ch12 110204043908 Phpapp02

Organizational Theory, Design, and Change
Sixth Edition
Gareth R. Jones
Chapter 12
Decision Making,
Learning, Knowledge
Management, and
Information Technology
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
12- 1
Learning Objectives
1. Differentiate between several models
of decision making that describe how
managers make decisions
2. Describe the nature of organizational
learning and the different levels at
which learning occurs
3. Explain how organizations can use
knowledge management and
information technology to promote
organizational learning to improve
the quality of their decision making
12- 2
Learning Objectives
(cont.)
4. Identify the factors, such as the
operation of cognitive biases, that
reduce the level of organizational
learning and result in poor decision
making
5. Discuss some techniques that
managers can use to overcome
these cognitive biases and thus
open the organization up to new
learning
12- 3
Organizational Decision
Making
Organizational decision making:
the process of responding to a
problem by searching for and
selecting a solution or course of
action that will create value for
organizational stakeholders
Programmed decisions: decisions
that are repetitive and routine
Nonprogrammed decisions:
decisions that are novel and
unstructured
12- 4
Models of Organizational
Decision Making
The rational model: decision
making is a straightforward, threestage process
Stage 1: Identify problems that need

to be solved
Stage 2: Design and develop a list of
alternative solutions and courses of
action to solve the problems
Stage 3: Compare likely
consequences of each alternative and
decide which course of action offers
the best solution
12- 5
Figure 12.1: The Rational

Model of Decision Making
12- 6
Decision Making (cont.)
The rational model (cont.)
Underlying assumptions
Decision makers have all the

information they need
Decision makers can make the best
decision
Decision makers agree about what
needs to be done
12- 7
Decision
Making
(cont.)
The rational model (cont.)
Criticisms of the assumptions
Information and uncertainty: the

assumption that managers are aware of
all alternative courses of action and their
consequences is unrealistic
Managerial abilities: managers have
only a limited ability to process the
information required to make decisions
Preferences and values: assumes
managers agree about what are the most
important goals for the organization
12- 8
The Carnegie Model

Introduces a new set of more
realistic assumptions about the
decision-making process
Satisficing: limited information

searches to identify problems and
alternative solutions
Bounded rationality: a limited
capacity to process information
Organizational coalitions: solution
chosen is a result of compromise,
bargaining, and accommodation
between coalitions
12- 9
Table 12.1: Differences

Between the Rational and
Carnegie Models
12-10
The incrementalist model:

managers select alternative courses
of action that are only slightly, or
incrementally, different from those
used in the past
Perceived to lessen the chances of

making a mistake
Called the science of muddling
through
They correct or avoid mistakes through
a succession of incremental changes
12-11
The unstructured model:

describes how decision making
takes place in environments of
high uncertainty
Unstructured model recognizes

uncertainty in the environment
Managers rethink their alternatives
when they hit a roadblock
Decision making is not a linear,
sequential process
Tries to explain how organizations
make nonprogrammed decisions
12-12
Decision
Making
(cont.)
The garbage can model: a view of decision

making that takes the unstructured process to
the extreme
Decision makers are as likely to start decision

making from the solution side as the problem side
Create decision-making opportunities that they can
solve with ready-made solutions based on their
competencies and skills
Different coalitions may champion different
alternatives
Decision making becomes a garbage can in
which problems, solutions, and people all mix and
contend for organizational action
Selection of an alternative depends on which
persons or groups definition of the current
situation holds sway
12-13
The Nature of
Organizational Learning
Organizational learning: the

process through which managers
seek to improve organization
members desire and ability to
understand and manage the
organization and its environment
Creates an organizational capacity

to respond effectively to the
changing business environment
12-14
The Nature of
Types of organizational learning
(cont.)
Exploration: organizational
members search for and
experiment with new kinds or
forms of organizational activities
and procedures
Exploitation: organizational
members learn ways to refine
and improve existing
organizational activities and
procedures
12-15
The Nature of
Learning organization: an
(cont.)
organization that purposefully designs

and constructs its structure, culture,
and strategy so as to enhance and
maximize the potential for
organizational learning to take place
Employees at all levels must be able to analyze

the way an organization performs and
experiments with change to increase
effectiveness
12-16
Levels of Organizational
Learning
Individual-level learning:
managers need to facilitate the
learning of new skills, norms, and
values so that individuals can
increase their own personal skills and
abilities
Employees develop a sense of personal

mastery to create and explore what they
want
Employees must develop a commitment
and attachment to their job so they will
enjoy experimenting and risk taking
Organizations should encourage
employees to assume more responsibility
for their decisions
12-17
Learning (cont.)
Group-level learning: managers

need to encourage learning by
promoting the use of various kinds of
groups so that individuals can share
or pool their skills and abilities
Allows for the creation of synergy

Group routines can enhance group
effectiveness
Group learning is even more important
than individual learning in promoting
organizational learning
12-18
Learning
(cont.)
Organizational-level learning:
managers can promote organizational

learning through the way they create
an organizations structure and culture
Cultural values and norms are an
important influence on learning
Adaptive cultures: value innovation and

encourage and reward experimentation
and risk taking by middle and lower-level
managers
Inert cultures: are cautious and
conservative, and do not encourage risk
taking by middle and lower-level
managers
12-19
Learning (cont.)
Organizations can improve their

effectiveness by copying and
imitating each others distinctive
competences
Encourages explorative and

exploitative learning by cooperating
with suppliers and distributors to
discover new ways to handle inputs
and outputs
Systems thinking: argues that in
order to create a learning organization,
managers must recognize the effects
of one level of learning on another
12-20
Figure 12.2: Levels of

12-21
Knowledge Management
and Information
Knowledge management: a
Technology
type of IT-enabled organizational
relationship that has important
implications for both
organizational learning and
decision making
Involves sharing and integrating of

expertise within and between
functions and divisions through realtime, interconnected IT
12-22
Knowledge Management
(cont.)
Codification approach: knowledge is

carefully collected, analyzed, and
stored in databases where it can be
retrieved easily by users who input
organization-specific commands and
keywords
Suitable for standardized product or service
Personalization approach: IT
designed to identify who in the
organization might possess the
information required for a custom job
More reliance on know-how, insight, and

judgment to make decisions
12-23
Factors Affecting
Several factors may reduce

organizational learning over time
Managers may develop rules and

standard operating procedures to
facilitate programmed decision
making
Past success with SOPs inhibits
learning
Programmed decision making drives
out nonprogrammed decision making
12-24
Factors Affecting
Cognitive structure: system of

(cont.)
interrelated beliefs, preferences,
expectations, and values that
predetermine responses to and
interpretations of situations
These shape the way managers

make decisions and perceive
environmental opportunities and
threats
12-25
Factors Affecting
Types of cognitive biases

(cont.)
Cognitive biases: systematically

bias cognitive structures to cause
misperception and misinterpretation
of information, thereby affecting
organizational learning and decision
making
Cognitive dissonance: state of
discomfort or anxiety experienced
when there is an inconsistency
between ones beliefs and actions
Managers seek or interpret information

that confirms and reinforces their beliefs
and ignore information that does not
12-26
Factors Affecting
Types of cognitive biases (cont.)

(cont.)
Illusion of control: causes managers

to overestimate the extent to which
the outcomes of an action are under
their personal control
Frequency: deceives people into
assuming that extreme instances of a
phenomenon are more prevalent than
they really are
Representativeness: leads
managers to form judgments based on
small and unrepresentative samples
12-27
Factors Affecting
Types of cognitive biases (cont.)
(cont.)
Projection: allows managers to justify
and reinforce their own preferences and

values by attributing them to others
Ego-defensiveness: leads managers
to interpret events in such a way that
their actions appear in the most
favorable light
Escalation of commitment: leads
managers to remain committed to a
losing course of action and refuse to
admit that they have made a mistake
12-28
Figure 12.3: Distortion of

Organizational Decision Making by
Cognitive Biases
12-29
Improving Decision
Making and Learning
Strategies for organizational
learning
Cause managers to continuously

unlearn old ideas and confront
errors in their beliefs and
perceptions
Listening to dissenters
Converting events into learning
opportunities
Experimenting
12-30
Improving Decision
Making
and
Learning
Game theory: tool to help managers
improve decision making and enhance
(cont.)
learning
Interactions between organizations are

viewed as a competitive game
Two basic types of game
Sequential move game: players move in

turn, and one player can select a strategy to
pursue after considering its rivals choice of
strategies
Simultaneous move game: the players act
at the same time, in ignorance of their rivals
current actions
Useful for organizations competing

against a limited number of rivals that
are highly interdependent
12-31
Figure 12.4: A Decision

Tree for UPSs Pricing
Strategy
12-32
Improving Decision
Learning
Making
Nature of and
the top-management
team
(cont.)
The way the top management is

constructed and the type of people who
are on it affect organizational learning
Wheel configuration decreases org
learning because managers report
separately to the CEO
Wheel works best when problems are

simple and require minimal coordination
Circle configuration works best for

team and organizational learning
12-33
Improving Decision
Making and Learning
(cont.)
Learning occurs best when there
is heterogeneity of the topmanagement team
Groupthink: the conformity that

emerges when like-minded people
reinforce one anothers tendencies
to interpret events and information
in similar ways
12-34
Figure 12.5: Types of TopManagement Teams
12-35
Improving Decision Making

and Learning (cont.)
Devils advocate: a person who is

responsible for critiquing ongoing
organizational learning
A method for overcoming cognitive

biases and promoting organizational
learning by institutionalizing dissent
Dialectical inquiry: teams of

decision makers generate and
evaluate alternative scenarios and
provide recommendations
12-36
Improving Decision
Making and Learning
(cont.)
Collateral organizational
structure: an informal organization

of managers that is set up parallel
to the formal organization structure
to shadow the decision making
and actions of managers in the
formal organization
Allows an organization to maintain its

capacity for change at the same time
that it maintains its stability
12-37
Figure 12.6: How Devils Advocacy and

Dialectical Inquiry Alter the Rational
Approach to Decision Making
12-38

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Organizational Theory, Design, and Change

Stage 1: Identify problems that need

Figure 12.1: The Rational

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Decision makers have all the

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Criticisms of the assumptions

Information and uncertainty: the

The Carnegie Model

Satisficing: limited information

Table 12.1: Differences

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

The incrementalist model:

Perceived to lessen the chances of

The unstructured model:

Unstructured model recognizes

The garbage can model: a view of decision

Decision makers are as likely to start decision

Organizational learning: the

Creates an organizational capacity

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

organization that purposefully designs

Employees at all levels must be able to analyze

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Employees develop a sense of personal

Group-level learning: managers

Allows for the creation of synergy

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

managers can promote organizational

Adaptive cultures: value innovation and

Organizations can improve their

Encourages explorative and

Figure 12.2: Levels of

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Involves sharing and integrating of

Codification approach: knowledge is

Suitable for standardized product or service

More reliance on know-how, insight, and

Several factors may reduce

Managers may develop rules and

Cognitive structure: system of

These shape the way managers

Types of cognitive biases

Cognitive biases: systematically

Managers seek or interpret information

Types of cognitive biases (cont.)

Illusion of control: causes managers

and reinforce their own preferences and

Figure 12.3: Distortion of

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Cause managers to continuously

Interactions between organizations are

Two basic types of game

Sequential move game: players move in

Useful for organizations competing

Figure 12.4: A Decision

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

The way the top management is