Decision-making in organizations Alexander Styhre peer e ie CU} School of Business, Economics, and Law Winrlenm acter stirs Sous MET CUE tel AOInstrumental and rational views of decision-making * “Decision-making has five distinct phases: Defining the problem; analysing the problem; developing alternate solutions; deciding upon the best solution; converting the decisoon into effective action”. (Drucker, 1955: 312) * Decision-support systems, “rational models” for decision making etc.Behavioral theories of decision (I) Herbert Simon and the Carnegie-Mellon school of research. The “cognitive revolution in psychology” in the 1940s and 1950a. Simon was awarded the Nobel Prize in Economics in 1976. “How decisions are made in practice rather than in theory?” the overarching research question “In a society based on reason, rationality, and a conception of intellectual human control over destiny, decision making is a sacred activity. The world is imagined to be produced by deliberate human action and responsive to human intention” (March, 1994: 216) “\deas of willful, rational choice are the standard terms of discourse for answering the generic questions: Why did it happen? Why did you do it?” (March, 1991: 97) “Rationality has become a compelling creation myth for decisions.” (Carruthers and Espeland, 1991: 57)Behavioral theories of decision (II) Rem ee meen ecg “The capacity of the human mind for formulating and solving complex problems is very small compared to the size of the problems whose solutions is required for objective rational Peg Cu ben eV een ee ee tune e Re ae rationality” (Simon, 1957: 198, Original in italics) iene Ras cg cen eC cee of an actor requires him to construct a simplified model of the real situation in order to deal with it” (Simon, 1957: 199) oie “Most human decision-making, whether individual or organizational, is concerned with the discovery and selection of satisfactory alternatives; only in exceptional cases it is concerned Pana econ ees aie oe aurea} “ A] decision may be called ‘objectively’ rational if in fact it is the correct behaviour for maximizing given values in a given situation. It is ‘subjectively’ rational if it maximizes attainment relative to the actual knowledge of the subject”. (Simon, 1976: 76) Sequential attention to goalsBehavioral theories of decision (III) * The concept of attention « “Attention is a scarce resource; theories of limited rationality are, for the most part, theories of allocation of attention.” (March, shs}s)iies}))Garbage-can decision making (I) Decisions are not always preceded by perceived problems but instead solutions “may look for problems”; a non-linear model of decision- making. “Tossed into a garbage can is a loosely coupled mix of (1) problems or issues looking for solutions; (2) solutions looking for problems to resolve; (3) participants with different amounts of time and energy; (4) choice situations waiting to be actualized”. (Powell, 1985: 96)Garbage-can decision making (II) “In a garbage-can process, it is assumed that there are exogenous, time-dependent Arrivals of choice opportunities, problems, solutions, and decision makers. Problems and solutions are attached to choices, and thus to each other, not because of means- ends linkages but because of their temporal proximity. The logic of ordering is temporal rather than hierarchical and consequential.” (March, 19914: 109) In summary “Decisions in organizations involve an ecology of actors trying to act rationally with limited knowledge and preference coherence; trying to discover and execute proper behavior in ambiguous situations; and trying to discover, construct, and communicate interpretations of a confusing world.” (March, 1991: 111)"Decision rationality” vs “Action rationality” Brunsson (1982), Follow prescribed decision making routines (Decision rationality) or a accomplish objectives (Action rationality). “Much of the behaviour in an organization is specified by standard operating procedures, professional standards, cultural norms and institutional structures. The terminology is one of duties and roles rather than anticipatory, consequential choice.” (March, 1991: 105)Legitimizing decisions: The collection of information Pe Ne aA erg em peel ea eer ec ee Pee eos (2) Much of the information that is used to justify a decision is collected and interpreted after the decision is made, or substantially made MeN nun tence ies ease ce aos a en rate oe CMC eee ec Cle al una OC ees ttc) (4) Regardless of the information available at the time a decision is first considered, more Feels Veco (5) Complaints that an organization does not have enough information to make a decision occur OPEN CIEE cane iS sco (6) The relevance of the information provided in the decision-making process to the decision being made is less conspicuous than is the insistence on information, in short, most organizations and EMM eee oat erates nour ortega Rau nae ene a tect humiliated rete hi mee ermr ttt tae ae ‘or complaining about inadequacies in information” (Feldman and March, 1981: 174) eee eel atu CREO UCR kee een cele mee Cares tasersInstitutional logic * “Institutional logics define the norms, values, and beliefs that structure the cognition of actors in organizations and provide a collective understanding of how strategic interests and decisions are formulated.” (Thornton, 2002: 82) « “[T]he question what decisions is organizations ‘are’ (and correspondingly what the ‘are not’), must olalaatelaINVm Lemley co1a=1e No) a =1ic laa aman RNAI e clear ARS) MoNe 1 alP4=1o kolo (e) aM nar Ug aN decision is thus everything a system regards as a decision.” (Luhmann, 2003: 35)Three models for political decision- making MECC a arene ctuCuicl cir ieicecun etutessceear cian understood by analogy with the purposive acts of individuals. In many cases this is ERR an LeeLee Malle mene Mans Yom Nel coordinated, purposive individuals provide a useful shorthand for understanding problems of policy. But this simplification—like all simplifications—obscures as well as reveals, In particular, it obscures the persistently neglected fact of Pearl ced ata iuluia llc maculae let eri a: eecriong maker but is rather a conglomerate of large organizations and political actors”. (Allison, 1971; 3) “Most analysts explain (and predict) the behavior of national governments in Pee aise uc ku curiae cee eee Model’, (Allison, 1971: 4. The original in italics) a eel meee Mitel mice) lle Ree cL eee Cele (Model II) and a Governmental (Bureaucratic ) Politics Model (Model |!!), provide PEreeaciatniteartencehih sc letcw Ute melcr sein int ttre italics)Decision-making in practice (1) el FeV clico ae ltoleMUla =] acl i ny aeal-] eae) Mice) aaa Clima csi) cic 10 (ear of the environments through decisions . . . Their decision style is most oh iclam aterm at-1Mole-ecli(r1N-Ta1\ em NS) a oleic aer old ny ae a clad thinking’ (Isenberg, 1984) and basing their actions on subjective models which contain principles that reflect their experience, they do not consider intuitive decision-making inferior to scientific-rational decision-making.” (Kieser and Leiner, 2009: 521) “Organizations interpret present states as outcomes of past decision. They base decisions on causality assumptions . . . Since an organization is unable to operate on the basis of knowledge containing many contingencies it has to keep its picture of the world—its assumptions concerning means and ends—simple (which might explain managers’ aversion to scientific knowledge pointing to many contingencies and their preference for consulting knowledge).” (Kieser and Leiner, 2009: 522)In financial trading (2) “Traders often said they did a trade because it felt right or felt good... Intuitive processes are built up through trial and error experience, independent of any conscious effort to learn. Intuitive judgment is most PhicclameclaleccrscsceMMidae-larel adie Maal) diye aCe Memeo ase (teste R- Re alec] decision tool by bond traders.” (Abolafia, 2001: 26) “A feel for the market” important (Abolafia, 2001: 27) “The first thing traders learn is that numbers tell very little.” (Zaloom, 2003: 261) ““Market chatter’ as | call it, is an important device or forming interpretation about market fluctuations.” (Zaloom, 2003: 266) STV Mae ole eleanor te) 1k an “Traders know that market numbers carry social content that cannot be computed. Searching for the hidden values and phantom figures that lurks behind the numbers is the anchor in a global marketplace where the only certainty is instability.” (Zaloom, 2003: 269)In nursing (3) * “To assume that it is possible to capture all the steps in nursing practice is to assume that nursing is procedural rather than holistic... Attempts may be made to model or make explicit all the elements that go into a nursing decision, but experts do not actually make decisions in this elemental, procedural way. They do not build up their conclusions, elements by elements; rather, they grasp the whole. Even when they went into their decisions, essential elements are left out.” (Benner, 1984: 42-43)Learnings from management training re) goyede= yan C9] * “In the beginning of the program, my vision of leadership was secret formula: known to a few, sword-waving, ‘over the top of victory, lads’ out- the-front leaders. | believed that somehow it could all be destilled to a few formulas, heuristics, or algorithms, that one could make the perfect leadership decision for any team in any situation, given sufficient knowledge and expertise.” (leadership training program participant, cited in Carroll and Levy, 2010: 223)In political processes (5) ““Rule-based calculation” in political decision processes: the case of the US Homeland Secturity Den “Through their apparent scientific rigor and universal applicability, these decision tools potentially provide a form of objectivity that will be resilient against external critique . . . These decision instruments share the characteristics of quantifying diverse entities, in order to make them comparable and thus to make decisions ‘calculable.” (Lakoff and Klinenberg, 2010: 507) ‘The Department of Homeland Security allocated $61 per person to Wyomming but only $14 per person to California. Densely populated states such as New York and New Jersey received less than North Dakota and Montana. (Lakoff and klinenberg, 2010: 508) Democratic senators argued they were being punished by the Republican Administration; still ” eee ele een ne cette acc ad ee SO eee nek seuss ence ae Re gag coe RV eal eee and regions, and so there was no definitive way to determine whether homeland security funds were Poin ere sit et at sore ea (ese em 2010: 512. Emphasis added) Behaviour (politics) is not separated from “rationality” Dae ecu cu sec est lt aan a gs Ue between ‘rationality’ and ‘politics’ does not exists @ priori, but rather is defined in the concrete political and technical struggle over the creation of a decision tool” (Lakoff and Klinenberg, 2010: 523)In summary * Decision-making are key processes in organizations. Managerial work is the work to particpate in ongoing Coffey (el praare] <1 ni oa * Rather than being inherently rational and linear procedures, they are anchored in situated practices, cultures, traditions, and cognitive limitations. * Organizations struggle to maintain that they make decisions rationally” (e.g., decision rationality) at the expense of their effectiveness (e.g., the collection of excessive information making little difference).References IU CE ee ets a ta ee a eRe Pa ac ce ea oe ao ce es Abolafia, Michael, (2001), Making markets Opportunism and restraints on Well Street, Cambridge: Harvard University Press. Carrol, Bright & Levy, Lester (2010), Leadership development as identity construction, Management Communication errs esters Carruthers, Bruce & Espeland, Wendy, (1994), Accounting for rational ee eet cee ee Drucker, Peter F, (1955), The practice of management, Melbourne, London &. Toronto: Heineman. Feldman, Martha S., & March, James G., (1981), Information in organizations as signal and symbol, Administrative Science ere eee kKieser, Alfred and Leiner, Lars (2009), Why the rigour-relevance gap in managemetn research is unbridgeable, Journal of reat neta Toe} Luhmann, Niklas, (2003) Organization, in Bakken, Tore & Hemes, Tor, Eds, (2003), Autopoetic organization theory: Drawing POE oc ne tas ai ao RCC ree ee saa Sa Lakoff, Andrew and Klinenberg, Eric, (2020), of risk and pork: urban secutiry asndf the politics of objectivity, Theory ond Society, 39: 502-525, Powel Walter W, (1985), Getting int print The decision processin scary publishing, Chicago & London: The University Cielo Simon, HA, ((1947] 1976), Administrotive Behavior, 3rd. ed., Free Press, New York PC edn cca Thornton, Patricia H., (2002), The rise of the corporation in 2 craft industry: Conflict and conformity in institutional logis, ee I eras CES Peano ee acd