DECISION MAKING

Compiled from various sources by:

RATNA DWI WULANDARI
9-2

The Rational Model of Decision

Making
•Consists of a structured four-step sequence
* identifying the problem
* generating alternative solutions
* selecting a solution
* implementing and evaluating the solution
 Simon’s Normative Model of
Decision Making
•Based on the notion of bounded rationality, i.e.
decision makers face a variety of constraints
•Decision making is characterized by
* limited information processing
* use of judgmental heuristics (rules, shortcuts)
* satisficing
 Judgmental Heuristics
Availability Heuristic: A decision maker’s tendency to
base decisions on information that is readily available in
memory.

Representativeness Heuristic: The tendency to

assess the likelihood of an event occurring based on one’s
impressions about similar occurrences.
 Judgmental Heuristics (cont)

Satisficing: Choosing a solution that meets a minimum

standard of acceptance
Improving Decision Making Through Effective
Knowledge Management

• Systems and practices that increase the sharing of knowledge

and information
• Types of knowledge
– Tacit knowledge – intuition, experience, natural abilities
– Explicit knowledge

• Explicit knowledge requires access to large amounts of

information; tacit knowledge is obtained through observation,
mentoring, collaboration, etc.
General Decision Making Styles
• Based on how one perceives and comprehends stimuli and chooses to respond
• Value orientation – task and technical concerns or people and social concerns
• Tolerance for ambiguity – need of structure or control
 Decision Making Styles
High

Tolerance for Ambiguity

Analytical Conceptual

Directive Behavioral
Low
Tasks and Technical People and Social
Concerns Concerns
Value Orientation
Hands on Exercise

What is Your Decision Making

Style?
• Which of the four styles best represents your
decision-making style? Which is least reflective of
your style?
• How do your scores compare with the following
norms: directive (75), analytical (90), conceptual
(80), and behavioral (55)?
• What are the advantages and disadvantages of
your decision-making style?
Escalation of Commitment
• Tendency to stick to a course of action even when it is associated
with and unlikely to reverse a bad situation. Why?
– Psychological and social
– Bias facts to support a decision
– “Recover losses” more attractive than achieve gains
– Ego
– Organizational inertia
– Characteristics of project – long-term returns
– Contextual determinants – outside organization
9-9

Skills and Best Practices: Recommendations

to Reduce Escalation of Commitment
1. Set minimum targets for performance, and have
decision makers compare their performance with these
targets.
2. Have different individuals make the initial and
subsequent decisions about a project.
3. Encourage decision makers to become less ego-
involved with a project.
4. Provide more frequent feedback about project
completion and costs.
5. Reduce the risk of penalties of failure.
6. Make decision makers aware of the costs of
persistence.
9-10

Stages Underlying the Creative

Process
1. Preparation: Reflects the notion that creativity starts
from a base of knowledge.
2. Concentration: Where an individual concentrates on the
problem at hand.
3. Incubation: Done unconsciously. During this stage,
people engage in daily activities while their minds
simultaneously mull over information and make remote
associations.
4. Illumination: Remote associations from the incubation
stage are ultimately generated.
5. Verification: Entails going through the entire process to
verify, modify, or try out the new idea.
Group decision-making
• Data suggests that innovative groups possessed high levels of both
minority dissent and participation in decision making
• Note four requirements of effective decision making in a group:
– Focus on process
– Understand requirements for an effective choice
– Assess positive qualities of alternative solutions
– Assess negative qualities of alternative solutions
• Suggests openness, acceptance of dissent?
9-11
Table 9-2

Advantages and Disadvantages of

Group-Aided Decision Making
Advantages Disadvantages
1. Greater pool of knowledge 1. Social pressure

2. Different perspectives 2. Minority domination

3. Greater comprehension 3. Logrolling

4. Increased acceptance 4. Goal displacement

5. Training ground 5. “Groupthink”

Group Problem Solving Techniques
• Definition of consensus – . . . reached when all members can say they either
agree . . .
• Or have had their “day in court” and were unable to convince the others of
their viewpoint. In the final analysis, everyone agrees to support the outcome
Group Problem Solving Techniques
• Other approaches to a group decision
– Unanimity
– A minority or one decides
More Formal Group Problem Solving
Techniques
• Brainstorming - disciplined process
– Silent idea (optional)
– Ideas/opinions solicited and written on a board, disallowing criticisms,
allowing piggy-backing on ideas, clarification
• Delphi technique is another, more formal form of brainstorming.
Involves several rounds of questionnaire, feedback, etc. Useful in
cases where participants are not in the same place.
More Formal Group Problem Solving
Techniques
• Nominal Group Technique – used to narrow down options through voting
• Computer-aided Decision Making
– Uses computers to manage brainstorming or delphi questioning
DECISION MAKING
MATRIX
Decision Matrix
A Decision Matrix can help us analyze a number of similar options to
make a rational decision
• The Systems Approach to problem solving is based upon Divergent and
Convergent Thinking where we start be identifying all possible solutions to a
problem before evaluating and reducing these to a final solution