Individual and Organizational

Decision Making
Decision Making Process
 The Decision-Making Process

Programmed Decision - a simple, routine matter for

which a manager has an established decision rule

Nonprogrammed Decision - a new, complex

decision that requires a creative solution
 Recognize the problem and
The the need for a decision
Decision-
Making
Process Identify the objective of
the decision

Gather and evaluate data

and diagnose the situation

List and evaluate

alternatives
 Select the best
The course of action
Decision-
Making
Process Implement
the decision

Gather
feedback

Follow up
Individual Decision Making
 Perception
A process by which individuals
organize and interpret their sensory
impressions in order to give meaning to
their environment.

The world as it is perceived is the world

that is behaviorally important.
Factors Influencing Perception
 Person Perception: Attribution
Theory
Suggests that perceivers try to “attribute” the observed
behavior to a type of cause:

 Internal – behavior is believed to be under the

personal control of the individual
 External –the person is forced into the behavior by
outside events/causes
 The Link Between Perception and
Decision Making
Decision making occurs as a reaction to a perceived
problem
Perception influences:
 Awareness that a problem exists
 The interpretation and evaluation of information
 Bias of analysis and conclusions
 Individual Decision Making
 Rational approach – ideal method for how managers
should make decisions

 Bounded rationality perspective – how decisions are

made under severe time and resource constraints

19
 Rationality - a logical, step-
by-step approach to decision
Rational Model making, with a thorough
analysis of alternatives and their
consequences

1. The outcome will be completely rational

2. The decision maker uses a consistent system
of preferences to choose the best
alternative
3. The decision maker is aware of all alternatives
4. The decision maker can calculate the
probability of success for each alternative
 Bounded Rationality - a
Bounded Rationality theory that suggests that
Model there are limits upon how
rational a decision maker
can actually be

1. Managers suggest the first satisfactory alternative

Satisfice – to select the first alternative that is “good

enough,” because the costs in time and effort are too
great to optimize
 Bounded Rationality - a
Bounded Rationality theory that suggests that
Model there are limits upon how
rational a decision maker
can actually be

1. Managers suggest the first satisfactory alternative

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 Heuristics – shortcuts in decision
making that save mental activity
Organizational Decision
Making Process
Carnegie Model
 Problem Identification and
Problem Solution

Combining the Incremental Process and Carnegie

Models

48
 Garbage Can Model Solutions

Garbage Can Model - Problems Choice

opportunities
a theory that contends Participants
that decisions in
organizations are
random and unsystematic

From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative Science Quarterly 17 (March 1972) 1.25.
Reprinted by permission of the Administrative Science Quarterly
 Consequences of the
Garbage Can Model

1. Solutions may be proposed even when problems

do not exist
2. Choices are made without solving problems
3. Problems may persist without being solved
4. A few problems are solved

51
Illustration of Independent Streams of Events in
the Garbage Can Model of Decision-Making

52
 Organizations Can Facilitate
Creative Decision Making

 Reward creativity
 Allow employees to fail
 Make work more fun
 Provide creativity training
 Vary work groups (internal/external)
 Encourage creative stimuli (music, art, etc.)
Participative Individuals who are affected
by decisions influence the
Decision Making making of those decisions
 Organizational Foundations
 Participative, supportive organizational culture

 Team-oriented work design

 Individual Prerequisites
 Capability to become psychologically involved in

participative activities
 Motivation to act autonomously

 Capacity to see the relevance of participation for one’s

own well-being
 Group Decision Making
 Role of synergy - a positive force that occurs in groups
when group members stimulate new solutions to problems
through the process of mutual influence and
encouragement in the group
 Role of social decision schemes - simple rules used to
determine final group decisions
(prediction 80% correct) Majority Wins
Truth Wins
Two-thirds Majority
First shift
 Group Decision Making
1) more knowledge through pooling
of group resources
2) Increased acceptance & commit-
Advantages ment due to voice in decisions
3) greater understanding due to
involvement in decision stages

1) pressure in groups to conform

2) domination by one forceful
member or dominant clique
Disadvantages 3) amount of time required, because
group is slower than individual to
make a decision
 Ethics Check

 Is it legal?
 Does it violate law

 Does it violate

company policy
 Is it balanced?
 Is it fair to all

 Does it promote win–win relationships

 How will it make me feel about myself

 The end…

Thank you!!!