Decision Making

cf.: Participatory Management Styles
cf.: Blanchard’s Four Basic Leadership Styles.

Vroom & Yetton, and later Vroom & Jago found the following questions helpful in the sequence below:

1. Quality Requirement (QR): How important is the technical quality of the decision?
2. Commitment Requirement (CR): How important is subordinate commitment to the decision?
3. Leader’s Information (LI): Do you (the leader) have sufficient information to make a high quality decision on your own?
4. Problem Structure (ST): Is the problem well structured (e.g., defined, clear, organized, lend itself to solution, time limited, etc.)?
5. Commitment Probability (CP): If you were to make the decision by yourself, is it reasonably certain that your subordinates would be committed to the decision?
6. Goal Congruence (GC): Do subordinates share the organizational goals to be attained in solving the problem?
7. Subordinate conflict (CO): Is conflict among subordinates over preferred solutions likely?
8. Subordinate information (SI): Do subordinates have sufficient information to make a high quality decision?

Click here for an On-line example application of the model

It is in making decisions that managers most acutely feel the responsibilities, the power, and the vulnerabilities of their jobs.

The organizational process of problem identification, information sharing, and problem solving, if mishandled, can undo the work of the finest, most logical, and experienced individual decision maker.

Decision making in organizations is also a social process.

part of a manger’s role is determining who in the organization has the information , experience, and wisdom needed to make a particular decision.  Another part is understanding who are the stakeholders in each issue who need to be involved because their acceptance of the outcome is crucial.

Management is responsible for determining how the problem is solved, but not necessarily the solution.

The repeated use of edicts depletes a manager’s social credit … and may result in sabotage, token compliance, delays, and outright refusals to comply.

Employees are more likely to overlook the merits of a decision made by edict and devote their energies to complaining about how the decision was made.

The Rational Decision-Making Process

1. Recognize and define the problem.
2. Identify the objective of the decision and the decision criteria
3. Allocate weights to the criteria
4. List and develop the alternatives
5. Evaluate the alternatives
6. Select the best alternative
7. Implement the decision
8. Evaluate the decision.

Although this model is useful in guiding our general approach to decision making, the circumstances surrounding most decisions are seldom so simple or so rational that this model works perfectly and predictably.

Bounded Rationality

Herbert Simon: People are restricted in making decisions and settle for less than ideal solutions. Bounded rationality is based on these assumptions:

1. Managers select the first alternative that is satisfactory, which is called satisficing.
2. Both the available information and the definition of the situation are incomplete and inadequate to some degree.
3. managers are comfortable making decisions without first determining all the alternatives.
4. Managers use judgment shortcuts to make decisions, which are called heuristics.

Managers satisfice (i.e. accept a decision that is “good enough”) because the costs of maximizing are too great.
Bounded discretion … optimal solutions are not always best because they may involve unethical behavior.
Heuristics are rules of thumb based on past experience that managers use to simplify decision making.

Garbage Can Model

Four factors – problems, participants, solutions, and choice opportunities — all float randomly inside an organization, described metaphorically as a garbage can.  If they connect, a decision is made.

Factors that influence decisions

Risk-shift.  That includes greater risk (groupthink) when people have a sense of diffused responsibility, as well as a cautions shift.
Risk-shift is far more common that a caution-shift.  Group discussion seems to cause individuals to exaggerate their initial stance and move toward extremes.

Escalation of commitment occurs when people continue to commit resources to a failing course of action.  In spite of evidence that a previous decision was a mistake, people sometimes focus on what they have invested in an effort and become even more committed.

The Leader Participation Model

Managerial effectiveness depends on the skills required to analyze the problem in question and the ability to vary one’s leadership behavior accordingly.

The choice of leadership style can affect these four outcomes of the decision making process

1. The quality or rationality of the decision, which is defined as the extend to which decisions influence employee performance and further the attainment of organizational goals.
2. The amount of commitment to the decision, which is defined as the degree of employee commitment to executing the decision effectively.
3. The length of time required to make the decision, in other words, efficiency.
4. The amount of growth or development of the group or team.

A normative model such as this raises three questions

1. When managers utilize this model, how likely are their decisions to be effective
2. Do managers really make decisions in this manner
3. If not, why not?

Differences between managers decisions and the model surfaced some of their underlying assumptions:

• The group wouldn’t be able to deal with a difficult problem like this
• I wouldn’t know how to control the conflict this situation creates if it became a group decision
• In most groups the members would expect the managers to make this decision, and they would have to live with it.

Managers tend to underemphasize the importance of the acceptance and commitment components of decision effectiveness.
cf.: Connor: Managing at the speed of change.

Organizational history and culture will affect the decision-making method chosen independent of the logical dictates of the situation.

Vroom and Jago developed a more sophisticated version of this theory that includes four new contingencies:

1. Time constraints
2. Geographical dispersion (which acknowledges the difficulty of getting people together for a discussion)
3. Motivation to minimize the time needed to make the decision (so that time can be devoted to more pressing items)
4. Motivation to develop subordinates.  (cf.: One Minute Manager)

The Zone of Indifference

Chester Barnard: Employees willingly accept decisions made by their boss on topics that fall within their zone of indifference (e.g.: the font of the lettering on the new office stationary).

Understanding what falls inside and outside the zone of indifference for one’s employees is an important managerial competency.