Organizational behavior core concepts by kinicki chapter7

7

Organizational Behavior
core concepts

Decision Making: How
Individuals and Groups
Arrive at Decisions
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McGraw-Hill/Irwin
Organizational Behavior, Core Concepts

Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved.


Learning Objectives
• Compare the rational model of decision
making with Simon’s normative model.
• Discuss knowledge management and
ways that companies increase
knowledge sharing.
• Explain the model of decision-making
styles and the stages of the creative
process.
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Learning Objectives
• Summarize pros and cons of involving
groups in the decision-making process.

• Explain how participative management
affects performance.
• Describe techniques used to improve the
quality of group decisions

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Models of Decision Making
• Decision making
– identifying and choosing solutions that lead
to a desired result

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Models of Decision Making
• The Rational Model
– logical four-step approach to decision
making.

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The Rational Model
1.
2.
3.
4.

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Identifying the problem
Generating alternative solutions
Selecting a solution
Implementing and evaluating the
solution


Rational Model
• Identifying the Problem
– Problem – exists when the actual situation
and the desired situation differ

• Generating Solutions
– For routine decisions alternatives are readily
available through decision rules

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Rational Model
• Selecting a Solution
– Want to maximize the expected utility of an
outcome
– People vary in their preferences for safety or
risk
– Ethics should be considered

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Rational Model
• Selecting a Solution
– Evaluating alternatives assume they can be
judged according to some criteria
– Assumes valid criteria exists
– Each alternative can be compared to these
criteria
– Decision maker actually uses the criteria

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Rational Model
• Implementing and Evaluating the
Solution
– After solution is implemented, the evaluation
phase is used to evaluate its effectiveness
– Optimizing – choosing the best possible
solution

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Simon’s Normative Model
Decision making is characterized by:
1. Limited information processing
2. Use of judgmental heuristics
3. Satisficing

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Simon’s Normative Model
• Bounded rationality
– constraints that restrict decision making

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Simon’s Normative Model
Limited Information Processing
• Tendency to acquire manageable rather
than optimal amounts of information
• Difficult for managers to identify all
possible alternative solutions

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Question?
What is a rule of thumb that people use to
reduce information processing
demands?
A. Decision maker
B. Judgmental heuristics
C. Judgmental verdict
D. Decision conclusion
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Simon’s Normative Model
• Judgmental heuristics
– rules of thumb or shortcuts that people use
to reduce information processing demands.

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Simon’s Normative Model
• Availability heuristic
– tendency to base decisions on information
readily available in memory.

• Representativeness heuristic
– tendency to assess the likelihood of an
event occurring based on impressions about
similar occurrences.

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Simon’s Normative Model
• Satisficing
– choosing a solution that meets a minimum
standard

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Dynamics of Decision Making
• Knowledge management
– implementing systems and practices that
increase the sharing of knowledge and
information throughout an organization

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Forms of Knowledge
• Tacit knowledge
– information gained through experience that
is difficult to express and formalize.

• Explicit knowledge
– information that can be easily put into words
and shared with others.

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General Decision Making Styles
• Decision making styles
– combination of how individuals perceive and
respond to information

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General Decision Making Styles
• Value orientation
– reflects the extent to which an individual
focuses on either task and technical
concerns or people and social concerns
when making decisions

• Tolerance for ambiguity
– extent to which a person has a high need for
structure or control in his life
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Decision Making Styles

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Figure 7-1


Escalation of Commitment
• Escalation of
commitment
– sticking to an
ineffective course
of action too long

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Escalation of Commitment
Psychological and Social Determinants
1. Tend to bias facts so that they support
previous decisions
2. Take more risks when a decision is
stated in negative terms
3. Get too ego-involved with the project

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