Decision Making by Individuals and Groups

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					     Chapter 10
    Decision
    Making by
   Individuals
   and Groups
  Michael A. Hitt
  C. Chet Miller
 Adrienne Colella

Slides by Ralph R. Braithwaite
                           10-1
 Dawn Ostroff’s Decision Making
  at the CW Television Network
            • What are your thoughts about Ostroff’s
               decision-making process regarding
               programming at the “new” network?
             • Given the nature of the decisions needed, did
               she used the knowledge and wisdom of her
Dawn Ostroff   advisors wisely?
             • What are your thoughts about the “creative
               and somewhat risky tactics” that were
               adopted?
             • Do you think the network will survive and be
               successful in the future?

          Exploring Behavior in Action                     10-2
        Knowledge Objectives
1. Describe the fundamentals of decision making,
   including the basic steps and the need to balance
   ideal and satisfactory decisions.
2. Discuss four important decision-making styles,
   emphasizing the effectiveness of each one.
3. Explain the role of risk-taking propensity and
   reference points.
4. Define cognitive bias and explain the effects of
   common types of cognitive bias on decision making.
5. Discuss common pitfalls of group decision making.
6. Describe key group decision-making techniques.
7. Explain the factors managers should consider in
   determining the level of associate involvement in
   managerial decisions.
                                                        10-3
    Fundamentals of Decision
           Making
Decisions are choices of actions from among
multiple feasible alternatives.
Making decisions is one of the primary activities
of senior managers.
Decisions are also made by managers at all
levels and by associates in high-involvement
organizations.



                                                    10-4
         Decision-Making Process
                                     Define the Problem

                                        Identify Criteria

                                Gather and Evaluate Data
Feedback
                            List and Evaluate Alternatives

                                  Select Best Alternative

                                Implement and Follow Up

Adapted from Exhibit 10-1: The Decision-Making Process       10-5
Optimal versus Satisfactory
        Decisions
 Optimal decision   Satisficing decision




                                           10-6
            Decision-Making Styles
            Individuals’ predispositions can affect
            decision process at two critical stages
                 Gathering         Evaluating
Carl Jung
                (Perceiving)      (Judging) of
               of Information     Alternatives

                Sensing style     Thinking style
                Intuition style    Feeling style




                                                   10-7
              Define the
               Problem                       Decision-Making
           Identify Criteria                      Styles


                               Perceptual
                                                 Sensing                       Intuition




                               Influences
             Gather and
               Evaluate                        Using the five          Using abstractions
Feedback




             Information                     senses to identify        and describing the
                                               factual details            “big picture”


           List and Evaluate
                               Judgmental
                                Influences

                                                Objective              Subjective values
              Alternatives
                                             analysis, rational        with emotional and
                                               procedures               personal factors
             Select Best
             Alternative                         Thinking                      Feeling

              Implement
            and Follow Up       Adapted from Exhibit 10-2: Influence of Decision Styles    10-8
     Gathering Information
     Sensing                  Intuition
   A decision style         A decision style
focused on gathering    focused on developing
concrete information       abstractions and
 directly through the   figurative examples for
   senses, with an      use in decision making,
emphasis on practical     with an emphasis on
 and realistic ideas.       imagination and
                              possibilities.




                                                  10-9
      Intuition Style
Valuable when:
• A high level of ambiguity exists
• Few or no precedents exist
• Facts are limited
• Facts don’t clearly indicate which way to go
• Time is limited and there is pressure to make the
  right decision
• Several plausible alternative solutions exist with
  good arguments for each



                                                       10-10
    Evaluating Alternatives
     Thinking                Feeling
  A decision style        A decision style
focused on objective   focused on subjective
   evaluation and        evaluation and the
systematic analysis.   emotional reactions of
                              others.




                                                10-11
                 Nurturing Alternative
Managerial
                   Decision Styles
Advice       What are your thoughts about the comment that
             many accountants believe that more data is
             better and they hide behind “a mass of data”?
             What are your thoughts that some marketers
             have “blind spots” when it comes to having to
             do data analysis?
             What are you thoughts about the Six Thinking
             Hats concept of Edward de Bono?




                                                         10-12
Edward de Bono
   Degree of Acceptable Risk
• Risk exists when the outcome of a chosen
  course of action is not certain
• Risk-taking propensity (Willingness to take
  chances)


                 Reference
                   Point




                                                10-13
          Cognitive Biases
Confirmation bias                Ease of recall bias
Seeking information              Relying too much on
that confirms early              information that is
beliefs and ideas                easy to recall from
                                 memory
                       Cognitive Mental shortcuts involving
 Sunk-cost bias         Biases simplified ways of thinking
 Not treating past
 investments (time,                Anchoring bias
 effort, money) as sunk-           Emphasizing too
 costs when deciding to            much the first piece
 continue an investment            of information
                                   encountered


                                                          10-14
    Mount Everest Expeditions
• What role do “sunk costs” play in many decisions?
• Why would someone like Rob Hall ignore his pre-
  determined turnaround time?
• Have you experienced the “perils of sunk cost” in
  your work or personal lives? Give examples.




 George Mallory (R)
 and Andrew Irvine
                                   Sir Edmund Hillary (L)
    Experiencing       Rob Hall     and Tenzing Norgay
                                                        10-15
    Strategic OB
      Group Decision Making
• Some members may arrive with their own
  expectations, problem definitions, and pre-
  determined solutions
• Some members may have given more thought
  to the decision situation and what is to be
  accomplished
• Focus of the team leader may be in developing a
  collaborative team rather than developing
  individual decision making skills



                                                10-16
         Decision-Making Process
                            Common                       Diversity-
                          Information                      based
                              Bias                       Infighting
  Groupthink
                                                                           Risky Shift

                                         Group
Brainstorming
                                        Decision
                                         Making                                Devil’s
                                                                              Advocacy


         Nominal
          Group                                                  Dialectical
                                         Delphi
        Technique                                                 Inquiry
                                       Technique


Adapted from Exhibit 10-3: Group Decision-Making Phenomena – Pitfalls and Techniques     10-17
Group Decision-Making
       Pitfalls
                           Common
             Groupthink   Information
                              Bias


       Diversity-
                     Risky         Brain-
         Based
                     Shift        storming
       Infighting


  Nominal
               Delphi     Dialectical    Devil’s
   Group
             Technique     Inquiry      Advocacy
 Technique
                                                   10-18
           Vroom-Yetton Method

Victor Vroom                                         Philip Yetton
Requires managers to diagnose the problem situation and
then determine the extent to which associates will be
involved in the decision-making process. The involvement
depends on the probable effect participation will have on:
• the expected quality of the decision
• the acceptance or commitment needed from associates to
  implement the solution
• the amount of time available (and needed) to make the
  decision.


                                                             10-19
                    Who Should Decide?
              Level of Associate Involvement in Decision

  Low                                                                              High

  AI                    AII                 CI                 CII                   GII

  AI Manager solves problem or makes decision alone
  AII Manager requests information but not alternatives
  CI Manager explains problem individually but makes
      decision alone
  CII Manager explains problem to group, gets suggestions,
      makes decision alone
  GII Manager explains problem to group, facilitates problem
      solving, implements decision supported by the group


Adapted from Exhibit 10-4: Managerial Approaches to Associate Involvement in Decision Making   10-20
                Vroom-Yetton Method
 Questions asked to determine level of associate
 involvement in decision making
  A. Is there a quality requirement such that one solution is likely to
     be more rational than another solution, or will any number of
     solutions work reasonably well?
  B. Do I have sufficient information to make a high-quality decision?
  C. Is the problem structured (do I know the question to ask and
     where to look for relevant information)?
  D. Is acceptance of the decision by associates critical to effective
     implementation?
  E. If I were to make the decision by myself, is it reasonably certain
     that it would be accepted by my associates?
  F. Do the associates share the organizational goals to be attained in
     solving this problem?
  G. Is conflict among associates likely in preferred solutions?

Adapted from Exhibit 10-5: Decision Tree Method                      10-21
                    Vroom-Yetton Method
          A         B          C              D              E               F            G

                                                  No        1-AI    Yes    2-AI

                                                  Yes               No
                                                                          3-GII
                        No                                  4-AI
                                                  No                                                   7-CII
                                                                                         6-GII
Problem




                                                                   Yes     5-AI    Yes
                                                  Yes
                                                                     No                            Yes
                                                                                    No
                             Yes                                   No                             No
              Yes
                                                  Yes
                                      Yes                          Yes    9-AII                        8-CI
                                                   No
                        No                              10-AII
                                       No                          Yes    11-CII
                                                  Yes                                    12_GII
                                                                                   Yes
                                                                    No
                                                       No                          No
                                                                                         13-CII
                                                        14-CII
              Decision points
                Recommended strategies

Adapted from Exhibit 10-5: Decision Tree Method                                                          10-22
  Vroom-Yetton Model and the
          Civil War
• What are your thoughts regarding the application of
  the Vroom-Yetton Model to the Civil War battles
  discussed in the text?
• How could you use this model to “fight” some of your
  “battles” in your life?




    Experiencing
                                                         10-23
    Strategic OB
 Value of Individual vs. Group
       Decision Making
Important considerations for judging the overall
value of group decision vs. individual decision
making include:

          Time                     Cost


      Nature of the          Satisfaction and
        Problem               Commitment


                 Personal Growth

                                                   10-24
          Group Decision Making
         Advantages                                      Disadvantages
Can accumulate more                              Take more time to reach
knowledge and facts and                          decisions than do individuals.
generate better alternatives.
Often display superior                           Social interactions may lead to
judgment when evaluating                         premature compromise.
alternatives.
Involvement in decisions leads                   Often dominated by one or two
to a higher level of acceptance                  “decision leaders.”
and satisfaction.
Can result in growth for                         Managers may rely too much on
members of the group.                            group decisions – lose their
                                                 own skills.


 Adapted from Exhibit 10-6: Advantages and Disadvantages of Group Decision Making   10-25
            The Strategic Lens
1. You are a manager of a unit with 25 associates. You
   have just been informed that you must lay off 20% of
   the associates in your unit. What process will you
   follow to make the decision and implement it?
2. 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.
3. 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?                            10-26
Questions




            10-27

				
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