve the quality
and quantity of alternatives generated. In order to reach a robust decision, you
decide to employ two techniques that you’ve learned.

Brainstorming

You want the group to generate significantly more alternatives for

consideration, so you decide to facilitate a brainstorming session. You follow
the nominal group technique, which employs the following process:

1. Everyone independently comes up with alternatives to the current data

management system.

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 2. You go around the group and each member presents one alternative.
3. Group members discuss each of the alternatives, but only after they have
all been presented.
4. Finally, each person rank orders the alternatives. The ideas with the
highest aggregate ranking move to your next step.
Devil’s Advocacy

As a second step, you take the ideas with the highest aggregate ranking from
the brainstorming session and subject them to the devil’s advocacy method.
Rotating members of the group are selected to be the critic for the alternatives
that made it through the brainstorming round. You choose this method to
ensure that groupthink hasn’t settled into the decision-making process.

The end result of this process is that numerous alternatives were suggested
and evaluated. Ultimately, you were able to present a solution to your boss that
was well thought-out and has the support of the rest of the team.

It bears repeating that this scenario represents the types of challenges you may
face and decisions you may have to make in a management role. This module
has equipped you with the processes and tools that can help you make the right
call when faced with tough decisions.

Why It Matters- Decision Making

Why does a manager need to understand the processes and techniques in

decision making?

You have been in your new role as a manager for two months, and your boss
just asked you to lead a committee in selecting a new data management system
for human resources (HR). The current data management process is run on
spreadsheets, but the company has grown from fifty to three hundred
employees in just three years, and the spreadsheets won’t work anymore. You
have all the key areas from HR represented on your committee, plus finance
and IT. How will you decide which new system to use?

Decision Criteria

In your kickoff meeting, you spend time finding out the important factors, such
as what systems it will need to run (payroll, benefits, disability, leave of
absence, etc.), how many employees it will need to handle, software
compatibility, and the budget. After an extensive list of requirements is
compiled on the white board, you label the list “decision criteria.”

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Weigh Decision Criteria

Next, you ask the members to weigh the importance of each of the criteria.
Early on, everyone weighted his criteria as critical, but eventually the group was
able to agree on some less critical needs, such as customization of the web
interface (brand colors, logos, etc). Comfortable with the group’s progress, you
task all the members to bring potential solutions to next week’s meeting.

Generate Alternatives

Feeling confident from the previous week’s successful meeting, you are anxious
to hear the replacement solutions. However, there are only two options offered:
stay with current system but add staffing, or go with a new vendor in the field,
who happens to be run by your boss’s daughter.

Evaluate the Alternatives

Besides the obvious landmines that exist in this decision-making process, you
know the biggest flaw will be due to the lack of alternatives to evaluate.
Although you may be tempted to engage deciding between these two options
or neither, you know that the committee needs more alternatives in order to
make the best decision.

This scenario represents the types of challenges you may face and decisions
you may have to make in a management role. Throughout this module you’ll
learn about the processes and tools that can help you make the right call when
faced with tough decisions.

Introduction to Barriers to Individual Decision Making and Styles of

Decision Making

What you’ll learn to do: describe the barriers to individual decision making and
common styles of decision making

Making decisions is easy. Making the right decision is hard. When making
decisions, you will face many barriers, including the quality of information you
have, the amount of time allowed, and several cognitive biases that will
influence your decisions. In addition to these barriers, we’ll also look at some
common styles of decision making, including satisficing, optimizing, intuitive,
rational, combinatorial, and positional.

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Barriers to Individual Decision Making

Learning Outcomes
 Describe the barriers to decision making.

Obviously, not all decisions prove to be good ones. Sometimes that is due to
unfortunate situations that would have been impossible to foresee. Other times,
however, the problem with the decision could have been avoided. What are the
potential barriers that we should be aware of during the decision-making
process?

Information-Related Barriers

Almost every decision is based at least in part on information that the decision
maker trusts. The reliability and use of that information can potentially lead to
multiple problems.

One of the most obvious information-related problems occurs when the

information is either incorrect or incomplete. Trusting information that is faulty
leads to many wrong deductions and conclusions. If information is incomplete,
even if the decision maker is aware of that fact, uncertainty is introduced, and
any decision based on that partial information could prove to be misguided.

On the other hand, a contrasting problem can arise when there is too much
information available. An information overload can make it difficult to grasp the
big picture and recognize which pieces of information are most important.
Another problem it can create is that large sets of data may contain data that
seems contradictory, leading the analyst to confusion or uncertainty and an
inability to synthesize it as a whole.

An overabundance of information can also lead to an inability to process

everything to the decision maker’s satisfaction. The result can be a harmful
delay in the decision-making process as the over-abundance of information is
being considered for an undue amount of time. Similarly, if the decision maker
is excessively concerned to find every possible piece of information, the same
problem can arise.

Circumstance and Time-Related Barriers

A variety of difficulties can also arise from the circumstances in the midst of
which a decision maker must work. One of the most common issues is stress,
which can arise from a great number of sources. If the decision maker is
experiencing abnormal levels of stress either in his personal life or work
environment, that can often lead him to poor decisions that are out of character.

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He may be less objective or less disciplined in following the decision-making
process he usually trusts. Recognizing high stress levels can provide the
opportunity to intentionally protect against those tendencies.

Also, when time is a restricting factor, that often contributes to poor decisions.
Unsurprisingly, evidence suggests that when decision makers feel rushed for
time, their judgment often suffers. This is true even when there actually is
sufficient time for the decision-making process: just the feeling of a lack of time
causes problems. It is important to commit to taking sufficient time for decisions
if at all possible (and it usually is).

Cognitive Biases

Even when circumstances are conducive to good decisions and a sufficient

supply of accurate information is available, there are still a number of ways in
which decision makers might be at fault in their manner of judgment. For
instance, their perception can be distorted. Understanding how this happens is
relevant for managers because they make many decisions daily. They must also
deal with many people making assessments and judgments.

Faulty ways of thinking during the analysis stage are often referred to as
cognitive biases. A few common ones follow:

Confirmation Bias

Confirmation bias is the tendency to seek out or prefer information and opinions
that we believe will confirm our own judgment. We want to be confirmed, so
we pay more attention to information that we think supports us, and we ignore
or diminish the significance of information to the contrary. We also tend to
accept information at face value that confirms our preconceived views while
being critical and skeptical of information that challenges these views. For
example, if you believe your new diet of bananas and almonds is the healthiest
foods to eat, you will search for and accept any supporting information on the
virtues of bananas and almonds, and ignore and discount any contradictory
information.

Framing Bias

Framing bias is the tendency to be influenced by the way that a situation or

problem is presented. Framing a message with a positive outcome has been
shown to be more influential than framing a message with a negative outcome.
For example, public health messages that depict nonsmokers as happy and
popular with sparkling white smiles has proven more effective than displaying
a smoker’s diseased lung. Numerous studies have demonstrated framing effects
in our everyday lives.
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  We are more likely to enjoy meat labeled 75 percent lean meat as
opposed to 25 percent fat.
 93 percent of PhD students registered early when the framing was in
terms of a penalty fee for late registration, with only 67 percent
registering early when the framing was in terms of a discount for earlier
registration.
 More people will support an economic policy if the employment rate is
emphasized than when the associated unemployment rate is
highlighted.[1]

It is important to be aware of this tendency because, depending on how a

problem is presented, we might choose an alternative that is disadvantageous
simply because of how it is framed.

Hindsight Bias

Hindsight bias is the tendency to believe falsely that we would have accurately
predicted the outcome of an event after that outcome is actually known. When
something happens and we have accurate feedback on the outcome, we appear
to be very good at concluding that this outcome was relatively obvious. For
example, a lot more people claim to have been sure about the inevitability of
who would win the Super Bowl the day after the game than they were the day
before.

What explains hindsight bias? We are very poor at recalling the way an
uncertain event appeared before we realize the actual results of the event, but
we can be exceptionally talented at overestimating what we actually knew
beforehand as we reconstruct the past. Just listen to a call-in sports show after
a big game, and hindsight bias will be on full display.

We seek out or prefer information and opinions that we believe will confirm our
own judgment. We want to be confirmed, so we pay more attention to
information that we think supports us, and we ignore or diminish the
significance of information to the contrary.

Anchoring

Anchoring bias is a tendency to fixate on initial information and then fail to

adjust for subsequent information. When our opinion becomes anchored to that
piece of information, we cannot stray very far from it. For example, in a mock
jury trial, one set of jurors was asked to make an award in the range of $15
million to $50 million. Another set of jurors was asked for an award in the range
of $50 million and $150 million. The median awards were $15 million and $50
million respectively with each set of jurors.

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Halo Effect

Halo effect concerns the preferential attitude that we have toward certain
individuals or organizations. Because we are impressed with their knowledge or
expertise in a certain area or areas, we unconsciously begin to give their
opinions special credence in other areas as well. This would, for example, be
exhibited when sports stars express their political opinions and the public gives
strong weight to what they say. There is no logical reason to think that they
have sound political opinions just because they have great skill in the realm of
sports.

Overconfidence Bias

Overconfident bias is particularly easy to understand. It basically amounts to

the idea that an individual decision maker trusts his own judgment (usually his
intuition) and allows that judgment to override evidence to the contrary. His
opinion counts more strongly to him than that of experts who are more
knowledgeable and often more than factual data that contradicts his views.
From an organizational standpoint, as managers and employees become more
knowledgeable about an issue, the less likely they are to display
overconfidence. And overconfidence is most likely to arise when employees are
considering issues outside of their area of expertise.

Status-Quo Bias

Some decision makers prefer to avoid change and maintain the status quo. This
desire, perhaps unrecognized, often leads them to favor ideas that do not lead
to significant changes. Evidence and ideas that support change are neglected
as a result.

Pro-Innovation Bias

Pro-innovative bias is the opposite of the status-quo bias. Rather than prefer
things to stay the same, the innovation bias gives preference to any new and
innovative idea simply because it represents something new. The feeling is that
new ideas must be better than old ones. Even if no objective evidence supports
the new idea as useful and helpful, it is still attractive just by virtue of being
new.

Here is an explanatory video that will help you understand some of these biases
along with others:

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Styles of Decision Making

Learning Outcomes
 Identify common styles of decision making.
Optimizing vs. Satisficing

The “fog of war” refers to the uncertainty common on a battlefield. Business

is not quite that bad, but there often isn’t good information for a full
analysis. With limitations on information, thoughtful analysis may be
impossible. So what’s a decision maker to do? There are two ends of a spectrum
from which to approach this: satisficing and optimizing. Satisficing—a
combination of the words “satisfy” and “suffice”—means settling for a less-than-
perfect solution when working with limited information. Optimizing involves
collecting as much data as possible and trying to find the optimal choice.
Generally, decision makers don’t pick one or the other—you can think of
satisficing to optimizing as a spectrum, and each decision starts with an
assessment of how critical it is. A branch of management called management
science offers methods for solving complex problems.

Intuitive vs. Rational

According to Daniel Kahneman, who you’ll read more about in the next section,
each of us has two separate minds that compete for influence. One way to
describe this is a conscious and a subconscious perspective. The subconscious
mind is automatic and intuitive, rapidly consolidating data and producing a
decision almost immediately. The subconscious mind works best with repeated
experiences. The conscious, rational mind requires more effort, using logic
and reason to make a choice. For example, the subconscious mind throws a
ball and hits the target, while the conscious mind slowly describes the physics
and forces required to complete the action.

Combinatorial vs. Positional

Aron Katsenelinboigen proposed this description based on how the game of

chess is played. A combinatorial player has a final outcome in mind, making
a series of moves that try to link the initial position with the final outcome in a
firm, narrow, and more certain way. The name comes from the rapid increase
in the number of moves he must consider for each step he looks
ahead. The positional decision-making approach is “looser,” setting up strong
positions on the board and preparing to react to the opponent. A player using
this strategy increases flexibility, creating options as opposed to forcing a single
sequence.

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In business, a market share strategy is positional. A dominant market share
gives a firm negotiating power even with lesser product. A complex situation
with many players and many solutions might require a more combinatorial
strategy. Apple faced a complex environment when it entered the music
streaming business. It created an ecosystem that served artists, labels, and
customers without dominating the music business.

Introduction to Rational Decision Making vs. Other Types of Decision

Making

What you’ll learn to do: explain the concept of “rational decision making” and
contrast it with prospect theory, bounded rationality, heuristics, and robust
decisions

Though everyone makes decisions, not everyone goes about the process in the
same way. In fact, not everyone even uses a “process” to make decisions. There
are various decision-making styles, and we will focus on the rational decision-
making model. We will also become familiar with a common process that many
groups and individuals follow when making decisions. Though almost everyone
will agree that decision making should be rational, there are also some
important contrasting ideas that often balance out the “rational” aspects to the
process.

Introduction to Evidence-Based Decision Making

What you’ll learn to do: explain evidence-based decision making and its tools

We have seen how the rational decision-making process is valuable but also
can be improved by useful modifications. We are ready now to learn about
another emphasis that might provide improvement on the strictly rational
model. In one sense, however, an emphasis on “evidence-based” decision
making is only an extension and refinement of rational principles. As its name
suggests, this approach relies on actual evidence of effectiveness in evaluating
alternative approaches to a decision.

Evidence-Based Decision Making

Learning Outcomes
 Explain evidence-based decision making.
 Explain the uses of descriptive and predictive analytics.

Using objective facts as the supporting basis for decisions seems like a sensible
approach. However, there is a way to do this that still leaves far too much room

9
for error. Having looked at objective data, it is still far too easy and common to
posit unproven theories to explain the data, identify causes, and predict future
outcomes. Even if the data itself is reliable, how that data is used remains a key
consideration. This is where the idea of “evidence-based” decision making
becomes central.

Proof of Success

The emphasis of evidence-based thinking is relying on actual experimentation

to demonstrate that a plan does indeed provide a likelihood of success. Suppose
an analysis of data and trends leads a decision maker to propose a potential
course of action. The decision maker believes the course of action should
resolve a particular problem and lead to a desirable outcome. An evidence-
based approach asks a key question: has such a course of action been proven
to be effective for others in similar situations?

This calls for a different type of data collection and analysis. There is today an
increased focus on scientific experimentation—or at least as close to scientific
as circumstances will allow—to test theories and provide evidence about the
effectiveness of different approaches to problems and different business
strategies.

The medical field provides an example of an area where evidence-based

decision making is clearly valuable. Medical professionals work with much
scientific and objective data about the health conditions of their patients, but
many professionals believe that many medical practices have too long been
subjective in nature. Given the same set of conditions, one doctor might
prescribe one treatment whereas another doctor might prefer another. The
question becomes that of which treatment has been shown to be most effective
in actual practice. By relying on actual evidence of this sort, much of the
uncertainty about treatment practices can be removed.

Of course, physical health is a complex matter that involves many factors, just
as business situations are. Identifying the significance of all the factors involved
and finding parallel situations to use as evidence can remain very challenging.
Still, evidence-based principles provide one more helpful tool in guiding the
decision-making process.

Data Collection, Sharing, and Analytics

In today’s business environment, those who take an analytical and evidence-

based approach have at least one significant advantage: there is plenty of
material for them to work with. One of the main reasons people have not relied
on evidence-based decision making as strongly over the years is that the
evidence simply did not exist or was not accessible. Today, however, the
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advance of technology has resulted in previously unparalleled amounts of data
that can be collected, shared, organized, and analyzed in ways never before
imaginable.

Descriptive Analytics

This dramatic increase in the availability of data has led to the rapid
development and maturation of the field of data analytics. Much attention has
been given to the science of how to analyze this data in a useful way.

Today’s massive sets of data are commonly referred to as “big data.”

The most basic type of data analytics is known as descriptive analytics. The
focus of this type of analytics is simply to understand and describe what has
taken place as revealed by data sets. The analyst attempts to explain what the
data reveals about the events that have occurred, the relationships between
different events and market forces, and why the numbers are what they are.

Though this sounds simple enough, the vastness of the data sets makes it
rather a tall order to accomplish. Turning almost endless matrixes of numerical
data into sensible patterns of interrelated and explainable trends can be a
daunting task. However, the same technological power that has made the
collecting of such data sets possible has also been harnessed to aid in analyzing
that data.

Predictive Analytics

There is another step beyond the basic analytical goal of explaining what the
data reveals, though. What if an understanding of past events and trends could
be used to predict the most likely outcomes of future data sets and events? If
current trends are identified and projected to continue in the future, decision
makers will have access to rich insight that can aid their cause. This work of
projecting future trends is known as predictive analytics, and although it still
obviously remains only a best guess about the future, it is grounded in objective
facts and trends and can provide a greater degree of likelihood as a result.

The practice of predictive analytics should also be subjected to the discipline of

evidence-based principles. That is, not only should guesses be made about the
likelihood of future outcomes based on present trends, but also those
predictions should be verified by actual examples from similar situations in the
past—as much as possible, at least. When data from many situations has
common trends that end up leading to similar outcomes, the consistent pattern
provides strong evidence for future results under similar conditions and trends.

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Introduction to Managing Group Decision Making

What you’ll learn to do: explain common techniques used to manage group
decision making

Thus far in our study, we have not distinguished strongly between the decision-
making process from the standpoint of the individual and that of the group.
Many business decisions, however, are made in groups. Though many of the
principles we have learned about apply to group decision making, there are
unique advantages, disadvantages, and techniques for group settings that
should also be considered.

Managing Group Decision Making

Learning Outcomes
 Identify the advantages of group decision making.
 Identify the disadvantages of group decision making.
 Describe techniques managers can use to guide and reach consensus in
groups.

Decision making in group settings is quite common because most businesses

recognize the potential benefits of group participation in the process. In that
group setting, the same basic decision-making process can be followed, the
same decision-making styles might be favored, and many of the same
techniques and biases can still be identified. There are also significant
differences, however. What unique aspects to decision making arise when
decisions are made in groups?

Advantages of Group Decision Making

Involving multiple participants in the decision-making process provides

unmistakable benefits. To begin with, the sum of the knowledge, skills,
creativity, and expertise in a group setting will always be greater than that of
any individual member. If this greater resource base can be properly accessed
and harnessed, the result should be a greater number of more diverse and
higher-quality solution ideas. Also, the ability to evaluate those ideas should be
improved by group collaboration.

In addition to this primary and most important advantage, group participation

also provides the significant benefit of increased understanding of the issue and
the decision amongst the team members. If an individual works through the
decision-making process alone, arrives at a decision, and communicates that
decision to employees who were not involved in the process, those employees

12
might not understand or appreciate the nature, importance, or propriety of the
decision. When a decision is made as a group, all the members will have a far
greater understanding of the issues and the reasons behind the decision.

Similarly, if group members have a legitimate opportunity to participate in the

decision-making process, they will be far more likely to support the decision.
They were a part of the process, had the opportunity to help shape the decision,
and will probably take greater “ownership” of and exhibit more “buy-in” to the
decision.

Disadvantages of Group Decision Making

The advantages of group decision making are clear, but there are certainly
potential drawbacks to consider as well.

To begin with, even when the advantages of group decisions are used, there is
no way around the process being slower and more expensive than individual
decision making. All the group members must invest their time in the process,
and the group discussion and interaction is more time-consuming than
individual decision-making processes. The number of man-hours involved can
be relatively high, and the larger the group, the higher that number. Further,
many group members involved in business meetings report that they find the
meetings to be inefficient and wasteful of time.

If groups lead to wiser, better decisions, however, these higher resource

investments will almost certainly be more than repaid. There are ways, though,
in which group involvement can actually become a hindrance to making good
decisions if not managed properly.

One common pitfall is groupthink. This is the tendency of group members to

conform to and support a proposed group position. Perhaps an outspoken
individual strongly favors a decision, and other group members allow
themselves to be persuaded simply because of his forcefulness. Alternatively,
perhaps a segment of the group shares a common perspective and common
biases. Together, they propose a course of action, and because multiple voices
are already supporting the decision it makes it easy for the rest of the group to
fall in line. This negates the whole purpose of group involvement, which is to
bring a variety of perspectives and ideas to the decision-making process.

Groups can also sometimes exhibit a tendency to polarization, meaning their

decisions move toward extremes that the individuals alone might not be
comfortable supporting. The group setting can cause individuals to feed on the

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excitement or enthusiasm of one another and move toward those extreme
positions.

On the other hand, there is also the danger that groups with sharply divergent
perspectives can struggle to agree on a course of action that they can all
support. This can lead to a loss of time when no decision is reached. Pressure
to resolve this situation and make a decision can then lead to a compromise
decision where all sides take a middle ground. Too often, this middle ground
represents a solution that none of the group members support wholeheartedly.
The end result is often a far from optimal solution.

Lastly, to compound the situation, if a group does make a decision that is not
optimal, who bears the responsibility? In one sense, the entire group is
accountable, but this also means that no individual will be personally and
directly accountable, which can be problematic at times.

Ways to Facilitate Group Decision Making

In light of the potential advantages and potential dangers involved in group

decision making, it is important to have a plan to direct and facilitate the group
process so it is carried out effectively. This usually requires one individual to
take some form of leadership within the group, even if only to help organize
and direct meetings. A number of things can be done to pursue smooth and
effective group meetings.

Brainstorming is an idea-generating process that specifically encourages all

alternatives while withholding any criticism of those alternatives. Therefore, this
technique can help build a group’s cohesiveness because all members are
encouraged to contribute and participate in the process without fear of
judgment. In a typical brainstorming session, a small group of people respond
to questions or problems posed by a facilitator. All responses are recorded and
there is no discussion or analysis at this point. After a set amount of time, the
group then selects the ideas or alternatives it would like to explore, but there
is no pressure to commit to selecting a solution during brainstorming.

Brainstorming can indeed generate new ideas, but research consistently shows
that individuals working alone actually generate more ideas than group sessions
because of “production blocking.”[1] When people are generating ideas in a
group, many people are talking at once, which distracts the thought process
and impedes the sharing of ideas.

The nominal group technique is similar to brainstorming, in that it

encourages all members to contribute their ideas. However, it is different from

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brainstorming in that it limits discussion during the decision-making
process. Group members are all present but members operate independently
and use the following four-step process in idea generating:

1. Members independently write down ideas on a given problem.

2. Each member presents one idea to the group. Each member takes a turn,
presenting a single idea, until all ideas have been shared.
3. The group engages in discussion on the ideas for clarity and evaluation.
4. Each member independently rank-orders the ideas. The idea with the
highest aggregate ranking determines the final decision.

A major advantage of the nominal group technique is it alleviates the fear of

those people who are concerned about having their ideas criticized and who do
not like to engage in conflict. But because of the highly structured format, it
lacks the flexibility to address more than one idea at a time. Another
disadvantage to the nominal group technique is the amount of time needed to
present each idea and the resulting discussion on each and every idea
proposed.

A new variation is e-brainstorming, where people respond to issues via their

computers in real time. The responses and rankings are all anonymous and
displayed for everyone to view and to add further comments. The advantages
of e-brainstorming are the possibility of lots of generated ideas, anonymity,
honesty, and speed. The major disadvantage is the reduction in group
cohesiveness.

The devil’s advocacy decision-making technique is where an individual or a

group is selected to become the critic in the proposed decision. The biggest
strength to using the devil’s advocate technique is the ability to
prevent groupthink.[2] The devil’s advocate technique allows for in-depth
dialogue on a range of ideas and can help bridge seemingly irreconcilable
opposites.[3] This process can help the group refine its thinking and produce
high-quality ideas. Any leader using this technique must be aware that it is
designed to generate conflict and will require the leader to actively manage the
meetings.

For an in-depth discussion on an issue, a neutral facilitator or referee can be

used to separate participant and leadership roles or groups with opposing ideas.
The facilitator manages group processes and dynamics and calls for a high
degree of neutrality about content issues and a focus on group needs. The
facilitator is focused on what needs to be accomplished and appropriate levels
of participation, all in an effort to ensure quality decisions are made. The
advantage to a facilitated technique is that it can produce innovative, creative

15
and high-quality decisions.[4] The facilitated model does require a skilled
facilitator and a significant amount of time.

In the Delphi technique (named after the Oracle at Delphi), experts respond
to questionnaires in a number of rounds. Questions narrow in on a specific topic
as the rounds progress. The first questionnaire consists of open-ended
questions and aims to identify broad issues related to the issue at hand. The
responses are analyzed qualitatively by sorting, categorizing, and searching for
common themes. These responses are then used to construct the second
questionnaire, which is more specific and aims to rate or rank the items in terms
of their significance. Subsequent questionnaires can narrow down responses
further. As the facilitator feeds back results from the previous rounds, there
tends to be convergence to a consensus of opinion. The Delphi technique is
useful if convening the participants face-to-face is not practical. The
disadvantage is that it takes days to complete and it requires a large amount of
work by the leader.

Within all of these group decision-making techniques, you will need to watch
for affective conflict and strive for healthy cognitive conflict. Affective
conflict is when the dialogue becomes “personal” and people become more
aggressive or start to disengage. The mindset moves from “we have a problem”
to “you are the problem.” Opposition is seen as something to be thwarted rather
than explored. The goal becomes winning for its own sake rather than the best
possible solution.[5]Cognitive conflict is where people focus on the tasks or
issues and debate and thrash these out and come to a creative solution. The
parties might argue and exchange views vigorously, yet there is two-way
communication and an openness to hearing each other. The goal is to find the
best possible solution rather than to win the argument. Alternative perspectives
are seen as valuable rather than threatening.

The Final Decision

One of the basic requirements is to make the decision-making process clear.

There are different options, of course, and different settings and preferences
might lead to selecting one of three options: command, democratic, or
consensus. When an organization has a centralized decision-making structure,
the “command” preference will dictate that the leader will make the final
decision. Also, it could be that the group will actively participate in the
discussion and thought process, but the final decision will be made by an
individual leader. The democratic method is when all group members are
given equal authority in a formal voting system. Even then, there are choices.
A decision might be accepted by a simple majority or unanimity might be
required. The most favored method currently is through consensus. Each one
of the decision-making processes detailed here is predicated on the involvement

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of everyone in the group. The consensus process enables the discussion of
current and potential obstacles, already known to participants, resulting in
work-arounds to be built into a decision in advance. Defining that process from
the start will help everyone know what to expect.

Strengths and Weaknesses of Group Decision-Making Techniques

Each of these group decision-making techniques has its own strengths and
weaknesses. The choice of one technique will depend on what criteria you want
to emphasize and the cost/benefit trade-off. For instance, as illustrated in the
figure that follows, e-brainstorming is good for generating lots of ideas, the
nominal group technique minimizes conflicts, the devil’s advocate generates
high quality ideas, and brainstorming builds a group’s cohesiveness. Remember
that group performance varies significantly, no matter which techniques you
use.

Evaluating Group Decision-Making Techniques

Group Decision-Making Techniques
Effectiveness e- Devil’s Referee/
Brainstorming Nominal Delphi
Criteria Brainstorming Advocate Facilitator
Number of ideas Moderate High High High Low Low
Quality of ideas Moderate High Moderate Moderate High High
Speed Moderate Moderate High Low Moderate High
Potential for
interpersonal Low Moderate Moderate Low High Moderate
conflict
Commitment to
Not applicable Moderate Moderate High Moderate High
solution
Group
High Moderate Low Low Moderate High
cohesiveness

It is also essential to manage the process of the group meeting time to make it
productive. There must be a concerted effort to keep the discussion on topic.
All group members must also feel free to contribute their thoughts. Sometimes
there are rules in place that prohibit any criticism of ideas during the
brainstorming sessions so all ideas can be voiced without fear of a negative
reception.

At some point, however, ideas need to be evaluated together. Finding the right
way for that to happen with a good spirit and environment is important. An
effective group leader will find the system that works best for each particular
group and setting. If at any point interpersonal conflict or tension arises, the

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group leader must be prepared with a plan to diffuse the situation and bring
the group back to productive cooperation.

Introduction to Using a Decision Tree

What you’ll learn to do: describe the components and use of a decision tree

Despite the limitations of strict rational decision making, there is no doubt that
it still has significant value—especially as we refine and improve our abilities to
predict costs and market outcomes for our potential actions. When a business
feels it has a reasonably accurate measurement of potential costs and a
reasonable prediction of likely future outcomes, that data can be used to
calculate the likely value of decision pathways. A useful tool for this is the
decision tree, which we are going to learn about now.

Using a Decision Tree

An example of a decision tree

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From the decision node, a branch is created for each of the alternative choices
under consideration. The initial decision might lead to another decision, in which
case a new decision node is created and new branches are added to show each
alternative pathway for the new decision. The result is a series of decision
pathways. The flowchart might include only one or two decisions with only one
or two alternatives, or it can become a complex sequence of many decisions
with many alternatives at each node.

Along the decision pathway, there is usually some point at which a decision
leads to an uncertain outcome. That is, a decision could result in multiple
possible outcomes, so an uncertainty node is added to the tree at that point.
Branches come from that uncertainty node showing the different possible
outcomes.

Eventually, each pathway reaches a final outcome. The decision tree, then, is a
combination of decision nodes, uncertainty nodes, branches coming from each
of these nodes, and final outcomes as the result of the pathways.

How to Make Calculations with a Decision Tree

Even in only this simple form, a decision tree is useful to show the possibilities
for a decision. However, a decision tree becomes especially useful when
numerical data is added.

First, each decision usually involves costs. If a company decides to produce a

product, engage in market research, advertise, or any other number of
activities, the predicted costs for those decisions are written on the appropriate
branch of the decision tree. Also, each pathway eventually leads to an outcome
that usually results in income. The predicted amount of income provided by
each outcome is added to that branch of the decision tree.

The other numerical data that needs to be provided is the probability of each
outcome from the uncertainty nodes. If an uncertainty node has two branches
that are both equally likely, each should be labeled with a 50 percent, or 0.5,
probability. Alternatively, an uncertainty node might have three branches with
respective probabilities of 60 percent, 30 percent, and 10 percent. In each case,
the total of the percentages at each uncertainty node will be 100 percent,
representing all possibilities for that node.

With this numerical data, decision makers can calculate the likely return value
for each decision pathway. The value of each final outcome must be multiplied
by the probability that the outcome occurs. The total of the possibilities along
each branch represent the total predicted value for that decision pathway. The
costs involved in that decision pathway must be subtracted to see the final profit
that pathway represents.
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