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Behaviour and decision making

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					Topic 3



Behaviour and decision making
     o Decision Making

     o The Decision Making Process

     o Alternative Decision Making Models

     o Decision Making Aids

     o Self-Concept and Decision Making

     o Implications for Managers

     o Summary




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TOPIC 3:   Behaviour   and   decision   making
     Learning objectives

     On completion of this topic, you should be
     able to:

     !"    describe the kinds of decisions managers
           make;

     !"    explain the meaning of rational decision
           making;

     !"    outline the steps in the decision making
           process;

     !"    describe individual attributes such as
           cognitive style, personality and
           motivation and explain how they affect
           decision making;

     !"    describe a number of techniques for
           improving group decision making; and

     !"    discuss and comment on the tactics that
           managers can use to make their decision
           making more effective.




24   B E H A V I O U R A L   A S P E C T S   O F   M A N A G E M E N T
Decision making

Decision making is the lifeblood of any
organisation and the very essence of
management. It is not unusual for a manager
to face decisions about hiring and firing,
product specifications and return on
investment all in the same business day.

Some managers confront decision rationally
and coolly; others decide impulsively or with
only part of the information that they should
use. Some people avoid making decisions
consciously; however, even such passive
people actually have a definite philosophy
about how to confront problems. These people
probably are unaware that their philosophy of
how to confront problems has a decision
making component: they have decided to run
away from problems rather than to rationally
select alternatives.


Definition
Firstly, a decision is a choice made from
available alternatives. Decision making is
the process of identifying a set of feasible
alternatives and, from these, choosing a
course of action.


The decision making process

The decision making process has seven steps.
They are logical and simple in themselves;
but they are all essential to the process:

1.   Define the problem.
2.   Identify the limiting or critical
     factors.
3.   Develop potential alternatives.
4.   Analyse the alternatives.
5.   Select the best alternative or
     combination of best alternatives.
6.   Implement the solution.


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TOPIC 3:   Behaviour   and   decision   making
     7.    Establish a control and evaluation
           system.


     Define the problem
     This is the critical step.

     The accurate definition of a problem affects
     all the steps that follow; if a problem is
     inaccurately defined, every other step in the
     decision making process will be based on that
     incorrect point.

     Is there a good method for a manager to use
     to define the problem? Yes. A manager needs
     to focus on the problem, not the symptoms.
     This is accomplished by asking the right
     questions and developing a sound questioning
     process.

     According to Peter Drucker, ‘‘……the most
     common source of mistakes in management
     decisions is the emphasis on finding the
     right answer rather than the right
     questions.’’


     Identifying the limiting or critical factors
     Limiting factors are those constraints that
     rule out certain alternative solutions. One
     common limitation is time. Resources,
     personnel, money, facilities, and equipment
     are the other common limiting or critical
     factors that narrow down the range of
     possible alternatives.


     Develop potential alternatives
     These alternatives should eliminate, correct,
     or neutralise the problem. Doing nothing
     about a problem sometimes is the proper
     alternative, at least until the situation has
     been thoroughly analysed.

     While building this list of alternatives it
     is wise to avoid being critical or
     judgemental about any alternative that occur,


26   B E H A V I O U R A L   A S P E C T S   O F   M A N A G E M E N T
and for you to be as creative and wide-
ranging as possible.

Sources for alternatives include past
experience, other persons whose opinions and
judgements are respected and the practices of
successful managers.


Analyse the alternatives
The purpose of this step is to decide the
relative merits of each of the alternatives.

!"What are the positives and negatives of
  each alternative?
!"Does the alternative conflict with the
  critical (limiting) factors that you
  identified earlier?
If so they must be automatically discarded.

Depending on the type of problem and the
potential solutions developed, the manager
might need to make more thorough analysis by
applying specific decision making aids. (A
discussion about decision making aids is
covered later in this topic.)


Select the best alternative
By this point, the alternatives have been
listed along with their corresponding
advantages and disadvantages. Which should
be selected? Sometimes the optimal solution
is a combination of several of the
alternatives.

In trying to select an alternative or
combination of alternatives, you must,
reasonably enough, find a solution that
appears to offer the fewest serious
disadvantages and the most common advantages.

Take care not to solve one problem and create
another with your choice.




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TOPIC 3:   Behaviour   and   decision   making
     Implement the solution
     Managers are paid to make decisions, but they
     are also paid to get results from these
     decisions. A decision that just sits there
     hoping someone will put it into effect may as
     well never have been made. Everyone involved
     with it must know what he or she must do, how
     to do it, why, and when.

     Additionally, a good alternative, applied by
     uncommitted persons in a half-hearted way,
     will often create problems, not solve them.

     Like plans, solutions need effective
     implementation to yield the desired results.


     Establish a control and evaluation system
     The final step in the decision making process
     is to create a control and evaluation system.

     Ongoing actions need to be monitored. This
     system should provide feedback on how well
     the decision was implemented, what the
     results are - positive or negative - and what
     adjustments are necessary to get the results
     that were wanted when the solution was
     chosen.

     For a manager who choses this decision making
     process, the probability for success in
     decisions should be improved. Why? Because
     it provides a step-by-step roadmap for the
     manager to move logically through decision
     making.


     Alternative decision making models

     Do individuals actually make their decisions
     the way as described above? Sometimes.

     When decision makers are faced with a simple
     problem having few alternative courses of
     action, and when the cost to search out and
     evaluate alternatives is low, this model



28   B E H A V I O U R A L   A S P E C T S   O F   M A N A G E M E N T
provides a fairly accurate description of the
decision process.

But many decisions, particularly important
and difficult ones - the kind a person has
not encountered before and for which there
are no standardised or programmed rules to
provide guidance - don’t involve simple and
well-structured problems.

 Rather they are characterised by complexity,
relatively high uncertainty (all the
alternatives, for example, are unlikely to be
known), and goals and preferences that are
neither clear nor consistent.

The three alternative decision making models
to consider are:

!"   The Satisficing Model
!"   The Implicit Favourite Model
!"   The Intuitive Model


The Satisficing Model
The essence of this model is that, when faced
with complex problems, decision makers
respond by reducing the problems to a level
at which they can be readily understood. A
model where a decision maker chooses the
first solution that is ‘good enough’ - that
is, satisfactory and sufficient.

Since the capacity of the human mind for
formulating and solving complex problems is
far too small to meet all the requirements
for full rationality, individuals operate
within the confines of bounded rationality.
They construct simplified models that extract
the essential features from problems without
capturing all their complexity.

Individuals can then behave rationally within
the limits of the simple model.




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TOPIC 3:   Behaviour   and   decision   making
     The Implicit Favourite Model

     This, like the previous model, argues that
     individuals solve complex problems by
     simplifying the process, however,
     simplification in the implicit favourite
     model means not entering into the difficult
     ‘evaluation of alternatives’ stage of
     decision making until one of the alternatives
     can be identified as an implicit ‘favourite’.

     In other words, the decision maker is neither
     rational nor objective. Instead, early in
     the decision making process, they implicitly
     select a preferred alternative. Then the
     rest of the decision process is essentially a
     decision confirmation exercise, where the
     decision maker makes sure that their implicit
     favourite is indeed the ‘right’ choice.


     The Intuitive Model

     There are a number of ways to conceptualise
     intuition.

     Let us define intuitive decision making as an
     ‘‘unconscious process created out of
     distilled experience’’. It doesn’t
     necessarily operate independently of rational
     analysis; rather, the two complement each
     other.

     Experience probably gained over many years
     allows managers to recognise a situation and
     draw upon previously learnt information
     associated with that situation to quickly
     arrive at a decision choice. The result is
     that the intuitive decision maker can decide
     rapidly with what appears to be very limited
     information.

     People are most likely to use intuitive
     decision making when the following conditions
     apply:

     !"    when a high level of uncertainty exists;



30   B E H A V I O U R A L   A S P E C T S   O F   M A N A G E M E N T
!"   when there is little precedent to draw
     on;
!"   when variables are less scientifically
     predictable;
!"   when ‘facts’ are limited;
!"   when facts do not clearly point the way
     to go;
!"   when analytical data is of little use;
!"   when there are several plausible
     alternative solutions to choose from,
     with good arguments for each; and
!"   when time is limited and there is
     pressure to come up with the right
     decision.


Decision making aids
We have been looking at influences on
decision making. Now we need to know if
there are some aids to decision making
available to a manager. Here are four of
them.


Involvement of others
A manager can choose to involve others in the
decision making process either through
individual employee participation or through
structured committee. Involvement of other
employees may result in utilising insights
and skills others who may be better equipped
to deal with elements of the decision than
the manager is.


The programming of decisions
Decisions that keep recurring can become
programmed decisions, that is, the known
components can be quantified in routine,
decision making steps or procedures.
Computers are often involved in programmed
decision making. The new and unique
decisions must be made using managerial
intuition, experiences, trial and error, and
creative approaches. Most one-of-a-kind
problems require a non-programmed approach

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TOPIC 3:   Behaviour   and   decision   making
     because few, if any, precedents or procedures
     exist that would apply.


     Using decision trees
     A decision tree is a pictorial representation
     of a potential decision. It allows the
     manager to show graphically which actions
     could be taken and how these actions relate
     to future events.

     Decision trees require the manager to draw
     out only those decisions and events or
     results that are important. These are ones
     that have consequences that need to be
     compared.


     Payback analysis
     If a manager needs to evaluate capital
     purchasing alternatives, a sound strategy is
     to apply payback analysis, which is an
     approach the manager uses to rank
     alternatives according to how long each takes
     to pay back its initial cost. The strategy
     is to choose the alternative that has the
     quickest payback.


     Self-concept and decision making: from a
     behavioural perspective

     An important consideration in deciding which
     decision making style a person will adopt,
     when faced with the need to make a decision,
     is their own self-concept.

     Two researchers, Janis and Mann found that
     the more stressful the decision was for the
     person, the more predictable was the outcome
     based on the self-concept the person had of
     their ability to make the ‘right’ decision.
     If the person was confident or optimistic
     about their ability to make the decision and
     there was sufficient time and information,
     they were likely to adopt a coping pattern
     called vigilance.




32   B E H A V I O U R A L   A S P E C T S   O F   M A N A G E M E N T
When there was similar confidence or optimism
but there was insufficient time to weigh up
all the alternatives, the person could become
stressed, panic and take the least
objectionable alternative. Such a coping
strategy was classified as hyper-vigilance.

The third coping pattern was the defensive-
avoidance approach.
The defensive-avoidance pattern occurs when
the person is not confident of either their
ability to make the decision or the
likelihood of making the right decision.

The defensive-avoidance coping pattern is
characterised by:

!"   procrastination;
!"   buck-passing;
!"   avoiding the decision; or
!"   choosing the least objectionable
     alternative.

Implications for managers

Individuals think and reason before they act.
It is because of this that an understanding
of how people make decisions can be helpful
if we are to explain and predict their
behaviour.

Under some decision situations, people follow
the seven-step model discussed earlier. But
for most people, and most non-routine
decisions, this is probably more the
exception than the rule.

Few important decisions are simple or
unambiguous enough for this model’s
assumptions to apply. So we find individuals
looking for solutions that satisfice rather
than optimise and injecting biases and
prejudices into the decision process.

The alternative decision models presented can
help us to explain and predict behaviours
that would appear irrational or arbitrary if
viewed under normal assumptions.
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TOPIC 3:   Behaviour   and   decision   making
     Illustrative example
     Employment interviews are complex decision
     activities. The interviewer finds themself
     inundated with information. Research
     indicates that interviewers respond by
     simplifying the process.

     Most interviewers’ decisions change very
     little after the first four or five minutes
     of the interview. In a half-hour interview,
     the decision maker tends to make a decision
     about the suitability of the candidate in the
     first few minutes and then uses the rest of
     the interview to select information that
     supports the early decision. In so doing,
     interviewers reduce the probability of
     identifying the highest-performing candidate.
     They bias their decision towards individuals
     who make favourable first impressions.

     Evaluating an employee’s performance is a
     complex activity.
     Decision makers simplify the process by
     focussing on visible and easy-to-measure
     criteria. This may explain why factors such
     as neatness, promptness, enthusiasm and a
     positive attitude are often related to good
     evaluations. It also explains why quantity
     measures typically override quality measures.
     The former category is easier to measure.
     This effort at satisficing encourages
     individuals to take on visible problems
     rather than important ones.

     Finally, managers must guard against the
     tendency to escalate commitments to decisions
     to avoid having to admit a mistake. This
     applies to individual managers and to those
     who report to them.

     Decision making comes with risks and
     sometimes you make the wrong choice. It is
     often less costly to admit a decision error
     when it first surfaces rather than escalating
     commitment to that decision based on
     unrealistic hopes that it may eventually
     proven to have been correct.



34   B E H A V I O U R A L   A S P E C T S   O F   M A N A G E M E N T
Summary

Every management decision has an element of
risk in it. As a result, managers frequently
try to minimise that risk by seeking
additional facts.

Good managers, however, learn when they have
sufficient information to make a decision.
They recognise that they will never have all
the facts they want, and while the search for
additional data can reduce or eliminate risk
or even show a problem doesn’t really exist,
delays have costs. Opportunities can be
missed while waiting for additional
information.

It is analogous to a fearful marksman:
‘Ready, aim, aim, aim, aim….’ He can’t just
pull the trigger!

If it were possible to have so many facts
that the element of decision making were
totally eliminated, the question could be
asked, ‘‘Why do we have managers?’’




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TOPIC 3:   Behaviour   and   decision   making
         Learning activities
         To consolidate your understanding of this topic you should
         complete these activities.



         Activity 1
         Most people when confronted with personal or
         work problems use a trial and error method.
         In this topic you have been presented with a
         seven-stage decison-making approach.

         Identify a work-based problem, and using
         this approach, provide information for each
         key stage in order to resolve the problem.

         [This is a reasonable sized activity so it
         may take you a up to an hour to complete,
         depending on the complexity of the problem
         you have identified.]


         Activity 2
         Review the alternative decision making
         models of the Satisficing Model, the
         Implicit Favourite Model and the Intuitive
         Model. For each model, provide an example of
         the circumstance where you might use the
         decision making models to resolve a work-
         based problem.

         Activity 3
         As a manager, what would you do if you made
         a wrong decision or the expected solution
         did not eventuate? What action(s) would you
         take to rectify the situation?


         Activity 4
         Identify a decision making aid you have used
         in the past or could use in the future.
         Explain briefly how you used it (or could
         use it) to help resolve a work-based
         problem.




36   B E H A V I O U R A L   A S P E C T S   O F   M A N A G E M E N T
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TOPIC 3:   Behaviour   and   decision   making

				
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