Decision Making Processes by rt3463df


									Decision Making Processes

Individual Decision Making
Organisation Decision Making
The Learning Organisation
Contingency Decision-Making Framework
Special decision circumstance
                        Business Environment
   • New strategies
   • Reengineering
   • Restructuring
   • Mergers/Acquisitions
   • Downsizing
   • New product/market development
   • . . . Etc.

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                Decisions Made Inside the Organization

   • Complex, emotionally charged issues

   • More rapid decisions

   • Less certain environment

   • Less clarity about means/outcomes

   • Requires more cooperation

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                 A New Decision-Making Process

   • Required because
          • no one person has enough info to make all major
          • No one person has enough time and credibility to
            convince many
   • Relies less on hard data
   • Guided by powerful coalition
   • Permits trial and error approach

Business 5301

Organisational Decision Making – process of identifying and
  solving problems
Two major stages:
1. Problem identification
2. Problem solution (also includes alternative forms of action)
Two types of decision
•    Programmed
•    Non-programmed

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   • Non-programmed decisions usually involve strategic planning
   • Today’s managers and organisations are dealing with a higher
     percentage of non-programmed decisions because of rapidly
     changing business environment
   • See Exhibit 12.1

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                Steps in the Rational Approach to Decision-Making

                                       Implement        Monitor
                                         Chosen         Decision
                                       Alternative    Environment

                                 Choose                          Define
                                  Best            8   1         Decision
                               Alternative                      Problem
                                              7           2

                                 Evaluate     6           3    Specify
                               Alternatives       5   4        Decision

                                       Alternative     Diagnose
                                        Solutions      Problem

Business 5301
Individual Decision Making

Two ways of describing:
1. Rational – which suggests how managers should try to make
2. Bounded rationality perspective – which describes how
     decisions actually have to be made under severe time and
     resource constraints
•    Rational decision making approach is an ideal that is very
     difficult to reach

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Rational Approach

• Need for systematic analysis of a problem followed by choice
   and implementation in a logical, step-by-step sequence
• Not ideal or fully achievable – but the rational model helps
   managers think about decisions more clearly and rationally
• Steps are
1. Monitor the decision environment
2. Define the decision problem
3. Specify decision objectives
4. Diagnose the problem

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Rational Approach

5. Develop alternative solutions
6. Evaluate alternatives
7. Choose the best alternative
8. Implement the chosen alternative

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Bounded rationality perspectives

   • Try and use systematic procedures to arrive at good decisions
   • Very difficult to evaluate all the factors
   • There is a limit to how rational managers can be
   • Many other constraints impinge on the decision maker (see
     Exhibit 12.3)
   • Corporate culture and ethical values also influence decision
     making – personal constraints also involved
   • Need for intuitive decision making
   • Previous experience and judgement

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                                                                    Constraints and Trade-offs
                                                             During Non-programmed Decision-Making

                         Bounded Rationality:
                    Limited time, information,
                 resources to deal with complex,
                     multidimensional issues

                                                                        Personal Constraints:                    Decision/
                                        Trade-off                   Desire for prestige, success;                 Choice:
                                                                    personal decision style; and                  Search for
                                                                   the need to satisfy emotional                a high-quality
                                                                    needs, cope with pressure,                     decision
                                        Trade-off                      maintain self-concept                     alternative

                 Organizational Constraints:
                   Need for agreement, shared
                    perspective, cooperation,                                              Trade-off
                  support, corporate culture and
                     structure, ethical values
                Sources: Adapted from Irving L. Janis, Crucial Decisions
Business 5301   (New York: Free Press, 1989); and A. L. George, Presidential
                Decision Making in Foreign Policy: The Effective Use of
                Information and Advice (Boulder, Colo.: Westview Press, 1980).
                     Choice Processes in the Carnegie Model

                  Uncertainty       Coalition Formation          Search
                Information is      Hold joint discussion   Conduct a simple,
                limited             and interpret goals     local search
                Managers have       and problems
                many constraints                            Use established
                                    Share opinions          procedures if
                    Conflict                                appropriate
                                    Establish problem
                Managers have       priorities              Create a solution
                diverse goals,                              if needed
                opinions, values,   Obtain social support
                experience          for problem, solution

                                                            Adopt the first
                                                            that is acceptable
                                                            to the coalition
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                The Incremental Decision Process Model

Identification Phase
  • Recognition
  • Diagnosis
Development Phase
  • Search
  • Screen
  • Design
Selection Phase
  • Judgment (evaluation – choice)
  • Analysis (evaluation)
  • Bargaining (evaluation – choice)
  • Authorization
  Dynamic Factors
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     Learning Organization Decision Process When Problem
       Identification and Problem Solution Are Uncertain


                                                    When problem solution is
                When problem identification is      uncertain, Incremental process
                uncertain, Carnegie model applies   model applies

                Political and social process is     Incremental, trial-and-error
                needed                              process is needed

                Build coalition, seek agreement,    Solve big problems in little steps
                and resolve conflict about goals
                and problem priorities              Recycle and try again when

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Illustration of Independent Streams of Events in the Garbage
                 Can Model of Decision-Making

                                          Problems           Solutions

                                             Middle Management
                        Participants              Solutions              Participants

                   Choice Opportunities                                  Choice Opportunities
                      Department A                   Solutions              Department B
                        Problems                    Choice                    Problems
                        Solutions                Opportunities                Solutions
                         Choice                                                Choice
                      Opportunities                                         Opportunities
                      Participants               Participants               Participants

                Solutions         Problems                         Problems             Solutions
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                       Participants                                        Participants
                Contingency Framework for Using Decision Models

                             Certain                   Problem                   Uncertain

                  Certain    1                             2
                                 Individual:                   Individual:
                                  Rational Approach             Bargaining, Coalition
                                  Computation                   Formation

                                 Organization:                 Organization:
                                  Management Science            Carnegie Model
                             3 Individual:                 4 Individual:
                                Judgment                      Bargaining and Judgment
                                Trial-and-error               Inspiration and Imitation
                                                             Learning Organization:
                                 Organization:                Carnegie and Incremental
                 Uncertain        Incremental Decision        Decision Process Models,
                                  Process Model               Evolving to Garbage Can

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                Special Decision Circumstances

   • High-Velocity Environments

   • Decision Mistakes and Learning

   • Escalating Commitment

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