decision making by individuals and

groups

KNOWLEDGEKNOWLEDGE OBJECTIVESOBJECTIVES

Describe the fundamentals of decision making, including the basic steps and the need to balance ideal and satisfactory decisions.

Discuss four important decision-making styles, emphasizing the effectiveness of each one.

Explain the role of risk-taking propensity and reference points.

Define cognitive bias and explain the effects of common types of cognitive bias on decision making.

Explain the role of moods and emotions in decision making.

Discuss common pitfalls of group decision making.

Describe key group decision-making techniques.

Explain the factors managers should consider in determining the level of associate involvement in managerial decisions.

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DECISIONS

DECISION-MAKING PROCESS

Adapted from Exhibit 10-1: The Decision-Making Process

Define the Problem

Identify Criteria

Gather and Evaluate Data

List and Evaluate Alternatives

Select Best Alternative

Implement and Follow Up

Feedback

TYPES OF DECISIONS

Optimal

Best Choice

maximize objectives

complete knowledge

know outcomes

Satisficing

Satisfactory Choice

satisfies objectives

incomplete knowledge

probable outcomes

DECISION MAKING STYLESIndividuals’ predispositions can affect

decision process at two critical stages

DECISION-MAKING STYLES

Adapted from Exhibit 10-2: Influence of Decision Styles

Implement and Follow Up

Pe

rce

ptu

al

Infl

ue

nce

s Intuition

Ju

dg

men

tal

Infl

ue

nce

s

Fe

edb

ack

Identify Criteria

Gather and Evaluate

Information

List and Evaluate Alternatives

Select Best Alternative

Define the Problem

Using the five senses to identify

factual details

FeelingThinking

Subjective values with emotional and

personal factors

Objective analysis, rational

procedures

DEGREE OF ACCEPTABLE RISK

Risk

outcome of an action is uncertain

Risk-taking Propensity

willingness to take chances

lower versus higher propensity

Reference Point

performance level used to evaluate current standing

COGNITIVE BIASMENTAL SHORTCUTS INVOLVING SIMPLIFIED WAYS

OF THINKING

MOODS AND EMOTIONS

Mood

General positive or negative feelings disconnected from any event or stimulus

Positive Mood

neglect decision details

less conservative

more creative and risk-taking

Emotion

Specific feelings associated with particular events, people, or other stimuli

Regret

Anger

GROUPTHINK

COMMON INFORMATION BIAS

DIVERSITY-BASED INFIGHTING

Group members engage in unproductive, negative conflict over differing views.

RISKY SHIFT

DECISION-MAKING PROCESS

Adapted from Exhibit 10-3: Group Decision-Making Phenomena – Pitfalls and Techniques

Risky Shift

Devil’s Advocacy

Brainstorming

Group Decision Making

Dialectical Inquiry

Delphi Technique

Nominal Group

Technique

Diversity-based

InfightingGroupthink

Common Information

Bias

WHO SHOULD DECIDE?

Adapted from Exhibit 10-4: Managerial Approaches to Associate Involvement in Decision Making

Low High

Level of Associate Involvement in Decision

AI Manager solves problem or makes decision aloneAII Manager requests information but not alternativesCI Manager explains problem individually but makes decision

aloneCII Manager explains problem to group, gets suggestions,

makes decision aloneGII Manager explains problem to group, facilitates problem

solving, implements decision supported by the group

AI AII CI CII GII

VROOM-YETTON METHOD

14-CII

10-AII

4-AI

1-AI 2-AI

3-GII

5-AI

9-AII

11-CII

13-CII

12_GII

6-GII7-CII

8-CI

No

Yes

No

No

No

No

NoNo

No

No

NoNo

NoNo

No

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Decision points

Recommended strategies

A B C D E F G

Pro

ble

m

Adapted from Exhibit 10-5: Decision Tree Method for Diagnosing the Appropriate Level of Subordinate Involvement in Decisions

GROUP DECISION MAKING

Adapted from Exhibit 10-6: Advantages and Disadvantages of Group Decision Making

Accumulate more knowledge and facts and generate better alternatives.

Often display superior judgment when evaluating alternatives.

Involvement in decisions leads to a higher level of acceptance and satisfaction.

Can result in growth for members of the group.

AdvantagesAdvantagesTake more time to reach decisions than do individuals.

Social interactions may lead to premature compromise.

Often dominated by one or two “decision leaders.”

Managers may rely too much on group decisions – lose their own skills.

DisadvantagesDisadvantages

GROUP VERSUS INDIVIDUAL?

Time

Cost

Nature of Problem

Satisfaction and Commitment

Personal Growth

STRATEGIC LENS

Check out http://wileymanagementupdates.com/ for daily articles related to management in the news .

You are a manager of a unit with 25 associates. You have just been informed that you must lay off 20 percent of the associates in your unit. What process will you follow to make the decision and to implement it?

If you made a decision that your manager told you was important for the organization and later you learned that you made an error in that decision, what actions would you take? Assume that others will not notice the error for some time.

You make decisions on a daily basis. Do you find it difficult to make decisions, especially those of importance? What can you do to improve your decision-making abilities?