Decision Making Processes

1
Decision Making Processes
2
Decision Making

• The process by which members of an
  organization choose a specific course of action
  to respond to both problems and opportunities.

3
Decision Making Process

• Decision making unfolds over time it is not an
  event
• Decision process may be more inquiry-based or
  advocacy-based or somewhere in between

4
Decision Making Processes

• Rational Models (prescriptive)
• Administrative Models (descriptive)
• Garbage Can Models (descriptive and political)

Inquiry Based

• Advocacy
• Based

5
Components of Decision Making

• Criteria
• Standards that we use to evaluate alternatives
• Alternatives
• Different options from which to choose
• Cause and effect beliefs
• Links between alternatives and criteria
• Example PMBA 540 Salary Increase Decisions

6
PMBA 540 Salary Increase Decisions
7
PMBA 540 Salary Increase Decisions
8
Rational Model Steps

• List all criteria against which alternatives will
  be judged.
• Attach weights to the criteria.
• Derive extensive list of alternatives from which
  a choice will be made.
• Judge each alternative against each criteria.
• Choose the alternative which best meets each
  criteria (maximizes your preferred outcomes).

9
Assumptions of the Rational Model

• People have access to all the information they
  need to make a decision and are able to use this
  information
• Limitless time and effort available to make
  decisions
• People make decisions by choosing the best
  possible solution to a problem or response to an
  opportunity

10
Administrative Decision Making Model

• A descriptive approach how we actually make
  decisions
• Incomplete information, psychological and
  sociological processes, and the decision makers
  cognitive abilities affect decision making
  (bounded rationality)
• Decision makers often choose satisfactory, not
  optimal, solutions (they satisfice)

11
Influences on Decisions

• Sociological influences
• Group norms and roles
• Organizational norms and systems
• National culture values

• Psychological influences
• Personality and ability
• Perception process
• Cognitive Style
• Personal values
• Experiences and knowledge

12
Incremental and Unstructured Models

• Incremental Managers choose actions close to
  past actions to reduce the risk (stable
  environments)
• Unstructured Managers use judgment and
  intuition to make decisions in a series of little
  steps that result in a major decision over time
  (dynamic environments)

13
Intuition in Decision Making

• Alternative to rational models
• Intuition as
• Experience/expertise
• Intuition as gut feeling
• Role of feedback and learning in honing intuition
• Integration of rational and intuitive decision
  making

Intuition is sometimes wrong, but never in
doubt.
14
Garbage Can Models

• Occurs under organized anarchy conditions of
  ambiguity in goals and cause and effect
  relationships, limited time, and not much data
• Four streams of events occur problems,
  participants, potential solutions, and choice
  opportunities
• Above are mixed in garbage can and some
  decisions result

15
Potential Problems in Decision Making

• Heuristics or shortcuts
• Escalation of commitment
• Groupthink
• Diffusion of responsibility

16
Potential Problems in Decision Making

• Polarization
• Interpersonal or emotional conflict
• Lack of procedural fairness
• Appropriate closure

17
The Role of Values in Decision Making

• Broad preferences that guide our actions
• Terminal and instrumental values (ends vs. means
  values)
• Intrinsic and extrinsic work values (or, do you
  live to work or work to live?)
• Values show up in decision goals and criteria
• Special case Ethical values at work

18
Ethical Approaches

• Utilitarianism or consequence-based ethics
• Proponents John Stuart Mill and Jeremy Bentham
• Theory of duties/obligations/rights
• Proponent Immanuel Kant
• Theory of justice or fairness
• Proponent John Rawls
• Ethics of care
• Proponent Carol Gilligan

19
What Typical Moral Dilemmas Do Managers Face?

• What do you see are as the most ethically
  challenging decisions that face people at work?
• Why do we do these things?
• See what other MBA students have said in the past

20
Stakeholder Management

• Stakeholders are any individuals, groups, or
  organizations that have an interest in the firms
  activities and ultimate survival
• Internal stakeholders owners or shareholders,
  employees, and managers
• External stakeholders customers, suppliers,
  government, unions, local community, general
  public, natural environment

21
Managing Stakeholders

• Inducements and contributions balance
• Inducements are what the firm provides for
  stakeholder (e.g., employees receive paychecks)
• Contributions are what the stakeholder provides
  for the firm (e.g., employees provide expertise,
  effort, knowledge, etc.)
• Firms would like to provide as little inducement
  as possible for adequate levels of stakeholder
  contribution and vice versa

22
Managing Core Stakeholders

• Assess importance of stakeholders
• Power, legitimate rights, and urgency
• Assess potential for threat vs. potential for
  cooperation
• Opportunity, capacity, and willingness
• Determine appropriate strategies for managing the
  stakeholder

23
Potential for Threat
Low
High

Supportive Stakeholder Get Involvement
Mixed Blessing Stakeholder Collaborative
strategies
High
Potential for Cooperation
Non-supportive Stakeholder Defensive strategies
Marginal Stakeholder Monitor
Low
Fringe stakeholder?
24
Managing Fringe Stakeholders

• Radical Transactiveness (RT)
• Dynamic capability of organizations to identify,
  explore, and integrate stakeholders on the
  fringe poor, isolated, weak, non-legitimate,
  and non-human
• Result competitive imagination
• Generate disruptive innovations and creative
  destruction for imagining new business
  possibilities
• Capabilities Fan out and Fan in

25
Managing Stakeholders

• Managing multiple goals of stakeholders
• setting priorities or preference ordering
• sequential attention
• bargaining and compromise
• satisficing
• At least minimal satisfaction of all current
  stakeholders is organizational effectiveness.

26
Total Responsibility Management Systems

• Focus is on the triple bottom line
• Economic (profits)
• Social (people)
• Environmental (place)
• TRM can be significant source of competitive
  advantage for firms who take the lead in these
  initiatives
• (e.g., Whole Foods Market)

Philanthropic Ethical Legal Economic
27
Pressures for TRM

• Primary stakeholders owners, employees,
  customers, and suppliers
• Secondary (fringe) stakeholders NGOs,
  activists, communities, and governments
• Social and institutional pressures and trends
  best of rankings and awards emerging global
  standards (e.g., UNs Global Compact) and
  reporting/accountability initiatives (e.g., GRI
  or SA 8000 or AA1000)

28
Three Processes in the TRM Approach

• Institutionalizing a vision and set of values
  regarding responsible practice through the
  enterprise (inspiration)
• Integration of the responsibility into practice
  through strategy, management systems, and human
  resource capacity
• Improvement and innovation through measurement,
  feedback systems, and learning and remediation