© 2003 McGraw-Hill Ryerson Ltd.

Chapter Six

Decision Making and Decision Making and EthicsEthics

© 2003 McGraw-Hill Ryerson Ltd.

Chapter Six OutlineChapter Six Outline

Models of Decision MakingModels of Decision Making

•The Rational Model

•Bounded Rationality Model

Dynamics of Decision MakingDynamics of Decision Making

•Selecting Solutions: A Contingency Perspective

•Personal Decision-Making Styles

•Escalation of Commitment

•Creativity

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Group Decision MakingGroup Decision Making•Advantages and Disadvantages of Group-Aided Decision Making•Participative Management•When to Have Groups Participate in Decision Making: The Vroom/Yetton/Jago Model

Fostering Ethical Organizational Fostering Ethical Organizational BehaviourBehaviour

•Group Problem-Solving Techniques•How to Improve the Organization’s Ethical Climate

Chapter Six Outline Chapter Six Outline (cont’d)(cont’d)

© 2003 McGraw-Hill Ryerson Ltd.

•Consists of a structured four-step Consists of a structured four-step

sequencesequence * identifying the problem * generating alternative solutions * selecting a solution * implementing and evaluating the solution

The Rational Model of The Rational Model of Decision MakingDecision Making

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•Based on premise that decision Based on premise that decision

making is not rationalmaking is not rational

•Decision making is characterized byDecision making is characterized by * limited information processing * use of judgmental heuristics * satisficing choosing a solution

that meets a minimum standard

of acceptance

Bounded Rationality Model of Bounded Rationality Model of Decision MakingDecision Making

© 2003 McGraw-Hill Ryerson Ltd.

Availability Heuristic:Availability Heuristic: A decision

maker’s tendency to base decisions on information that is readily available in memory.

Representativeness Heuristic:Representativeness Heuristic: The

tendency to assess the likelihood of an event occurring based on one’s impressions about similar occurrences..

Judgmental HeuristicsJudgmental Heuristics

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Strategies toStrategies toselect a solutionselect a solution

* Aided analytic* Unaided-analytic

* Nonanalytic

Characteristics of Decision Task:Characteristics of Decision Task:The decision problemThe decision problem

* Unfamiliarity* Ambiguity* Complexity*Instability

The decision environmentThe decision environment*Irreversibility* Significance *Accountability

* Time and/or money constraints

Characteristics of Decision MakerCharacteristics of Decision Maker* Knowledge * Ability * Motivation

* Risk Propensity* Decision Making Style

GeneratingGeneratingalternativesalternatives

A Contingency Model for Selecting a A Contingency Model for Selecting a SolutionSolution

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1.1. Analytic strategiesAnalytic strategies are used when the decision problem is unfamiliar, ambiguous, complex, or unstable

2.2. Nonanalytic methodsNonanalytic methods are employed when the problem is familiar, straightforward, or stable.

3. Assuming there are no monetary or time constraints, analytic approachesanalytic approaches are used when the solution is irreversible and significant and when the decision maker is accountable.

4.4. Nonanalytic strategiesNonanalytic strategies are used when the decision can be reversed and is not very significant or when the decision maker is not held accountable.

Contingency Relationships in Contingency Relationships in Decision MakingDecision Making

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5. As the probability of making a correct decision goes down, analytic strategiesanalytic strategies are used.

6. As the probability of making a correct decision goes up, nonanalytic strategiesnonanalytic strategies are employed.

7. Time and money constraints automatically exclude some strategies from being used.

8.8. Analytic strategiesAnalytic strategies are more frequently used by experienced and educated decision makers.

9.9. Nonanalytic approachesNonanalytic approaches are used when the decision maker lacks knowledge, ability, or motivation to make a good decision.

Contingency Relationships in Contingency Relationships in Decision Making Decision Making (cont’d)(cont’d)

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Analytical Conceptual

Directive Behavioural

Tasks and TechnicalTasks and TechnicalConcernsConcerns

People and SocialPeople and SocialConcernsConcerns

Value OrientationValue Orientation

LowLow

HighHigh

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Personal Decision Making Personal Decision Making StylesStyles

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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.

Recommendations to Reduce Recommendations to Reduce Escalation of CommitmentEscalation of Commitment

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1.1. Preparation:Preparation: Reflects the notion that creativity starts from a base of knowledge.

2.2. Concentration:Concentration: Where an individual concentrates on the problem at hand.

3.3. Incubation:Incubation: Done unconsciously. During this stage, people engage in daily activities while their minds simultaneously mull over information and make remote associations.

4.4. Illumination:Illumination: Remote associations from the incubation stage are ultimately generated.

5.5. Verification:Verification: Entails going through the entire process to verify, modify, or try out the new idea.

Stages Underlying the Creative Stages Underlying the Creative ProcessProcess

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AdvantagesAdvantages DisadvantagesDisadvantages1. Greater pool of knowledge 1. Social pressure2. Different perspectives 2. Minority

domination3. Greater comprehension 3. Logrolling4. Increased acceptance 4. Goal

displacement5. Training ground 5. Groupthink

Advantages and Disadvantages of Advantages and Disadvantages of Group-Aided Decision MakingGroup-Aided Decision Making

© 2003 McGraw-Hill Ryerson Ltd.

1. Illusion of invulnerability2. Belief in inherent morality of the group3. Rationalization4. Stereotyped view of opposition5. Self-censorship6. Illusion of unanimity7. Peer pressure8. Mindguards

Symptoms of GroupthinkSymptoms of Groupthink

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1. Assign each member of the group the role of critical evaluator, to voice objections and doubts.

2. Top level executives should not use policy commitment to rubber-stamp decisions that have already been made

3. Different groups with different leaders should explore the same policy questions

4. Subgroup debates and outside experts should be used to introduce fresh perspectives

5. Someone should be given the role of devil’s advocate when discussing major alternatives.

6. Once a consensus has been reached, everyone should rethink their position to check for flaws.

How to Prevent GroupthinkHow to Prevent Groupthink

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AIAI –The manager solves the problem or make the decision him or herself, using information available to him or her at that time.

AIIAII –The manager obtains the necessary information from his or her subordinate(s), then decides on the solution to the problem alone.

CICI –The manager shares the problem with relevant subordinates individually, getting their ideas and suggestions without bringing them together as a group. Then he or she makes the decision that may or may not reflect the subordinates’ influence.

CIICII –The manager shares the problem with subordinates as a group, collectively obtaining their ideas and suggestions. Then the manager make the decision that may or may not reflect subordinates’ influence.

GIIGII –The manager shares a problem with subordinates as a group. Together they generate and evaluate alternatives and attempt to reach agreement (consensus) on a solution.

Management Decision Styles in Management Decision Styles in the Vroom-Yetton-Yago Modelthe Vroom-Yetton-Yago Model

© 2003 McGraw-Hill Ryerson Ltd.

QRState theProblem

CRCP

Low LowHigh

CR

LI

NoYes

ST

ST

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CP

CP

High

High

Yes

No

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GC

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GCYes CO

Yes

No

No

CO

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SI

SI

AIAI

GIIGII

CIICII

GIIGII

CIICII

AIIAII

CICI

CIICII

AIAI

GIIGII

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No

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Quality Requirement

Commitment Requirement

Leader’s Information

Problem Structure

Commitment Probability

Goal Congruence

Subordinate Conflict

SubordinateInformation

Vroom and Jago’s Vroom and Jago’s Decision-Decision-

Making ModelMaking Model

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Cultural InfluencesCultural Influences- Family

- Education-Religion

- Media/entertainment

Organizational InfluencesOrganizational Influences- Ethical codes

- Organizational culture- Role models

- Perceived pressure for results- Rewards/punishment system

IndividuaIndividual- Personality

- Values- Moral

principles- History of

reinforcement- Gender

Political/legal/Political/legal/economiceconomicinfluencesinfluences

Ethical Ethical behaviourbehaviour

Role

Role

Expectatio

Expectatio

nsns

A Model of Ethical Behaviour in A Model of Ethical Behaviour in the Workplacethe Workplace

© 2003 McGraw-Hill Ryerson Ltd.

• Behave ethically yourself

• Screen potential employees

• Develop a meaningful code of ethics

Distributed to every employee

Firmly supported by top management

Refer to dilemmas likely to be encountered

Evenly enforced

• Provide ethics training

• Reinforce ethical behaviour

• Create specific positions in the organization to deal with ethics

How to Improve an How to Improve an Organization’s Ethical ClimateOrganization’s Ethical Climate