Management by hitt back porter CH09

Chapter 9
Individual and
Group Decision
Making
PowerPoint slides by
R. Dennis Middlemist
Colorado State University


Learning Objectives
After studying this chapter, you should be
able to:






2

Explain the traditional model of decision
making.
Recognize and account for the limits of
rationality in the decision process.
Describe the role of risk and uncertainty in
decision making.

©2005


Learning Objectives

After studying this chapter, you should be
able to:






3

List the conditions when decisions are best
made individually and when they are best
made collectively.
Name the steps to facilitate group
participation in decision making.
Describe the barriers to effective decision
making and ways to overcome them.

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Decision Making Concepts


Decision Making Process




4

Specifying the nature of a
particular problem or opportunity
and
Selecting among available
alternatives how to solve a
problem or capture an opportunity

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Two Phases of Decision
Making
Decision
Formulation
Making







5

Identifying a problem or
opportunity
Acquiring information
Developing desired
performance expectations

Diagnosing causes and
relationships among
factors affecting the
problem

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






Solution
Generating alternatives
Selecting the preferred
solution
Implementing the
decided course of action
Monitoring the situation
to ensure successful
implementation


Individual Decision Making

6



Rational/classic model



Administrative, or bounded rationality
model



Retrospective decision‑making model

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Identify Decision
Situations

Rational (Classical)
Decision-Making Model
Step 1


Identify decision
situations





7

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Problems
Opportunities

Role of perception

Adapted from Exhibit 9.1: Classical Decision-Making Model


Identify Decision
Situations
Develop
Objectives and
Criteria

Rational (Classical)
Decision-Making Model
Step 2


Develop
objectives and
criteria





8

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Specific criteria
Relative weightings

Criteria (what is
important in the
outcome)
Adapted from Exhibit 9.1: Classical Decision-Making Model


Identify Decision
Situations
Develop
Objectives and
Criteria
Generate
Alternatives

Rational (Classical)
Decision-Making Model
Step 3


Generate
alternatives




9

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Past solutions
Creative new
solutions

Adapted from Exhibit 9.1: Classical Decision-Making Model


Identify Decision
Situations
Develop
Objectives and
Criteria
Generate
Alternatives
Analyze
Alternatives

Rational (Classical)
Decision-Making Model
Step 4


Analyze
Alternatives






10

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Minimally
acceptable results
Feasibility
Best results

Adapted from Exhibit 9.1: Classical Decision-Making Model


Identify Decision
Situations
Develop
Objectives and
Criteria
Generate
Alternatives
Analyze
Alternatives

Rational (Classical)
Decision-Making Model
Step 5



Select Alternative


Subjectively
expected utility

Select
Alternative

11

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Adapted from Exhibit 9.1: Classical Decision-Making Model


Identify Decision
Situations
Develop
Objectives and
Criteria
Generate
Alternatives
Analyze
Alternatives

Rational (Classical)
Decision-Making Model

Step 6


Implement
Decision


Select
Alternative



Implement
Decision




12

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Sources and reasons
for resistance
Chronology and
sequence of actions
Required resources
Delegation of tasks
Adapted from Exhibit 9.1: Classical Decision-Making Model

Identify Decision
Situations
Develop
Objectives and
Criteria
Generate
Alternatives
Analyze
Alternatives
Select
Alternative
Implement
Decision
Monitor and
Evaluate Results
13

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Rational (Classical)
Decision-Making Model
Step 7


Monitor and
Evaluate Results



Gather information
Compare results
to objectives and
standards set at
the beginning
Adapted from Exhibit 9.1: Classical Decision-Making Model


Assumptions of Classical Model

14



Problems are clear



Objectives are clear



People agree on criteria and weights



All alternatives are known



All consequences can be anticipated



Decision makers are rational

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Applying Criteria in Analyzing
Alternatives
Candidate Criteria
Rating
Martha
Motivation
8
Interpersonal
1.50
Sales Knowledge
1.75
Product Knowledge
1.20
Candidate
Criteria
Rating
Jane
Motivation
9
=
6.85

Interpersonal
2.00
Sales Knowledge
1.50
Product Knowledge
1.00
15

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X Weight= Score
x
.30 =
2.40
6
x
.25 =
7
x
.25 =
6
X
x
8
6
5

x
.20 =
Weight = Score

.30
2.70
Total =Score
x
.25 =
x
.25 =
x

.20

=

Total Score

Adapted from Exhibit 9.2: Applying Criteria in Analyzing Alternatives


Factors that Inhibit Accurate
Problem Identification and Analysis

16

Factor

Description

Illustration

Information

Bias

A reluctance to
give or receive
negative
information

You favor Jane as the
candidate; dismiss information
about performance problem on
her last job

Uncertainty
Absorption

A tendency for
information to lose
its uncertainty as it
is passed along

Not clear how well Martha did in
previous job. When feedback
gets to you, she is described as
a poor performer

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Adapted from Exhibit 9.3: Factors that Inhibit Accurate Problem Identification and Analysis

Factors that Inhibit Accurate
Problem Identification and Analysis

17

Factor

Description

Illustration

Selective
Perception

A tendency to
ignore or avoid
certain (especially
ambiguous)
information

Jane may have several
employment alternatives and
may even be considering going
back to school, but you ignore
all this in making her the offer

Stereotyping

Deciding about an
alternative on the

basis of
characteristics
ascribed by others

Not clear how well Martha did in
Jane graduated from a private
high school and went to a highly
rated college on a partial
scholarship, so you figure she
must be a great hire

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Adapted from Exhibit 9.3: Factors that Inhibit Accurate Problem Identification and Analysis


Factors that Inhibit Accurate
Problem Identification and Analysis

18

Factor

Description

Illustration

Cognitive
Complexity

A Limits on the
amount of
information people
can process at
one time

You initially have 200 applicants
for the position but decide to
eliminate anyone with less than
three years sales experience

Stress

Reduction of
people’s ability to
cope with
informational
demands

Your company’s market share is
slipping because you don’t have
enough sales people in the field,
so you feel you just can’t look at
every bit of information on every
candidate

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Adapted from Exhibit 9.3: Factors that Inhibit Accurate Problem Identification and Analysis

Bounded Rationality Model
First Mechanism


Possible solutions examined
time





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one at a

If alternative is unworkable it is discarded
When acceptable (not necessarily best)
solution is found, it is likely to be accepted
Thus search and analysis effort is likely to
stop at first acceptable solution

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Bounded Rationality Model
Second Mechanism


Explicit criteria and weights

used to evaluate
alternatives



Decision makers use heuristics


20

not

A rule that guides the search for alternatives
into areas that have a high probability for
yielding success

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Bounded Rationality Model
Third Mechanism


Satisficing
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

21

Selection of a minimally
acceptable solution
Rather than being an optimizer, this model
sees him or her as being a satisficer

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Retrospective Decision Model


Implicit favorite is identified early in decision
process



Perceptual distortion of information occurs
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

22

Decision rules are adopted that favor the
implicit favorite
Positive features of the implicit favorite
highlighted over the alternative

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Types of Decisions
Programmed
Decision
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





23

Decisions
Simple/routine
problem
High levels of
certainty
Rules and
procedures
Standard operating
procedures (SOP)

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




Nonprogrammed
Decision
Poorly
defined or
novel problem
No alternative is
clearly correct
Past decisions of
little help
Gresham’s law of
planning


Decision-Maker Level and
Type of Decision
Top
Managers
Middle
Managers
Lower-Level
Managers
Non-programmed Decisions
Programmed Decisions
24

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Adapted from Exhibit 9.4: Decision-Maker Level and Type of Decision

Gresham’s Law and Decisions
Many
important
decisions
are here

Nonprogrammed
Decisions
Programmed
Decisions
Urgent

25

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Not Urgent

Adapted from Exhibit 9.5: Gresham’s Law and Decisions