Decision Making

Individual Decision Making
ks
Types of Decisions
Programmed Nonprogrammed
Decision Decision
a simple, routine a new, complex decision
matter for which a that requires a creative
manager has an solution
established decision
rule
ks
Programmed and Nonprogrammed
Decisions: A Comparison
Programmed Decisions Nonprogrammed Decisions
Repetitive, routine, Novel, complex, difficult,

Types of frequent; decisions made infrequent; decisions
problems according to specific require original thinking
procedures
Depend on policies and Require creativity,
Proce- rules intuition, tolerance for
dures ambiguity
Business firm: Periodic Business firm:

reorders of inventory Diversification into new
Health care: Procedure for products and markets
Examples admitting patients Health care: Purchase of
University: Necessary GPA experimental equipment
for good academic University: Construction of
standing new classrooms
XUB/KS
Programmed vs. Non-programmed
Decisions
Characteristics Programmed Non-programmed
decisions decisions
Type of problem Structured Unstructured
Managerial level Lower level Upper level
Frequency Repetitive New, unusual
Information Readily available Ambiguous or

incomplete
Time frame for Short Relatively long

solution
Solution relies on Procedures, rules, Judgment and

and policies creativity
XUB/KS
According to functional Theory: Groups
must meet five functions during
interaction:
• Problem Analysis: Given the information available to it, a
group needs to arrive at an accurate (i.e. reasonable)
understanding of (a) the nature of the problem, (b) the
extent and seriousness of the problem, (c) the likely
cause(s) of the problem, and (d) the possible consequences
of not dealing effectively with the problem.
• Establishment of evaluation criteria: A group must
recognize the specific standards that the choice must satisfy
to be judged acceptable by evaluators of that decision.
• Generation of alternative solutions: A group must
generate, or be aware of, a number of appropriate and
feasible alternative choices among which an acceptable
choice is assumed to exist.
• Evaluation of positive consequences of solutions:
Given the information available to it, a group needs to be
fully cognizant of the relative merits of all available
alternatives.
• Evaluation of negative consequences of solutions:
Given the information available to it, a group needs to be
fully cognizant of the relative disadvantages associated with
each alternative choice
A Categorization of Decision
Characteristics
Category I Decisions Category II Decisions
Classifications Programmable; routine; Nonprogrammable; unique;
generic; computational; judgmental; creative;
negotiated; compromise adaptive; innovative; inspirational
Structure Procedural; predictable; Novel, unstructured,
certainty regarding consequential, elusive, and
cause/effect relationships; complex; uncertain cause/
recurring; within existing effect relationships; non-
technologies; well-defined recurring; information
information channels; channels undefined, incom-
definite decision criteria; plete information; decision
outcome preferences may criteria may be unknown;
be certain or uncertain outcome preferences may
be certain or uncertain
Strategy Reliance upon rules and Reliance on judgment,
principles; habitual intuition, and creativity;
reactions; prefabricated individual processing;
response; uniform heuristic problem-solving
processing; computational techniques; rules of thumb;
techniques; accepted general problem-solving
methods for handling processes
Recognize the problem and
Decision the need for a decision
Making
Process
Identify the objective of
the decision
Gather and evaluate data

and diagnose the situation
List and evaluate

alternatives
ks
Select the best
Decision
course of action
Making
Process
Implement
the decision
Gather feedback
Follow up
ks
Rational Model
1. The outcome will be completely rational

2. The decision maker uses a consistent system of
preferences to choose the best alternative
3. The decision maker is aware of all alternatives
4. The decision maker can calculate the probability of
success for each alternative
ks
Bounded Rationality
a theory that suggests that there are
constraints that force a decision
maker to be less than completely
rational
ks
Z Problem-Solving Model
Look at What alternatives
the facts Sensing Intuition do the facts
and details suggest?
Can it be What impact

analyzed Thinking Feeling will it have on
objectively? those involved?
Jung’s Cognitive Style
Style Ideal Organization
ST Sensing/thinking Facts/ Impersonal Analysis
SF Sensing/feeling Facts & Org. Relationships
NT Intuiting/thinking Broad Issues/ Impersonal & Ideal
NF Intuiting/feeling Serve Humankind/General Values

Cognitive Style
an individual’s preference for
gathering information and evaluating
alternatives
ks
Personality, Attitudes, and Values
ks
Escalation of Commitment
the tendency to continue to commit
resources to a failing course of action
ks
Escalation of Commitment
• Why it occurs
– people dislike inconsistency
– overly optimistic
– illusion of control
– sunk costs
• How to deal with it
– split responsibility for decisions
– closely monitor decision makers
– provide individuals with a graceful exit
– have groups make the initial decision
ks
Risk Aversion
the tendency to choose options
that entail fewer risks and less
uncertainty
ks
Group Polarization
Group Polarization- tendency to shift toward more

extreme positions after group discussion
Risky Neutral Cautious

Groupthink
• Groupthink- syndrome of bad decision-making
12.17
Influences on
Decision Making
Intuition – fast, Creativity – a

positive force in process
decision making influenced by
utilized at a level individual and
organizational
below factors that
consciousness, results in the
involves learned production of
patterns of novel and useful
information ideas, products,
or both
ks
Influences on Creativity
• Individual:
– Cognitive Processes
• Divergent Thinking
• Associational Abilities
• Unconscious Processes Creative performance is
– Personality Factors highest when there is a
match or fit between the
• breadth of interests
individual and
• high energy organizational influences.
• self-confidence
• Organizational:
– Flexible organization structure
– Participative decision making
– Quality, supportive relationships with supervisors
ks
Four Stages of Creative Process
Preparation Incubation Illumination Verification

experience/ reflective, insight into thinking,
opportunity
often solving sharing,
to build
knowledge unconscious a problem testing the
base thought decision
Providing
challenges
Encouraging Allowing
risk taking freedom
Establishing a
Creative
Atmosphere
Involves. . .
Providing Allocating
organizational ample
support resources
Providing
encouragement Creativity!
XUB/KS
Brainstorming
Nominal
Self-Managed
Group
Teams
Technique
Group
Decision
Dialectical Techniques Delphi
Inquiry
Technique
Quality Circles Devil’s Advocacy

and Quality Teams
Brainstorming
Origin
• During war periods, psychologists advanced the
concept of brainstorming to generate creative solutions
• Consists of 2 stages :
Greenlight stage: Evaluation-free atmosphere
Redlight stage: Subsequent evaluation
• Later formalization by Alex Osborn (1957) – An

Advertising Executive
Four basic rules
1. Be expressive
2. Postpone evaluation
3. Seek quantity
4. Piggyback ideas
Conducted in group, hence participants can
draw from one another; can revise
Barriers
1. Combination and cognitive losses
(forgetting in course of waiting)
2. Evaluation apprehension
3. Social comparison
4. Often overestimate their own contribution

(Study  report an average of 36% of ideas;
inreality 25%)
Nominal Technique (Nominee
Group Technique NGT)
Steps 1. Leader introduces a task
2. Member sharing the idea sit in round robin
manner)
3. Group discusses each idea
4. Members evaluate solution (assign marks)
• Leader collects cards and informs group outcome

• If the group so desires, they may re-discuss (Step 5) and
re-vote (Step 6)
Delphi Technique
Root: Delphic Oracle

Features
* Used when expert opinions are needed
* Coordinator of group decision uses several
waves of Questionnaire to solicit expert
opinion
* Consensus is derived through several waves
of questionnaires
Electronic Brainstorming (EBS)
Use of software design called group decision

support system or group work
Group System opens several windows on each

group member’s computer
1. One window for entering ideas
2. another window displays all ideas
3. shows a counter that tracks how many
ideas have been entered
Advantage Contd…….
1. No waiting hence no production blocking
2. Less evaluation apprehension
3. Greater persistence
Disadvantages
1. Can overwhelm group members with a flood of
information
2. Members become so focused on generating
ideas that they forget or do not pay attention to
others’ ideas
Conclusion Yet it is good

Decision Making

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Individual Decision Making

Repetitive, routine, Novel, complex, difficult,

Business firm: Periodic Business firm:

Type of problem Structured Unstructured

Managerial level Lower level Upper level

Frequency Repetitive New, unusual

Information Readily available Ambiguous or

Time frame for Short Relatively long

Solution relies on Procedures, rules, Judgment and

Gather and evaluate data

List and evaluate

1. The outcome will be completely rational

constraints that force a decision

maker to be less than completely

Can it be What impact

Style Ideal Organization

ST Sensing/thinking Facts/ Impersonal Analysis

SF Sensing/feeling Facts & Org. Relationships

NT Intuiting/thinking Broad Issues/ Impersonal & Ideal

NF Intuiting/feeling Serve Humankind/General Values

gathering information and evaluating

resources to a failing course of action

that entail fewer risks and less

Group Polarization- tendency to shift toward more

Risky Neutral Cautious

Intuition – fast, Creativity – a

Preparation Incubation Illumination Verification

Quality Circles Devil’s Advocacy

• Later formalization by Alex Osborn (1957) – An

4. Often overestimate their own contribution

• Leader collects cards and informs group outcome

Root: Delphic Oracle

Use of software design called group decision

Group System opens several windows on each

Conclusion Yet it is good

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