Decision Making Processes

Definition
Individual Decision Making
Organisation Decision Making
The Learning Organisation
Contingency Decision-Making Framework
Special decision circumstance
 Today’s
Business Environment
• New strategies
• Reengineering
• Restructuring
• Mergers/Acquisitions
• Downsizing
• New product/market development
• . . . Etc.

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 Decisions Made Inside the Organization

• Complex, emotionally charged issues

• More rapid decisions

• Less certain environment

• Less clarity about means/outcomes

• Requires more cooperation

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 A New Decision-Making Process

• Required because
• no one person has enough info to make all major
decisions
• No one person has enough time and credibility to
convince many
• Relies less on hard data
• Guided by powerful coalition
• Permits trial and error approach

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Definition

Organisational Decision Making – process of identifying and

solving problems
Two major stages:
3. Problem identification
4. Problem solution (also includes alternative forms of action)
Two types of decision
• Programmed
• Non-programmed

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Definition

• Non-programmed decisions usually involve strategic planning

• Today’s managers and organisations are dealing with a higher
percentage of non-programmed decisions because of rapidly
changing business environment
• See Exhibit 12.1

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 Steps in the Rational Approach to Decision-Making

Implement Monitor
Chosen Decision
Alternative Environment

Choose Define
Best 8 1 Decision
Alternative Problem
7 2

Evaluate 6 3 Specify
Alternatives 5 4 Decision
Objectives

Develop
Alternative Diagnose
Solutions Problem

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Individual Decision Making

Two ways of describing:

• Rational – which suggests how managers should try to make
decisions
• Bounded rationality perspective – which describes how
decisions actually have to be made under severe time and
resource constraints
• Rational decision making approach is an ideal that is very
difficult to reach

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Rational Approach

• Need for systematic analysis of a problem followed by choice

and implementation in a logical, step-by-step sequence
• Not ideal or fully achievable – but the rational model helps
managers think about decisions more clearly and rationally
• Steps are
4. Monitor the decision environment
5. Define the decision problem
6. Specify decision objectives
7. Diagnose the problem

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Rational Approach

5. Develop alternative solutions

6. Evaluate alternatives
7. Choose the best alternative
8. Implement the chosen alternative

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Bounded rationality perspectives

• Try and use systematic procedures to arrive at good decisions

• Very difficult to evaluate all the factors
• There is a limit to how rational managers can be
• Many other constraints impinge on the decision maker (see
Exhibit 12.3)
• Corporate culture and ethical values also influence decision
making – personal constraints also involved
• Need for intuitive decision making
• Previous experience and judgement

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 Constraints and Trade-offs
During Non-programmed Decision-Making

Bounded Rationality:
Limited time, information,
Trade-off
resources to deal with complex,
multidimensional issues

Personal Constraints: Decision/

Trade-off Desire for prestige, success; Choice:
personal decision style; and Search for
Trade-off
the need to satisfy emotional a high-quality
needs, cope with pressure, decision
Trade-off maintain self-concept alternative

Organizational Constraints:
Need for agreement, shared
perspective, cooperation, Trade-off
support, corporate culture and
structure, ethical values
Sources: Adapted from Irving L. Janis, Crucial Decisions
Business 5301 (New York: Free Press, 1989); and A. L. George, Presidential
Decision Making in Foreign Policy: The Effective Use of
Information and Advice (Boulder, Colo.: Westview Press, 1980).
 Choice Processes in the Carnegie Model

Uncertainty Coalition Formation Search

Information is Hold joint discussion Conduct a simple,
limited and interpret goals local search
Managers have and problems
many constraints Use established
Share opinions procedures if
Conflict appropriate
Establish problem
Managers have priorities Create a solution
diverse goals, if needed
opinions, values, Obtain social support
experience for problem, solution

Satisficing
Adopt the first
alternative
that is acceptable
to the coalition
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 The Incremental Decision Process Model

Identification Phase
• Recognition
• Diagnosis
Development Phase
• Search
• Screen
• Design
Selection Phase
• Judgment (evaluation – choice)
• Analysis (evaluation)
• Bargaining (evaluation – choice)
• Authorization
Dynamic Factors
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 Learning Organization Decision Process When Problem
Identification and Problem Solution Are Uncertain

PROBLEM IDENTIFICATION PROBLEM SOLUTION

When problem solution is

When problem identification is uncertain, Incremental process
uncertain, Carnegie model applies model applies

Political and social process is Incremental, trial-and-error

needed process is needed

Build coalition, seek agreement, Solve big problems in little steps

and resolve conflict about goals
and problem priorities Recycle and try again when
blocked

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Illustration of Independent Streams of Events in the Garbage
Can Model of Decision-Making

Problems Solutions

Middle Management
Problems
Participants Solutions Participants
Choice
Opportunities
Participants

Choice Opportunities Choice Opportunities

Department A Solutions Department B
Problems Choice Problems
Solutions Opportunities Solutions
Choice Choice
Problems
Opportunities Opportunities
Participants Participants Participants

Solutions Problems Problems Solutions

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Participants Participants
 Contingency Framework for Using Decision Models

Certain Problem Uncertain

Consensus

Certain 1 2
Individual: Individual:
Rational Approach Bargaining, Coalition
Computation Formation

Organization: Organization:
Management Science Carnegie Model
Solution
Knowledge
3 Individual: 4 Individual:
Judgment Bargaining and Judgment
Trial-and-error Inspiration and Imitation
Learning Organization:
Organization: Carnegie and Incremental
Uncertain Incremental Decision Decision Process Models,
Process Model Evolving to Garbage Can

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 Special Decision Circumstances

• High-Velocity Environments

• Decision Mistakes and Learning

• Escalating Commitment

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