10-1 michael a. hitt c. chet miller adrienne colella decision making by individuals and groups...
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10-1
Michael A. Hitt
C. Chet Miller
Adrienne Colella
Chapter 10 Decision Decision
Making by Making by IndividualsIndividualsand Groupsand Groups
Slides by Ralph R. Braithwaite
10-2
Dawn Ostroff’s Decision Making Dawn Ostroff’s Decision Making at the CW Television Networkat the CW Television Network
Dawn Ostroff
• What are your thoughts about Ostroff’s decision-making process regarding programming at the “new” network?
• Given the nature of the decisions needed, did she used the knowledge and wisdom of her advisors wisely?
• What are your thoughts about the “creative and somewhat risky tactics” that were adopted?
• Do you think the network will survive and be successful in the future?
Exploring Behavior in Action
10-3
Knowledge ObjectivesKnowledge Objectives1. Describe the fundamentals of decision making,
including the basic steps and the need to balance ideal and satisfactory decisions.
2. Discuss four important decision-making styles, emphasizing the effectiveness of each one.
3. Explain the role of risk-taking propensity and reference points.
4. Define cognitive bias and explain the effects of common types of cognitive bias on decision making.
5. Discuss common pitfalls of group decision making.6. Describe key group decision-making techniques.7. Explain the factors managers should consider in
determining the level of associate involvement in managerial decisions.
10-4
Fundamentals of Decision Fundamentals of Decision MakingMaking
Decisions are choices of actions from among multiple feasible alternatives.
Making decisions is one of the primary activities of senior managers.
Decisions are also made by managers at all levels and by associates in high-involvement organizations.
10-5
Decision-Making ProcessDecision-Making Process
Adapted from Exhibit 10-1: The Decision-Making Process
Define the Problem
Identify Criteria
Gather and Evaluate Data
List and Evaluate Alternatives
Select Best Alternative
Implement and Follow Up
Feedback
10-6
Optimal versus Satisfactory Optimal versus Satisfactory DecisionsDecisions
Optimal decision Satisficing decision
10-7
Decision-Making StylesDecision-Making Styles
Carl Jung
Individuals’ predispositions can affect decision process at two critical stages
Gathering Gathering (Perceiving) (Perceiving)
of Informationof Information
Sensing styleSensing styleIntuition styleIntuition style
Evaluating Evaluating (Judging) of (Judging) of AlternativesAlternatives
Thinking styleThinking styleFeeling styleFeeling style
10-8
Decision-Making Decision-Making StylesStyles
Adapted from Exhibit 10-2: Influence of Decision Styles
Implement and Follow Up
Pe
rce
ptu
al
Infl
ue
nce
s IntuitionSensing
Ju
dg
men
tal
Infl
ue
nce
s
Fe
edb
ack
Identify Criteria
Gather and Evaluate
Information
List and Evaluate Alternatives
Select Best Alternative
Define the Problem
Using abstractions and describing the
“big picture”
Using the five senses to identify
factual details
FeelingThinking
Subjective values with emotional and
personal factors
Objective analysis, rational
procedures
10-9
Gathering InformationGathering Information
SensingSensingA decision style
focused on gathering concrete information directly through the
senses, with an emphasis on practical
and realistic ideas.
IntuitionIntuitionA decision style
focused on developing abstractions and
figurative examples for use in decision making,
with an emphasis on imagination and
possibilities.
10-10
Intuition StyleIntuition StyleValuable when:
• A high level of ambiguity exists
• Few or no precedents exist
• Facts are limited
• Facts don’t clearly indicate which way to go
• Time is limited and there is pressure to make the right decision
• Several plausible alternative solutions exist with good arguments for each
10-11
Evaluating AlternativesEvaluating Alternatives
ThinkingThinkingA decision style
focused on objective evaluation and
systematic analysis.
FeelingFeelingA decision style
focused on subjective evaluation and the
emotional reactions of others.
10-12
ManagerialAdvice
Nurturing Alternative Nurturing Alternative Decision StylesDecision Styles
What are your thoughts about the comment that many accountants believe that more data is better and they hide behind “a mass of data”?
What are your thoughts that some marketers have “blind spots” when it comes to having to do data analysis?
What are you thoughts about the Six Thinking Hats concept of Edward de Bono?
Edward de Bono
10-13
Degree of Acceptable RiskDegree of Acceptable Risk• Risk exists when the outcome of a chosen
course of action is not certain
• Risk-taking propensity (Willingness to take chances)
Reference Point
10-14
Cognitive BiasesCognitive Biases
Confirmation biasSeeking information that confirms early beliefs and ideas
Ease of recall biasRelying too much on information that is easy to recall from memory
Anchoring biasEmphasizing too much the first piece of information encountered
Sunk-cost biasNot treating past investments (time, effort, money) as sunk-costs when deciding to continue an investment
Cognitive Biases
Mental shortcuts involving simplified ways of thinking
10-15ExperiencingStrategic OB
Mount Everest ExpeditionsMount Everest Expeditions
George Mallory (R) and Andrew Irvine
• What role do “sunk costs” play in many decisions?
• Why would someone like Rob Hall ignore his pre-determined turnaround time?
• Have you experienced the “perils of sunk cost” in your work or personal lives? Give examples.
Rob Hall
Sir Edmund Hillary (L) and Tenzing Norgay
10-16
Group Decision MakingGroup Decision Making• Some members may arrive with their own
expectations, problem definitions, and pre-determined solutions
• Some members may have given more thought to the decision situation and what is to be accomplished
• Focus of the team leader may be in developing a collaborative team rather than developing individual decision making skills
10-17
Decision-Making ProcessDecision-Making Process
Adapted from Exhibit 10-3: Group Decision-Making Phenomena – Pitfalls and Techniques
Risky Shift
Devil’s Advocacy
Brainstorming
Group Decision Making
Dialectical Inquiry
Delphi Technique
Nominal Group
Technique
Diversity-based
InfightingGroupthink
Common Information
Bias
10-18
Group Decision-Making Group Decision-Making PitfallsPitfalls
GroupthinkCommon
Information Bias
Diversity-Based
Infighting
RiskyShift
Brain- storming
NominalGroup
Technique
DelphiTechnique
DialecticalInquiry
Devil’sAdvocacy
10-19
Vroom-Yetton MethodVroom-Yetton Method
Victor Vroom Philip Yetton
Requires managers to diagnose the problem situation and then determine the extent to which associates will be involved in the decision-making process. The involvement depends on the probable effect participation will have on:
• the expected quality of the decision
• the acceptance or commitment needed from associates to implement the solution
• the amount of time available (and needed) to make the decision.
10-20
Who Should Decide? Who Should Decide?
Adapted from Exhibit 10-4: Managerial Approaches to Associate Involvement in Decision Making
Low High
Level of Associate Involvement in Decision
AI Manager solves problem or makes decision aloneAII Manager requests information but not alternativesCI Manager explains problem individually but makes
decision aloneCII Manager explains problem to group, gets suggestions,
makes decision aloneGII Manager explains problem to group, facilitates problem
solving, implements decision supported by the group
AI AII CI CII GII
10-21
Vroom-Yetton MethodVroom-Yetton Method
A. Is there a quality requirement such that one solution is likely to be more rational than another solution, or will any number of solutions work reasonably well?
B. Do I have sufficient information to make a high-quality decision?
C. Is the problem structured (do I know the question to ask and where to look for relevant information)?
D. Is acceptance of the decision by associates critical to effective implementation?
E. If I were to make the decision by myself, is it reasonably certain that it would be accepted by my associates?
F. Do the associates share the organizational goals to be attained in solving this problem?
G. Is conflict among associates likely in preferred solutions?
Questions asked to determine level of associate involvement in decision making
Adapted from Exhibit 10-5: Decision Tree Method
10-22
Vroom-Yetton MethodVroom-Yetton Method
14-CII
10-AII
4-AI
1-AI 2-AI
3-GII
5-AI
9-AII
11-CII
13-CII
12_GII
6-GII7-CII
8-CI
No
Yes
No
No
No
No
NoNo
No
No
NoNo
NoNo
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Decision points
Recommended strategies
A B C D E F G
Pro
ble
m
Adapted from Exhibit 10-5: Decision Tree Method
10-23ExperiencingStrategic OB
Vroom-Yetton Model and the Vroom-Yetton Model and the Civil WarCivil War
• What are your thoughts regarding the application of the Vroom-Yetton Model to the Civil War battles discussed in the text?
• How could you use this model to “fight” some of your “battles” in your life?
10-24
Value of Individual vs. Group Value of Individual vs. Group Decision MakingDecision Making
Important considerations for judging the overall value of group decision vs. individual decision making include:
TimeTime CostCost
Nature of theNature of theProblemProblem
Satisfaction andSatisfaction andCommitmentCommitment
Personal GrowthPersonal Growth
10-25
Group Decision MakingGroup Decision Making
Adapted from Exhibit 10-6: Advantages and Disadvantages of Group Decision Making
Can accumulate more knowledge and facts and generate better alternatives.
Often display superior judgment when evaluating alternatives.
Involvement in decisions leads to a higher level of acceptance and satisfaction.
Can result in growth for members of the group.
AdvantagesAdvantagesTake more time to reach decisions than do individuals.
Social interactions may lead to premature compromise.
Often dominated by one or two “decision leaders.”
Managers may rely too much on group decisions – lose their own skills.
DisadvantagesDisadvantages
10-26
The Strategic LensThe Strategic Lens
1. You are a manager of a unit with 25 associates. You have just been informed that you must lay off 20% of the associates in your unit. What process will you follow to make the decision and implement it?
2. If you made a decision that your manager told you was important for the organization and later you learned that you made an error in that decision, what actions would you take? Assume that others will not notice the error for some time.
3. You make decisions on a daily basis. Do you find it difficult to make decisions, especially those of importance? What can you do to improve your decision-making abilities?
10-27
QuestionsQuestions
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