DHR 301: Decision Making

Dr Bengat K. Joseph

University of Embu

Dept.: Business and Economics

UOE
 Dr Bengat K. Joseph
[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
DECISION MAKING PROCESS

Introduction

Decisions are the essence of management. The quality of manager’s decisions is important for
two principal reasons.

a) In directly affects his or her career opportunities, rewards and job satisfaction.
b) Managerial decisions contribute to the success or failure of an organization.

Decision making entails identifying and choosing alternative solutions that lead to a desired state
of affairs. The process begins with a problem and ends when a solution has been chosen.

Individuals in organizations make decisions. That is, they make choices from among two or more
alternatives. Decision-making is almost universally defined as choosing between alternatives.
Decision-making is a critical activity in the lives of managers. The decisions a manager faces can
range from very simple, routine matters for which the manager has an established decision rule
(programmed decisions) to new and complex decisions that require creative solutions (non-
programmed decisions).
The word "decision" is derived from the Latin words "de ciso" which means, "cutting away"
or to come to a conclusion. A decision is the selection of a course of action.

According to Felex M Lopez, "a decision represents a judgment; a final resolution of a conflict
of needs, means or goals; and a commitment to action made in the face of uncertainty,
complexity or even irrationality."
According to Philip Marvin, "decision-making may be viewed as the process by which
individuals select a course of action from among alternatives to produce a desired result. It
is a process made up of four continuous interrelated phases: explorative, speculative,
evaluative and selective." Thus, decision-making is the process by which the decision-maker
tries to jump over the obstacles placed between his current position and the desired future
position.

Decision-making occurs as a reaction to a problem. A discrepancy exists between some current

state of affairs and some desired state, requiring consideration of alternative courses of action.
Moreover, every decision requires interpretations and evaluation of information. Data is typically
received from multiple sources and it needs to be screened, processed, and interpreted. What data
is relevant to the decision will depend on the perception of the decision-maker.

Factors Affecting Decisions

1. Information: Adequate information must be available to the decision maker. Due to
computers lot of information may now be available but it is of little consequence. What is

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important is the amount, quality and the format in which the information is made available to the
decision maker. Inadequate information is as dangerous as too much of information.
2. Bias: Every individuals’ decision is highly affected by value attitudes and beliefs.
Individual has preconceived ideas about an issue and accepts what he wants to, and throws away
information which is not acceptable by him. Prejudice and bias that may lead to faulty decisions.
It is therefore necessary to have an open mind and take decision without any prejudice.
Organizational culture plays a decisive role in decision making. If an organization is known for
its promptness, honest dealings etc, a manager in such organization would definitely take just
and appropriate decisions.
3. Personal habits: Some people are rigid and stick to their own decision even if it is wrong.
Others blame their subordinates for failure and take credit for successful job. There are
individuals who have an external locus of control and blame outside agencies/ situations for their
failure for decisions to be effective.
4. Time constraints: A problem is identified and a solution is sought within a specified time. As
the complexity of impact of external variables, the enhanced time may be required. In the fast
moving era it is necessary to carry out time and space appreciation of the problem involved. A
rigid time schedule may be necessary that can be followed. There are mangers who can take
effective decisions under the pressure of time. However most people under time pressure rely on
“Heuristics” approach which means limiting the search for facts and data using the limited
information for decision making. Under the above circumstances the quality of decisions are
“Workable” rather than “Optimal”.
5. Risk Taking: Risk is related to various factors. A manager’s risk taking attitude is dependent
on personal characteristics, organizational culture where risk is rewarded and not penalized for
failed decisions, intelligence level and the expectations of the decision maker. High intelligent
managers are found to be generally conservative and do not take bold step. People with high
expectations are generally highly optimistic and take decisions even with minimum required
level of information. Social and cultural influences also play a dominant role on the quality of
decisions.

Components of Decision-making
Decision-making involves certain components like:
1. Decision environment: Every decision is made within a decision environment, which is
defined as the collection of information, alternatives, values, and preferences available at the
time of the decision. An ideal decision environment would include all possible information, all of
it accurate, and every possible alternative. However, both information and alternatives are
constrained because the time and effort to gain information or identify alternatives are limited.
The time constraint simply means that a decision must be made by a certain time. The effort
constraint reflects the limits of manpower, money, and priorities. (You wouldn't want to spend
three hours and half a tank of gas trying to find the very best parking place at the mall.) Since
decisions must be made within this constrained environment, we can say that the major challenge
of decision-making is uncertainty and a major goal of decision analysis is to reduce uncertainty.
We can almost never have all information needed to make a decision with certainty, so most
decisions involve an undeniable amount of risk.
The fact that decisions must be made within a limiting decision environment suggests two things.
First, it explains why hindsight is so much more accurate and better at making decisions that

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foresight. As time passes, the decision environment continues to grow and expand. New
information and new alternatives appear–even after the decision must be made. Armed with new
information after the fact, the hind sighters can many times look back and make a much better
decision than the original maker, because the decision environment has continued to expand.
The second thing suggested by the decision-within-an-environment idea follows from the above
point. Since the decision environment continues to expand as time passes, it is often advisable to
put off making a decision until close to the deadline.
2. Effects of Quantity on Decision-making: Many decision-makers have a tendency to seek
more information than required to make a good decision. When too much information is sought
and obtained, one or more of several problems can arise.
(a) A delay in the decision occurs because of the time required to obtain and process the extra
information. This delay could impair the effectiveness of the decision or solution.
(b) Information overload will occur. In this state, so much information is available that
decision-making ability actually declines because the information in its entirety can no longer be
managed or assessed appropriately.

Example: A manger spent a day at an information-heavy seminar. At the end of the day, he was
not only unable to remember the first half of the seminar but he had also forgotten where he
parked his car that morning.
(c) Selective use of the information will occur. That is, the decision-maker will choose from
among all the information available only those facts which support a preconceived solution or
position.
(d) Mental fatigue occurs, which results in slower work or poor quality work.
(e) Decision fatigue occurs, where the decision-maker tires of making decisions. Often the
result is fast, careless decisions or even decision paralysis–no decisions are made at all.

3. Decision Streams: A common misconception about decision-making is that decisions are

made in isolation from each other: you gather information, explore alternatives, and make a
choice, without regard to anything that has gone before. The fact is, decisions are made in a
context of other decisions. The typical metaphor used to explain this is that of a stream. There is
a stream of decisions surrounding a given decision, many decisions made earlier have led up to
this decision and made it both possible and limited. Many other decisions will follow from it.
Examples:
(a) When you decide to go to the park, your decision has been enabled by many previous
decisions. You had to decide to live near the park; you had to decide to buy a car or learn about
bus routes, and so on. And your previous decisions have constrained your subsequent ones: you
can't decide to go to a park this afternoon if it is three states away. By deciding to live where you
do, you have both enabled and disabled a whole series of other decisions.
(b) When you enter a store to buy a VCR or TV, you are faced with the preselected alternatives
stocked by the store. There may be 200 models available in the universe of models, but you will
be choosing from, say, only a dozen. In this case, your decision has been constrained by the
decisions made by others about which models to carry.

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Decision-making Process
Managers have to make decisions, whether they are simple or extremely complex. Making a
good decision is a difficult exercise. It is the product of deliberation, evaluation and thought. To
make good decisions, managers should invariably follow a sequential set of steps.
Decision-making is a process involving a series of steps:

First Step: The first step is recognition of the problem. The manager must become aware that a
problem exists and that it is important enough for managerial action. Identification of the real
problem is important; otherwise, the manager may be reacting to symptoms and firefighting
rather than dealing with the root cause of the problem. In order to monitor the problem situation
(decision-making environment), managers may have to look into management reports, check
progress against budgets, compare the results against industry competitors, and assess factors
contributing to employee efficiency or inefficiency, etc. They have to use judgment and
experience in order to identify the exact nature of the problem. In other words, the manager must
determine what is to be accomplished by the decision.

Second Step: The second step in the decision-making process is gathering information relevant
to the problem. A successful manager must have the ability to weed out the wheat from the chaff
before deciding on a specific course of action. Once aware of a problem, he must state the real
problem. He must try to solve the problem, not the symptoms. The manager must pull together
sufficient information about why the problem occurred. This involves conducting a thorough
diagnosis of the situation and going on a fact-finding mission.

Third Step: The third step is listing and evaluating alternative courses of action. Developing
alternative solutions (to the problem) guarantees adequate focus and attention on the problem.
It helps managers to fully test the soundness of every proposal before it is finally translated into
action. During this step, a thorough "what if" analysis should also be conducted to determine the
various factors that could influence the outcome. It is important to generate a wide range of
options and creative solutions in order to be able to move on to the next step. Therefore,
managers should encourage people to develop different solutions for the same problem. The
ability to develop alternatives is as important as making a right decision among alternatives. The
development of alternatives is a creative, innovative activity. It calls for divergent thinking; it
calls for "systems thinking". In other words, managers should try to seek solutions outside the
present realm of their knowledge; they are forced to look into all the relevant factors before
coming up with a novel solution.

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Recognize the problem and the need for a decision

Identify the objective of the decision

Implement the decision

Gather feedback

List and evaluate alternatives

Gather and evaluate data and diagnose the situation

Select the best course of action

Follow-up
Fourth Step: Next, the manager selects the alternative that best meets the decision objective.
If the problem has been diagnosed correctly and sufficient alternatives have been identified, this
step is much easier. Peter Drucker has offered the following four criteria for making the right
choice among available alternatives:
1. The manager has to weigh the risks of each course of action against the expected gains.
2. The alternative that will give the greatest output for the least inputs in terms of material and
human resources is obviously the best one to be selected.
3. If the situation has great urgency, the best alternative is one that dramatizes the decision and
serves notice on the organization that something important is happening. On the other hand, if
consistent effort is needed, a slow start that gathers momentum may be preferable.
4. Physical, financial and human resources impose a limitation on the choice of selection. Of
these, the most important resources whose limitations have to be considered are the human
beings who will carry out the decision.
Example: A company wants to strengthen its research and development. It has two options,
outsource it to a well-known company or develop an in-house panel of experts.
There are pros and cons of both the options. Outsourcing can be cost effective and time saving
whereas it might be difficult to control. On the other hand, developing an in-house panel will

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require a lot of investment but it will be easier for the higher level managers to monitor their
performance.
Managers need to weigh each pros and cons and then decide on an alternative. Here, the long
term benefit should also be considered. If the need is urgent, it is better to outsource as the other
option will take time to materialize.
Final Step: Finally, the solution is implemented. The manager must seek feedback regarding the
effectiveness of the implanted solutions. Feedback allows managers to become aware of the
recent problems associated with the solution. It permits managers to monitor the effects of their
acts to gauge their success. They can evaluate their own decision-making abilities. Consistent
monitoring and periodic feedback is an essential part of the follow-up process.
Models of decision making
There are two fundamentals models of decision making:

a) The rational model.

b) Simon’s normative model.

Each is based on a different set of assumptions and offers unique insights into the decision
making process.

The rational model

The model proposes that managers use a rational, four-step sequence when making decisions.

a) Identifying the problem.

b) Generating alternative solutions.
c) Selecting a solution.
d) Implementing and evaluating the solution.

According to this model, managers are completely objective and pass complete information to
make a decision. The model has been criticized as being unrealistic; however, rational model is
instructive because it analytically breaks down the decision-making process and serves as a
conceptual anchor for newer models. The model is a logical four-step approach to decision
making and the steps can be explored as follows:

a) Identifying the problem.

A problem exist when actual situation of the desired situation different.

b) Generating solution.

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After identifying a problem, the next logical step is generating alternative solutions. For
repetitive and routine decisions like deciding when to send customers a bill, alternative are
reality available through decision rules. But in novel and unstructured decisions, there is no
simple procedure for dealing with novel problems; managers must creatively generate alternative
solutions. Managers can use a number of techniques to stimulate creativity.

c) Selecting a solution.

Optimally, decision makers want to choose the alternative with the greatest value. This is often
referred to as maximizing the expected utility of outcomes. This task is often challenging:

First, assigning values to alternative is complicated and prone to error. The values can be sub
effective and may vary according to the preferences of the decision maker. E.g. Research shout
that makes display more risk taking then females. (ISO studies done). The ethical of the solution
should be considered.

d) Implementing and evaluating the solution.

Once the solution has been chosen, it needs to be implemented. After implementation, the
evaluation phase is used to access its effectiveness. If the solution is effective, it should reduce
the difference between the actual and desired states that created the problem. If the gap is not
closed, the implementation was not successful, and it could mean:

Either – The problem was incorrectly identified.

- The solution was inappropriate.

In summary, -The rational model based on the premise that managers optimize when they make
decisions. Optimizing involves solving problems by producing the best possible solution.

Simon’s normative model

Recognizing the deficiencies of the rational model, Herbert Simon suggested that there are limits
upon how rational a decision-maker can actually be. His decision theory, the bounded rationality
model, earned him a Nobel Prize in 1978. The essence of the bounded rationality and satisficing
model is that, when faced with complex problems decision-makers respond by reducing the
problems to a level at which they can be readily understood. This is because the information
processing capability of human beings makes it impossible to assimilate and understand all the
information necessary to optimize. Since the capacity of the human mind for formulating and
solving simplex problems is far too small to meet all the requirements for full rationality,
individuals operate within the confines of bounded rationality.

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Simon's model – also referred to as the "Administrative Man" theory – rests on the idea that
there are constraints that force a decision-maker to be less than completely rational. The bounded
rationality model has four assumptions:
1. Managers select the first alternative that is satisfactory.
2. Managers recognize that their conception of the world is simple.
3. Managers are comfortable making decisions without determining all the alternatives.
4. Managers make decisions by rules of thumb or heuristics.
How does bounded rationality work for the typical individual? Once the problem is identified,
the search for criteria and alternatives begins. But the list of criteria is likely to be far from
exhaustive. The decision-maker will identify a limited list made up of the more conspicuous
choices. Once this limited set of alternatives is identified, the decision maker will begin
reviewing them. But the review will not be comprehensive. That is, not all alternatives will be
carefully evaluated. The decision-maker proceeds to review alternatives only until he or she
identifies an alternative that satisfies – one that is satisfactory and sufficient. So the satisficer
settles for the first solution that is "good enough", rather than continuing to search for the
optimum. The first alternative to meet the 'good enough 'criterion ends the search.
Bounded rationality assumes that managers satisfice; that is, they select the first alternative that
is "good enough", because the costs of optimizing in terms of time and effort are too great.
Further, the theory assumes that managers develop shortcuts called heuristics, to make decisions
in order to save mental activity. Heuristics are rules of thumb that allow manager to make
decisions based on what has worked in past experiences. According to March and Simon, it is
often too inefficient or too costly to make optimal decisions in organizations.
Example: While selecting a new employee, the organization can just hire the first applicant who
meets all the minimum requirements instead of wasting time and effort looking for an ideal
personality. According to Hitt, Middlemist and Mathis, satisficing can occur for various reasons:
(a) Time pressure.
(b) A desire to sit through a problem quickly and switch to other matters.
(c) A dislike for detailed analysis that demands more refined techniques.
(d) To avoid failure and mistakes that could affect their future in a negative way.
Satisficing decisions make progress toward objectives, and this progress can be made while
continuing to search for the better decision. In other words, satisficing, by recognizing the
internal as well as external limitations under which decision-makers operate, provides a flexible
approach where objectives can be achieved more easily

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Evaluation: Does the bounded rationality model more realistically portray the managerial
decision process? Research indicates that it does. One of the reasons that managers face limits to
their rationality is because they must make decisions under risk and time pressure. The situation
they find themselves in is highly uncertain and the probability of success is not known. The
model also highlights the importance of looking into the behavioural aspects in the decision-
making process. This knowledge certainly helps in understanding how and why managerial
decisions have been made.
The model attempts to identify the process that managers actually use when making decisions.
The process is guided by a decision maker’s bounded rationality.

Bounded rationality represents the nation that decisions makers are “bounded” or restricted by
variety of constraints include any personal or environment characteristics that reduces rational
decision making. E.g

 Limited capacity of the human kind.

 Problem complexity and uncertainty.
 Amount and timeliness of information at hand.
 Criticality of the decision.
 Time demands.

Normative model suggest

S that decision making is characterized by;

i. Limited information processing.

ii. The use of judgmental heuristic.
iii. Satisfying.

Limited information processing

Managers are limited by how much information they process because of bounded rationality.

This result in the tenderly to acquire manageable rather than optimal amounts of
information, in turn this practice makes it difficult for managers to identify all possible
alternative solutions. In the long run, decision makers to fail to evaluate all potential
alternatives

Judgmental heuristic

Judgmental Heuristic represents rules of thumb or shortcuts that people use to reduce
information processing demands.

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*Research shows we tend to use these heuristic when confronted with excessive amounts of
choice as information and we use them without conscious awareness. The use of heuristic
helps decision makers to reduce the uncertainty inherent within the decision making process.
Because these shortcuts, represents knowledge gained from past experience, they can help
decision makers to evaluate current problems. But they can also lead to systematic errors that
erode the quality of decisions there are two common categories of heuristic that are
important to consider:

a) Availability Heuristic.

Represents a decision maker’s tenderly to base decisions on information that is readily

available in memory. Information is more accessible in memory when it involves an event
that recently occurred, when it is salient (e.g. phone crush), when it evokes strong emotions.
This heuristic is likely to cause people to overestimate the occurrence of unlikely events
such as a plane crash or a high school shooting- This bias also is partially responsible for the
recently effect. E.g. a manager is more likely to give an employee a positive performance
evaluation if the employee exhibited excellent performance over the last few months.

b). Representatives Heuristic.

Is used when people estimate the probability of an event occurring. It reflects the tendency based
on one’s impression about similar occurrence. E.g. A manager may hire a graduate from a
particular university because the past three people hired from the university turned out to be
good performers. Here the “school attended” criterion is used to facilitate complex information
processing associated with employment interviews. However this can result in biased decision
making.

iii) Satisfying

People satisfy because they do not have time; information or ability to handle the complexity
associated with following a rational process. Satisficing consists of choosing a solution that
meets some minimum qualifications, one that is “good enough”, satisficing resolves problems by
producing solutions that are satisfactory as opposed to optimal.

Finding a radio station to listen to is a good example, you cannot optimize because it is
impossible to listen to all stations at the same time.

Dynamics of decision making

Decision making is part of science and part art. There are four dynamics of decision making;
knowledge management; decision making style, escalation of commitment and creativity- that
affects science component.
An understanding of these dynamics can make managers make better decisions.

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A) Improving decision making through Effective Knowledge management.

*The quality of decision is only as good as the information used to make the decision. Managers
frequently need information or knowledge possessed by people working in other parts of the
organization. This gives the notion of knowledge management.
Knowledge management (KM) is the development of tools, processes, systems, structures and
cultures explicitly to improve the creation, sharing and use of knowledge critical fro decision
making. The effective use of KM helps organizations improve the quality of their decision
making and correspondingly reduce costs and increase.
Fundamentals of Knowledge management

Knowledge comes in different forms. There are two types of knowledge.

a) Tacit knowledge. Entails information that is difficult to express, formalize or share. It is

unconsciously acquired from the experience one has while immersed in an environment.
Tacit knowledge is intuitive and is acquired by having considerable experience and
expertise at some task or job.
b) Explicit knowledge. Can easily be put into words and explained to others. It is shared
verbally or in written documents or numerical reports. i.e.
*Tacit knowledge – represents private information that is difficult to share.
*Explicit knowledge is external or public and is more easily communicated.

Experts suggest that competitive advantages are created when tacit knowledge is shared among
employees.

How companies faster information sharing (tacit) knowledge sharing

Organizations rely on sophisticated KM software to share explicit knowledge. This software

allows companies to mass large amounts of information that can be accessed quickly from
around the world. These systems can also be used to obtain information and feedback from
customers and other organizations.

*Tacit knowledge is shared most directly by observing, participating, or working with experts or
coaches.

Methods of spreading tacit knowledge includes mentoring, informal networking, periodic

meetings and the design of office space can be used to facilitate KM

NB The best- laid plans for increasing KM are unlikely to succeed without the proper
organizational structure. Effective KM requires knowledge – sharing culture that both
encourages and reinforce the spread of tacit knowledge.

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(B) Decision Making Style.

A decision making style reflects the combination of how an individual perceives and
comprehend stimuli and the combination of how an individual perceives and comprehends
stimuli and the general manner in which he or she chooses to responds to such information.

Researchers have developed a model of decision-making styles that is based on the idea that
styles vary a long two different dimensions.

(a) Value orientation- reflects the extent to which an individual focuses on either [task and
technician concerns] or [people and social concern] when making decisions.
(b) Tolerance for ambiguity. This individual difference indicates the extent to which a
person has a high need for structure or control I his or her life. When the dimensions of
value orientation and tolerance for ambiguity are combined, they form four style of
decision making: directive, analytical, conceptual and behavioral.

Tolerance

For ambiguity.

Analytical Conceptual

Directive Behavioral

From managing with style: a guide to understanding, assessing and improving decision making
(Sa Francisco Jossey-Bass 1987)

Directive

People with directive style have a low tolerance for ambiguity and are oriented toward task and
technical concerns when making decisions. They are efficient, logical, practical and systematic
in their approach to solving problems. People with this style are action oriented and decision
pursuit and like to focus on facts. In their pursuit and results, however, these individuals tend to
be autocratic, exercise power and control, and focus on the short run. A directive style seems
well-suited for an air traffic controller. E.g. making decision quickly-emerging.

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Lending- it may be wrong but you owe to make it right}

*constantly take into account the speed of the airplane, its characteristics, the climb rate , and
how fast it’s going to react to your instructions- all this is done in second hoping it will work all
together.

Analytical

This style has a much higher tolerance for ambiguity and is characterized by the tenderly to
overanalyze a situation. People with this style like to consider more information and alternatives
than do directives. Analytical individuals are careful decision makers who take longer to make
decision than directives to make decisions but who also respond well to new or uncertain
situations. They can often be autocratic.

Conceptual

People with a conceptual style have a high tolerance for ambiguity and tend to focus on the
people or social aspects of a work situation. They take a broad perspective to problem solving
and like to consider many options and future possibilities. Conceptual types adopt a long term
perspective and rely on intuition and decisions with others to acquire information. They also are
willing to take risks and good at finding creative solution to problems.

Examples: - Making a decision about someone’s future, what kind of weapon system to invent
other kinds of business decision.

 Access the environment and make decisions based on your experience and training.
 React instinctively(use instincts)

NB- if you are collaborative, it builds trust and so when you have you have to decide people are
more likely to trust your decisions.

NB- on the downside, a conceptual style can foster an idealistic and indecisive approving to
decision making.

Behavioral

People with this style work well with others and enjoy social interactions in which opinions are
openly exchanged. Behavioral types are supportive, receptive to suggestions, show warmth, and
prefer verbal to written information. Although they like to hold meetings, people with this style
have a tendency to avoid conflict and to be concerned about others. This can lead behavioral type
to adopt a “wishy-washy” approach to decision makings to have a hard time saying no to others
and to have hard time making difficult decisions.

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NB managerial implications.

Research shows that very few people have only dominant decision-making styles. Most
managers have characteristics that fall into two or three styles. Studies show that decision-
making styles vary across occupations, job level, and countries.

 You can use knowledge of decision making style in three ways:

a) Knowledge of style helps you to understand yourself. Awareness of your style
assists you in identifying your style assist you in identifying your strength and
weaknesses as decision makers and facilities the potential for self-important.
b) You can increase your ability to influence others by being aware of style e.g. if you
are dealing with an analytical person, you should provide as much information as
possible to support your ideas.

This same approach is more likely to frustrate a directive types.

c) Knowledge of styles gives you an awareness of how people can take the same
information and yet arrive at different decisions by using a variety of decision-
making strategies.

NB-

There is not a best decision-making style that applies in all situations. We should strive to
capitalize on the strength of various decision-making styles while trying to achieve a “state of
clarity” when making decisions. The clarity state is characterized by a balanced of physical,
mental and physical and emotional state of being relaxed, positive and focused.

Escalation of commitment

Escalation situation involve circumstances in which things have gone wrong but where the
situation can possibly be turned around by investing additional time, money or effort. Escalation
of commitment refers to the tendency to stick to an ineffective course of which when it is
unlikely that the bad situation can be reserved, e.g. investing money into an old or broken car;
waiting an extremely long time bus to take you somewhere that you could have walked just
easily, research shows that escalation of commitment is partially responsible for some of the
worst finances losses experienced by organization.

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Reason for Escalation of Commitment

a) Psychology and social determinants.

Ego defense and individual motivations are the key psychology contributors to escalation of
commitment. Individuals “throw good money after bad” because they tend to:

i. Bias facts so that they support previous decisions.

ii. Take more risks when a decision is stated in negative terms (to recover losses)
rather than positive ones (to achieve gains).
iii. Get too ego-involved with the project.

Because failure threatens an individual’s self-esteem or ego, people tend to ignore

negative signs and push forward.(procrastinate)

Social pressures can make it difficult for an individual to drop a course of action
when he or she publicly support it in the past. Additionally managers may continue
to support bad decisions because they don’t want their mistakes exposed to others.

b) Organizational determinants.

Breakdowns in communication, workplace, politics, and organizational investees cause

organizations

c) Project characteristics.

Involve the objective features of a project. They have the greatest impact on escalation
decisions. E.g. because most project do not reap profits until some delayed time period,
decision makers are motivated to stay with the project until the end. Thus, there is a tendency
to attribute setbacks to temporary cause that are correctable with additional expenditures.
Moreover, escalation is related to whether the project has clearly defined goods and whether
people receive clear feedback about performance. Escalation can be fueled by ambiguous
performance feedback and the lack of performance standards.

d) Contextual determinants.

These causes of escalation are due to forces outside an organizations control. eg research
shows that a manager’s national culture influenced the amount of escalation in decision
making. It shows that Mexican manager exhibited more escalation than us managers.
External political forces also represent a contextual determinant.

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[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
How to reduce escalation of commitment

It is important to reduce escalation of commitment because it leads to poor decision making

for both individuals and groups. Some of the suggested ways of doing so includes the
following:

i. Set minimum target for performance and have decision makers compare their
performance with this targets.
ii. Have different individuals make the initial and subsequent decisions about the
project.
iii. Encourage decision makers to become less ego-involved with a project.
iv. Provide more frequent feedback about project completion and costs.
v. Reduce the risks of penalties of failure.
vi. Make decision makers aware of the cost of persistence.

Creativity

In light of todays need for fast-paced decisions, an organization ability to stimulate the
creativity and innovation of its employees is becoming increasingly important.

Creativity is the process of using intelligence, imagination, and skills to develop a new or
novel product, object, process or thought. It can be as simple as locating a place to hang
the car keys or complex like developing a pocket-size microcomputer. The definition
captures three broad types.

Types of creativity
i. Creation, one can create something new.
ii. Synthesis on can combine or synthesize things.
iii. Modification, one can improve or change things.
Creativity involves making remote associations between unconnected events, ideas, information
stored or physical objects.
Research has identified five stages underlying the creative process:
i. The preparation stage.
Reflects the notion that creativity starts from a base of knowledge. Experts suggest that creativity
involve a convergence between tacit or implied knowledge and explicit knowledge.
ii. The concentration stage.
During this stage, an individual focuses on the problem at hand. Research shows that creative
ideas at work are often triggered by work-related problems, incongruities, or failures. Japanese
companies are noted for encouraging this stage as part of a quality improvement process than
American companies.

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[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
iii) Incubation stage.
This is done unconsciously. During this stage, people enrage in dearly activities while their
simultaneously mull over information and make remote association.
iv) Illumination stage.- here associating priority got incubation stage are ultimately generated.
v) Verification stage- entails going through the entire process to verify, modify, or try out the
new idea.
NB
Organization should create a management infrastructure that encourages and reinforces
creativity. People should to identify problems (discontents) on the first day of employment- this
discontent should be treated as “golden eggs” to reinforce the notion that it is good to identify
problems
*creativity can be enhanced by effectively managing the creativity process and by fostering a
positive and supportive work environment. Non-structuredness and non-evaluation technologies
are stressed in a creative decision process.
Creativity/ innovation killers
1. Short –term focus.
2. Lack of time resources or staff.
3. Leadership expects payoff sooner than is realistic.
4. Management incentives are not structured to reward innovation.
5. Lack of a systematic innovation process.
6. Belief that innovation is inherently risky.
Group discussion making.
Individual decisions are taken by a single individual. These are concerned mainly with routine
problems for which broad policies are available. In such, decisions, analysis of various variables
relatively simple. However, in some cases, important decisions may be made by an individual.
Group decisions are those taken by a group of persons constituted for this purpose. Decisions
taken by the Board of Directors or a committee are examples of group decisions. These decisions
are generally important for the organization. Group Decision-making generally results in more
realistic and well-balanced decisions and encourages participative Decision-making. But if
involves delay and makes it difficult to fix responsibility for such decisions.

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[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
Advantages and Disadvantages of Group Decision-making
Advantages Disadvantages
More information and knowledge. Waste of time due to delay in decisions
A greater number of alternatives can be Groups create pressures on members to conformity and
Generated due to wider experience, variety of opinions to compromise on the least common alternative.
and more thorough probing of facts.
Participation in Decision-making increases acceptance Domination of the group by one or two powerful and
and commitment to decisions. influential members.
People understand the decision better. May be costlier than individual decisions.
Interaction between individuals helps to Tendency to pass the buck or to avoid responsibility.
improve cooperation and coordination
One man control reduced as authority is shared. Disagreement among group members may lead to
conflict and ill feelings between them.
Fosters creativity and initiative.

Group involvement in decision in decision making

Groups can contribute to each stage of the decision-making process. To maximize the value of
group-aided decision making, it is important to create an environment in which group members
feel free to participate and express their opinions.
Most innovative groups possess high levels of both minority different (the extent to which group
members feel comfortable disagreeing with other group members) and participation in decision
making.

Managers should seek divergent views from group members during decision making.

*groups need to work through various aspects of decision-making in order to be effective

decision-making effectiveness in group is dependent on successfully accomplishing the
following:

1. Developing a clear understanding of the decision situation.

2. Developing a clear understanding of the requirement for an effective choice.
3. Thoroughly and actively accessing the positive qualities of alternative solution.
4. Thoroughly and accurately accessing the negative of alternative solution.

Managers learn leaders and individuals group members are encouraged to focus on satisfying
these requirements to increase group making high-quality decisions.

Creativity Problem Solving Notes

A large number of techniques have been developed to encourage creative thinking. Some of
these techniques are described below:
1. Attribute Listing: This technique was developed by Robert Crawford. It involves listing of all
attributes of an object or problem. Then an attempt is made to modify each attribute or group of
attributes in as many ways as possible.

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[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
2. Brain Storming: This is a technique developed by Alex F. Osborn, an advertising agency
executive. Under this technique, a group of persons is given a problem and they are encouraged
to suggest whatever solutions come to their mind. The discussion is free and uninhibited.
3. Garden Technique (Synectics): William J. Gordon developed this technique. In order to
encourage wider and a more innovative outlook, the participants are kept in dark about the exact
nature of the problem. Gordon technique is more unconstrained than brainstorming.
4. Nominal Group Technique: The nominal group is a group in name only. This technique
consists of the following steps:
(a) The leader explains the problem to the members of the target group;
(b) Each member writes down his ideas silently and independently;
(c) Each member presents his one best idea to the group which is written on a blackboard for all
to see;
(d) A discussion is held to explain and evaluate the idea.
5. Delphi Technique: This technique is used to collect information from physically dispersed
persons by means of a written questionnaire. This technique permits collection of ideas from
experts placed in different locations. The members are not influenced by one another, as there is
no face-to-face interaction.

Advantage and Disadvantages of Group-Aided Decision Making

Advantage
i. Greater provision of knowledge- a group can bring much more information and
experience to bear on a decision or problems than can an individual acting alone.
ii. Different perspectives- individuals have various experience and interests- when help the
group to see decision situations and problems from different angles.
iii. Greater comprehension- Those who personally experience the give-and –take of group
decision about alternatives causes of action tend to understand the rationale behind the
final decision.
iv. Increase acceptance: Those who play an active race in group decision making and
solving tend to view the outcome as “ours” rather than “theirs”.
v. Training ground: Less experienced participate in group action learn how to cope with
group dynamics by actually being involved.

Disadvantage
i. Social pressure: Unwillingness to “rock the best boat” and pressure to confirm may
combine to shuffle the creativity of individual contributors.
ii. Domination by a vocal few: Sometimes the quality of group action is reduced when the
group gives in to those who talk the loudest and longest.
iii. Logrolling: Political wheeling and dealing can displace sound thinking when an
individual’s pet project or vested interest is at stake.

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[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
iv. Goal displacement: Sometimes secondary considerations such as winning an argument,
making a point, or getting back at a rival displace the primary task of making a sound
decision or solving a problem.
v. Group thinking: Sometimes cohesive “in-groups” let the desire for unanimity override
and judgment when generally and evaluating alternative course of action.

NB

Group performance is generally qualitatively and quantitatively superiors to the performance of

the average individuals.

Managers should use a contingency approach when determining whether to include others in
decision making process.

In the face of environmental threats such as time pressure and potentially serious effects of
decision, groups use less information of fever communication channels which increases, the
probability of a bad decision making- therefore managers should know that because the quality
of communication strongly affects a group’s productivity, on complex tasks, it is essential to
devise mechanisms to enhance communication effectiveness.
Participative management
An organization needs to maximize its workers potential if it wants to successfully compete in
the global economy. Participative management and employee empowerment are highly touted
methods for meeting the productive challenge.
Participative management has been defined as the process whereby employees play a direct role
in a
a. Setting goals.
b. Making decisions.
c. Solving problems.
d. Making charges in the organization.
Participative management (PM) entails much more than simply asking employees for their ideas
or opinions.
It has been observed that P.M,- employee participate increased employee satisfaction
commitment and performance.
Consistent with both Maslow’s need theory and the job characteristics model of job design,
participative management is predicted to increase motivation because it helps employees fulfill
three basic needs:
1. Autonomy.
2. Meaningfulness of work.
3. Interpersonal contact.

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[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
Satisfaction of these needs enhances feelings of acceptance and commitment, security,
challenges and satisfaction. These positive feelings supposed lead to increased innovation,
satisfaction and performance.
Factors that influence the effectives of participative management

Participative management does not work in all situations. The design of work, the level of trust
between management and employees’ competence and readiness to participate play a great role.

a) Design of work. Individual participation is counterproductive when employees are

highly interdependent on each other as an assembly line. The problem with individuals
participate in the case is that interdependent employees generally do not have broad
understanding of the entire production process.
b) The level of trust between management and employees
Participative management is less likely to succeed when employees do not trust
management.
c) Competence and ready to participate.
PM is more effective when employees are competent, prepared and interested in
participating.

Group problem-solving techniques

Using group decisions generally requires that they reach a consensus. A consensus is reached
when all members can say they either agree with the decision or have had their “day in court”
and were unable to convince others of their viewpoint in the final analysis; everyone agrees to
support the outcome.

This shows that consensus does not require unanimous agreement because group members may
still disagree with the final decision but are willing to work toward it success.

The Effect of Participative Decision-making

Participative decision making is when the leader involves the members of the organization. Other
perspectives of the situation are discovered because the leader deliberately asks and encourages
others to participate by giving their ideas, perceptions, knowledge, and information concerning
the decision. The leader maintains total control of the decision because, although outside
information is considered, the leader alone decides. The leader is also completely responsible for
the good or bad outcome as a result of the decision.
The advantages include some group participation and involvement. This is especially valuable
when a person is affected negatively by the decision. In most cases, the individual is informed
before the decision is implemented (no surprises) and usually feels good about personal

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[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
involvement. If the leader is a good communicator, and listens carefully to the information
collected, he or she will usually have a more accurate understanding of the situation and make a
better decision. The disadvantages of this style include a fairly slow, time consuming decision;
less security, because so many people are involved in the decision.
Roadblocks to consensus decision

Groups may not generate all relevant alternatives because an individual dominates or intimidates
other group members’ e.g present of powerful CEO, may be intimidating

Shyness inhibits the generation of alternatives. Shy or socially anxious individuals may withhold
their input for fear of embarrassment or lack of confidence.

Satisficing- is also a hurdle to effective groups satisfice due to limited time, information or
ability to handle large amount of information.

Achieving consensus

For successful consensus, groups should use active listening skills, involve as many members as
possible, seek out the reasons behind arguments, and dig for facts. Groups should not horse
grades (support on conditions), votes or agree just to avoid rocking the boat, voting is not
encourage because it can split the group into winners and losers.

Group problems solving techniques

a. Brainstorming.
b. The normal group technique.
c. The Delphi technique.

Knowledge of these techniques can help current and future managers to more effectively use
group-aided decision making. Additionally, the advent of computer-aided decision making
enables managers to use these techniques to solve complex problems with large groups of
people.

Brainstorming

Was developed by A.F Osborn to increase creativity. It is used to help group to generate multiple
ideas and alternatives for solving problems. This technique is effective because it helps to reduce
interference caused by critical and judgmental reactions to one’s ideas from other group
members. When brainstorming, a group is convene and the problem at hand is reviewed.
Individual members are asked to silently generate ideas or alternative for solving the problems.
Silent idea generation is recommendable over the practice of having group members randomly.
Shout out the ideas because it leads to a greater number of unique ideas.

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[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
Next, these ideas/ alternatives are satiated and written on board or flip chart. A second session is
used to critique and evaluate the alternatives. Managers are advised to follow seven rules from
brainstorming.

a. Defer judgment. Don’t criticize during the initial stage of idea generation. Phrases
such as “we’ve never done it that way”, “it won’t work”, “it too expensive” and “our
manager will never agree” should not be used.
b. Build on the ideas of others. Encourage participants to extent others ideas by
avoiding “buts” and using “ands”.
c. Encourage wild ideas. Encourage out –of –box thinking. Wilder and more outrageous
the ideas debate.
d. Go for quantity over quality. Participants should try to generate and write down as
many new ideas as possible. Focusing on quantity encourages people to think beyond
their favorite ideas.
e. Be visual. This different colored pens (e.g. red, purple, blue) to write on big sheets of
flip chart paper, whiteboards, or posters board that are put on the wall.
f. Stay focus on the topic. A facilitator should be used to keep the discussion on
target.
g. One conversation at a time. The ground rules are that no one interrupts another
person, no dismissing of someone’s ideas, no disrespect and no rudeness.
NB
Brainstorming is an effective technique for generating new ideas/alternatives. It is not
appropriate for evaluating alternatives or selecting solutions.

The nominal group technique

The nominal group techniques (NGT) helps group generate ideas and evaluate and selects
solutions. NGT is a structured group meeting that follows this format. A group is governed to
discuss particular problem or issue. After the problem is understood, individuals silently
generate ideas in writing. Each individual in round-robin fashion offers one idea from his or
her list. Ideas are recorded on a blackboard or flip chat and are then discussed at these stages
of the process. Ones all the ideas are elicited the group discusses them. Anyone may criticize
or defend any item. Doing this step clarification is provided as well as general agreement or
disagreement with the idea. The “thirty-second soap box” technique which entails giving
each participant a maximum of 30 seconds to argue for or against any of the ideas under
consideration, can be used to facilitate this discussion.

Finally group members unanimously vote for their top choices with a weighted voting
procedure e.g. 1st choice equals to 3 points, 2nd choice equals to two points, 3rd choice equals
to one point.

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[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
Alternatively group members can vote by placing colored dots next to their top choices. The
group leader then adds the votes to determine the groups choice. Prior making a final
decision the group may decide to discuss the top ranked items and second round of voting.

The nominal group technique reduces the roadblocks to group decision making by:

1. Separating brainstorming from evaluation.

2. Promoting balanced participation among group members.
3. Incorporating mathematical voting techniques in order to reach consensus.

NGT has been successfully used in in much different decision making situation and has been
found to generate more ideas than standard brainstorming session.

The Delphi technique

This problem solving method was originally developed by the Rand operation for technological
focusing. It is now used as a multipurpose planning tool. The Delphi technique is group process
that anonymously generates ideas or judgments from physically dispersed experts. Experts’ ideas
are obtained from questionnaires or via the internet as opposed to face-to- face group discussion.

A manager begins the Delphi process by identifying the issues he or she wants to investigate e.g.
manager might want to inquire about customer demand, customer’s future preferences, or the
effect of locating a plant in a certain region of the country.

Next participants are identified and a questionnaire is developed. The questionnaires are sent to
participant and return to the manager which may be email through present day computer
networks.

The manager summarizes the responses and sends feedback to participants. At this stage, the
participants are asked to:

1. Review the feedback.

2. Prioritize the issues being considered.
3. Return the survey within a specifying time period.

This cycle repeats until the manager obtains the necessary information. The Delphi technique is
useful when face-to-face discussions are in practical, when disagreements and conflict are likely
to impair communication when certain individuals might severely dominate group discussion,
and when group think is a probable outcome of the group process.(Go to script )
Computer-Aided Decision Making
The purpose of computer-aided decision making is to reduce consensus roadblocks while
collecting more information in a shorter period of time. There are two types of computer aided
decision making systems.

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[email protected]/[email protected]
DHR 301 : ORGANIZATION BEHAVIOUR
Chauffer Driven System
Ask participants to answer predetermined questions on electronic keypads or dials. The computer
system tabulates participants’ responses in a matter of seconds.
Group Driven Electronic
Meetings are conducted in one of two major ways.
First, managers can use email systems, or the internet to collect information or brainstorm about
a decision that must be made.
Secondly, group-driven meetings are conducted in special facilities equipped with individual
workstations that are networked to each other. Instead of talking, participants type their input,
ideas, comments, reactions, or evaluations on their keyboards. The input simultaneously appears
on a large processer screen at the front of the room, thereby enabling all participants to see all
input.
How Computer-Aided decision making reduces roadblocks
1. Input is anonymous
2. Everyone gets a chance to contribute
3. No one can dominate the process
Research reveals that computer aided decision making produce greater quality and
quantity of ideas than brainstorming or nominal group technique for both small and large
groups of people.
Managers should select the best method of computer aided decision making in a given situation.
Review Questions
a. Compare and contrast the rationale model of decision making and Simons’ normative
model.
b. Discuss knowledge management and techniques used by companies to increase
knowledge sharing.
c. Explain the model of decision making styles and the stages of the creative process.
d. What are the advantages and disadvantages of involving groups I decision making
process.
e. Explain how participative management affects performance.
f. Contrast brainstorming, the nominal group technique, the Delphi technique and
computer-aided decision making.
Why would decision making styles be a source of interpersonal conflict?

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