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Chapter 8: Organizational Decision making

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TYPES OF DECISIONS!
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Organizational decision making "


- formally defined as the process of identifying and solving problems"
- Problem identification: determine if the performance is satisfactory and to
diagnose the shortcomings."
- Problem solution: alternative courses of action are considered and one is
chosen. "

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Programmed Decisions!
- Repetitive and well defined and procedures exist to solve problems"
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ex. Whether to change the old copying machine"

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Non programmed Decisions !


- Novel and poorly defined and no procedures exists for solving the problem"
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ex. Emergence of the Smartphone era vs. Nokia"

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INDIVIDUAL DECISION MAKING!
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RATIONAL APPROACH!
- Ideal method for how managers should make decisions"
- Involves and 8 step decision making "
1.
2.
3.
4.
5.
6.
7.
8.

Monitor the decision environment "


Define the decision problem"
Specify decision objectives"
Diagnose the problem "
Develop alternative solutions "
Evaluate alternatives"
Choose best alternative "
Implement the chosen alternative"

Chapter 8: Organizational Decision making


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BOUNDED RATIONALITY PERSPECTIVE!
- Limit on how rational managers can be - time and resource constraints (Non
programmed decisions) "
- Constraints and tradeoffs:!
Personal constraints: Such as decision style, work pressure, desire for prestige, or
simple feelings of insecurity - constrain the search for alternatives or the
acceptability of an alternative."
Role of intuition: Experience and judgement rather than logic. Managers make
decisions based on what they sense to be right rather than on what they can
document with hard data."

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ORGANIZATIONAL DECISION MAKING!
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MANAGEMENT SCIENCE APPROACH!


- Analog to the rational approach "
- Use of statistics and mathematical procedures to develop solutions to complex
problems."

- Good tool for decisions where variables can be identified and measured "
- A drawback of management science is that quantitive data are not rich and lack tacit

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knowledge "
Managers have to sense informal clues that indicate problems."
In these situations, the role of management science is to supplement manager
decision making "

CARNEGIE MODEL!
- Involves many managers and a final choice based on a coalition among those
managers. "

- coalition: managers who agree about organizational goals and problem priorities. "
- Reasons why coalition is used:"

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Organizational goals are often ambiguous. and operative goals of the departments
are often inconsistent."
Individual managers intend to be rational but functions with human cognitive
limitations and other constraints. "
- Satisficing: organizations accept satisfactory rathe than maximum level of performance "
- Problemistic search: Managers look around immediate environment for a solution to
quickly resolve a problem. "

INCREMENTAL DECISION MAKING !


- Focused on structured sequence of activities undertaken from the discovery of a

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problem to its solution "


- Identification Phase:"
recognition - one or more managers become aware of a problem and the need to
make a solution. "
Diagnosis - when more information is gathered when needed to define a problem. "

Chapter 8: Organizational Decision making

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- Development Phase: solution is shaped to solve the problem in the identification stage"
Search - procedures may be used to seek out alternatives"
Design - Happens when the problem is novel so that previous experience has no
value. "
- Selection Phase: solution is chosen!
Judgement - when final choice is up to a single decision maker"
Bargaining - selection involves a group of people"
Analysis - evaluated on a more systematic basis"
Authorization - when the decision is passed on to the hierarchy!
- Dynamic Factors!

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ORGANIZATIONAL DECISIONS AND CHANGE!
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GARBAGE CAN MODEL!


- Deals with pattern or flow of multiple decisions within the organization."
- Thinks of the whole organization and the frequent decisions being made by managers

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throughout."
- Organized anarchy: Experiences tremendous uncertainty; an extremely organic
organizations. Happens when:"
1. Problem preferences "
2. Unclear, poorly understood technology"
3. turnover"

- Streams of events: Not seen as a streamline of steps that begin with a problem and ends
with a solution."
1. Problems"
2. Potential solution"
3. Participants!
4. Choice of opportunity!

- Consequences: four specfic techniques of the garbage can model"


1.
2.
3.
4.

Solutions may be proposed even when problems do not exist"


Choices are made without solving problems"
Problems may persist without being solved "
A few problems are solved "

Chapter 8: Organizational Decision making

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CONTINGENCY DECISION-MAKING FRAMEWORK!
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SPECIAL DECISION CIRCUMSTANCES !
High-velocity environments!
- Characterized by rapid competitive and technological changes"
- Learn from decision mistakes "

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Decision mistakes and learning!


- Decision learning: acquire sufficient experience and knowledge to perform more

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effectively in the future."

Cognitive Biases: serve as errors in judgement that all human are print to and that typically

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lead to bad choices!


- Escalating commitment: Managers continue to follow a course of action after it should
be deemed a failure, unwilling to acknowledge a mistake and put additional resources
into a poor course of action. They block or distort negative information"
- Prospect theory - Most managers have a tendency to analyse problems in terms of
what they fear losing rather than what they might gain"
- Groupthink - Tendency of people in groups to suppress contrary actions."

OVERCOMING PERSONAL BIASES!


- Evidence-Based Management: Means a commitment to make more informed and
intelligent decisions based on the best facts and evidence"

- Encourages dissent and diversity: Some groups assign a devils advocate, who has the
role of challenging the assumptions and assertions made by the group.