I Gde Reza Rizky Margana/1906420225

Summary Chapter 12 “Individual and Group Decision Making”

Organizational Behaviour

 Decision-making involves identifying and choosing between alternative solutions that lead to a
desired state of affairs. The process begins with a problem and ends when a solution has been
chosen and sometimes executed — since thinking about execution sometimes feeds back into the
thinking leading to the original decision.
 There are several models of decision-making. Each is based on a different set of assumptions and
offers a unique insight into the decision-making process:
 The rational model
According to the rational model, people use a rational, four-step sequence when making
decisions; they identify the problem, generate alternative solutions, select a solution, and
implement and evaluate that solution.
 The Carnegie model (Simon’s Normative Model)
According to the model, this process is constrained by a decision-maker's bounded
rationality. Bounded rationality represents the notion that decision-makers are 'bounded' or
restricted by a variety of constraints when making decisions. In contrast to the rational
model, this model suggests that decision-making is characterized by limited information
processing, the use of judgmental heuristics and a process that involves ‘satisficing' with
something short of ideal. The model suggests that decision making is characterized by:
a) Limited information processing – There is a limit to the quantity of information
managers can process resulting in the tendency to acquire manageable rather than
optimal amounts of information. So the reality is that managers are not evaluating
all potential alternatives to choose the best one.
b) Satisficing - Satisficing consists of choosing a solution that meets some minimum
standard of acceptance. Satisficing occurs because people do not have the time,
information, or ability to handle the complexity associated with the rational
process and, therefore, stop seeking alternatives when they find one that is good
enough.
 The incrementalist model
In the incremental or incrementalist model, managers select only those actions which differ
a little from what was previously done. By only making small changes, the risk of making
a costly mistake is reduced. If a decision turns out to be wrong, the cost of reversing it is
modest. This model is often referred to as 'muddling through', an expression coined by
Lindblom in the title of the paper that first introduced the model.'
 The 'garbage can' model
According to the 'garbage can' model, decisions result from a complex interaction between
four independent streams of events: problems, solutions, participants and choice
opportunities. The four streams of events - problems, solutions, participants and choice
 opportunities – flow in and out of organizational decision situations independently of each
other
a) Problems represent a gap between an actual situation and a desired condition. But
problems are independent from alternatives and solutions. The problem may or
may not lead to a solution.
b) Solutions are answers looking for questions. They represent ideas constantly
flowing through an organization. Contrary to the classical model, however,
solutions are used to formulate problems rather than vice versa. This is predicted
to occur because people often do not know what they want until they have some
idea of what they can get.
c) Participants are the organizational members who come and go throughout the
organization. They bring different values, attitudes and experiences, as well as
solutions that enter the garbage can with them, to a decision-making situation. Time
pressures limit the extent to which participants are involved in decision-making.
d) Choice opportunities are occasions in which an organization is expected to make a
decision. While some opportunities, such as hiring and promoting employees,
occur regularly, others do not because they result from some type of crisis or unique
situation.
 The unstructured model
The essential steps in the model are in fact somewhat similar to the rational model, but with
less emphasis on finding optimal solutions. The three stages in the model are:
a) Identification is about being able to spot changes that will necessitate decisions.
b) Development, where alternatives are sought and developed, is similar to the
solutions step in the rational model.
c) Selection, managers mix judgement, negotiation and formal analysis in order to
arrive at a final decision
 Snowden and Boone have come with with an integrated model of the rational and non-rational
models by defining four kinds of environments and effective methods of decision making for each:
Type of Context Indication Effective Methods
Simple Context Stable, cause & effect is Rational Model
clear
Complicated Context Cause & effect is clear but Rational Model; investigate
multiple solutions would options
work
Complex Context One right answer but cause Experiment; test options;
& effect is unclear seeks a creative solution
Chaotic Context Cause & effect is Act to establish order to
constantly changing identify pattern for
managing the problem
 There are several type of condition that can make a biases decision making:
 The availability heuristic is the decision maker’s tendency to base decisions on information
that is readily available in memory. So events that happened that are salient or recent may
disproportionately influence a decision.
 The representativeness heuristic occurs when people compare a current event or situation
to previous situations that they know about. If these situations are not really comparable
or if the decision makers’ knowledge about them is not accurate, it may lead to an
inaccurate decision.
 The confirmation bias occurs when people pre-judge a situation and then seek information
that confirms their decision or belief.
 The anchoring bias affects people’s decision making by the influence of initial information,
impressions, data, feedback or stereotypes that anchor subsequent decisions or judgments.
 Overconfidence bias is a tendency to be overconfident about estimates or forecasts
 Hindsight bias is knowledge of an outcome influences our belief about the probability that
we could have predicted the outcome earlier
 Framing bias is a tendency to consider risks about gains differently than risks about losses
 Escalation of commitment bias is a tendency to stick to an ineffective course of action
when it is unlikely that the bad situation can be reversed
 Several types of decision making styles, these are:
 People with a directive style have a low tolerance for ambiguity and are task-oriented.
They are efficient and action-oriented but tend to be autocratic.
 People with an analytic style have a higher tolerance for ambiguity and a tendency to
overanalyze a situation. They tend to consider more information and take longer to make
decisions but can be autocratic.
 Those with a conceptual style have a high tolerance for ambiguity and tend to focus on
the people or social aspects of work. They take a broad perspective and like to consider
numerous options, but can be indecisive when making decisions.
 People with a behavioral style are the most people-oriented of the four possibilities. They
are supportive and receptive, but have a tendency to avoid conflict and to be too concerned
about others.
 Intuition, also referred to as a hunch or a gut feeling, often plays a role in the decision-making
process. The technical definition of intuition is making a choice without the use of conscious
thought or logical inference. Intuition comes from two sources: expertise and feelings, the expertise
is based on explicit (information that can be easily put into words and shared with others) and tacit
(information gained through experience that is difficult to express and formalize). Intuition is
automatic and involuntary and there are two types:
 A holistic hunch represents a judgment that is based on a subconscious integration of
information stored in memory. It just “feels right.”
 Automated experiences represent a choice that is based on a familiar situation and
partially subconscious application of previously learned information related to that
situation, such as driving a car and riding a bike.
 Guidelines for developing intuitive awareness
Recommendation Description
Open up the closet To what extent do you experience intuition
Don’t mix up your I’s Instinct, Insight, and Intuition are not synonymous
Elicit Good Feedback Seed feedback on your intuitive judgments
Get a feel for your batting average Benchmark your intuitions
Use imagery Use imagery rather than words
Play devil’s advocate Test out intuitive judgments; raise objection to them;
generate counter-arguments; probe how robust gut feel
when challenged
Capture and validate your intuitions Create the inner state to give your intuitive mind the
freedom to roam
 Group-aided decision making has some advantages and disadvantages:
Advantage Disadvantage
Greater pool of knowledge Social pressure
Different perspective Domination by a vocal few
Greater comprehension Logrolling
Increased acceptance Goal displacement
Training ground Groupthink

 Three situations when it is best to use groups for decision making.

 If additional information would increase the quality of the decision
 If acceptance is important
 If people can be developed through their participation
 Several group problem-solving techniques:
 Brainstorming: used to help groups generate multiple ideas and alternatives for solving
problems. Although effective for generating ideas, this techniques is not appropriate for
evaluating alternatives or selecting solutions
 Nominal group technique: this technique brings together a small number of individuals
(usually 7-10) who systematically offer their individual solutions to a problem and share
their personal reactions to those solutions
 The Delphi technique is a systematic way of collecting and organizing the opinions of
several experts into a single decision. This is often used with organizations that need to do
forecasting where they need to rely on seasoned, experienced judgments but want to avoid
the problems of scheduling face-to-face meetings