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    Organizational Constraints in Decision Making

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    Pankil R Shah
    Organizational constraints can influence decision making in ways that deviate from rational models. Managers shape decisions around performance evaluations, organizational rules and regulations, and time constraints imposed by the organization. Previous organizational decisions also set precedents that constrain current decisions. Performance evaluations, reward systems, formal regulations, time pressures, and historical precedents all act as constraints on decision makers within an organization. This inhibits new ideas and decisions that differ from past actions, even if alternative approaches might achieve better outcomes. Managers avoid high-risk decisions due to fear of failure negatively impacting their standing with top management.

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    Organizational Constraints in Decision Making

    Uploaded by

    Pankil R Shah
    7K views2 pages
    Organizational constraints can influence decision making in ways that deviate from rational models. Managers shape decisions around performance evaluations, organizational rules and regulations, and time constraints imposed by the organization. Previous organizational decisions also set precedents that constrain current decisions. Performance evaluations, reward systems, formal regulations, time pressures, and historical precedents all act as constraints on decision makers within an organization. This inhibits new ideas and decisions that differ from past actions, even if alternative approaches might achieve better outcomes. Managers avoid high-risk decisions due to fear of failure negatively impacting their standing with top management.

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    Organizational constraints can influence decision making in ways that deviate from rational models. Managers shape decisions around performance evaluations, organizational rules and regulations, and time constraints imposed by the organization. Previous organizational decisions also set precedents that constrain current decisions. Performance evaluations, reward systems, formal regulations, time pressures, and historical precedents all act as constraints on decision makers within an organization. This inhibits new ideas and decisions that differ from past actions, even if alternative approaches might achieve better outcomes. Managers avoid high-risk decisions due to fear of failure negatively impacting their standing with top management.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    7K views2 pages

    Organizational Constraints in Decision Making

    Uploaded by

    Pankil R Shah
    Organizational constraints can influence decision making in ways that deviate from rational models. Managers shape decisions around performance evaluations, organizational rules and regulations, and time constraints imposed by the organization. Previous organizational decisions also set precedents that constrain current decisions. Performance evaluations, reward systems, formal regulations, time pressures, and historical precedents all act as constraints on decision makers within an organization. This inhibits new ideas and decisions that differ from past actions, even if alternative approaches might achieve better outcomes. Managers avoid high-risk decisions due to fear of failure negatively impacting their standing with top management.

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    ORGANIZATIONAL CONSTRAINTS IN DECISION MAKING

    The organization itself constrains decision makers and thus can create deviations from the
    rational model. Managers, for instance, shape their decisions to reflect the organizational
    performance evaluation and reward system, to comply with the organizational formal
    regulations, and to meet organizationally imposed time constraints. Previous organizational
    decisions also act as precedents to constrain current decision.

    Performance Evaluation

    Managers are strongly influenced in their decision making by the criteria on which they are
    evaluated. If a division manager believes that the manufacturing plants under his
    responsibility are operating best when he hears nothing negative, we should not be surprised
    to find his plant managers spending a good part of their time ensuring that negative
    information does not reach the division boss. Similarly, if a college dean believes that an
    instructor should never fail more than 10% of her student s—to fail more reflects on the
    instructors ability to teacher”we should expect that instructor who want to receive favorable
    evaluations will decide not to fail too many students.

    Reward systems

    The organizational reward system influences decision makers by suggesting to them what
    choices are preferable in terms of personal payoff. For example, if the organization rewards
    risk aversion, manager are likely to make conservative decisions. From the 1930s through the
    mid-1980s, General Motors consistently gave out promotions and bonuses to managers who
    kept a low profile, avoided controversy, and were good team players. The result was that GM
    managers became very adept at dodging tough issues and passing controversial decisions on
    to committees.

    Formal Regulations

    All but the smallest of organizations create rules, policies, procedures, and other formalized
    regulations in order to standardize the behavior of their members. By programming decisions,
    organizations are able to get individuals to achieve high levels of performance without paying
    for the years of experience that would be necessary in the absence of regulations. And of
    course, in so doing, they limit the decision makes choices.

    System –Imposed Time constraints

    Organizations impose deadlines on decisions. For instance, department budgets need to be


    completed by next Friday. Or the report on new- product development has to be ready for the
    executive committee to review by the first of the month. A host of decisions must be made
    quickly in order to stay ahead of the competition and keep customers satisfied. And almost all
    important decisions come with explicit deadlines. These conditions create time pressure on
    decision makers and often make it difficult, if not impossible, to gather all the information
    they might like to have making a final choice.
    Historical Precedents

    Decisions are not made in a vacuum. They have a context. In fact, individual decisions are
    more accurately characterized as points in a stream of decisions.

    Government budget decisions also offer an illustration of our point. Its common knowledge
    that the largest determining factor of the size of any given years budget is last years budget.
    Choices made today, therefore, are largely a result of choices made over the years.

    The inference is that these organizational constraints inhibit fresh ideas and decisions in view
    of the past actions. It is possible that the new ideas could have outperformed the old
    methodology but the managers are not willing to take a high risk due to fear of failure which
    may antagonize the top management. That is how the organization acts as a constraint.

    ++++++++++++++++++++++++++++++++++++++++++++++++++++++++

    Constraints on Decision-Making

    Internal Constraints

    These are constraints that come from within the business itself.

    - Availability of finance. Certain decisions will be rejected because they cost too much

    - Existing Business Policy. It is not always practical to re-write business policy to accommodate one
    decision

    - People’s abilities and feelings. A decision cannot be taken if it assumes higher skills than
    employees actually have, or if the decision is so unpopular no-one will work properly on it.

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