© 2008The McGraw-Hill Companies, Inc. All rights reserved.

ChapterChapter 12 12

Individual and Group Decision

Making

Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Ch. 12 Learning Objectives

1. Compare and contrast the rational model of decision making, Simon’s normative model, and the garbage can model.

2. Discuss eight decision making biases.3. Discuss knowledge management and

techniques used by companies to increase knowledge sharing.

4. Explain the model of decision-making styles.5. Explain the model of intuition and the ethical

decision tree.12-2

Ch. 12 Learning Objectives

6. Summarize the pros and cons of involving groups in the decision-making process.

7. Contrast brainstorming, the nominal group technique, the Delphi technique, and computer-aided decision making.

8. Describe the stages of the creative process.

9. Discuss the practical recommendations for increasing creativity. 12-3

Problem Solving

Problem – gap between an actual and desired situation

A rental car company notices a dip in revenue from 12 months ago. The branch is located in a very congested area and hybrid vehicles can travel in express lanes. Customers complain that they would like environmentally-friendly cars to choose from to rent.What is the problem?

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Problem Solving

Problem Solving Methods•Historical Cues•Scenario Technique•Perceptions of others

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Decision Making

Decision making – Identifying and choosing solutions that lead to a desired end result

•First, determine responses or actions necessary to alleviate a problem

•Second, choose the best alternative 12-6

Models of Decision Making

Rational Model logical four-step approach to decision making

1. Identifying the problem2. Generating alternative

solutions3. Selecting solution4. Implementing and

evaluating the solution

McGraw-Hill12-7

Rational Decision Making

Do decision makers actually make decisions this way?What goal does the rational model assume the decision maker has?What assumptions does the rational decision making model make?

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Non-Rational Models

Based on premise that decision making is not rationalAssume that:•Decision making is uncertain•Not all information is available or known•Making optimal decisions is difficult

Simon’s Normative ModelGarbage Can Model

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Simon’s Normative Model of Decision Making

Based on premise that decision making is not rationalDecision makers are guided by bounded rationality•constraints that restrict decision making

Decision making is characterized by•Limited information processing•Satisficing

•Choosing a standard that meets a minimum standard of acceptance

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Garbage Can Model

Based on premise that decision making is sloppy and haphazardDecisions are made as a result of the interaction between:•Problems, solutions, participants, and

choice opportunities

What are the implications of the Garbage Can model?

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Integrating Normative and Rational Models

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Decision Making Biases

Availability heuristic – use information readily available in memoryRepresentativeness heuristic – using similar situations to predict the occurrence of an eventConfirmation bias – decide before investigating then seek confirming evidenceAnchoring bias – decisions are influenced by initial information, data, stereotypes

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Decision Making Biases

Overconfidence bias – tendency to be overconfident about estimates or forecastsHindsight bias – knowledge of an outcome influences our belief about the probability that we could have predicted the outcome earlierFraming bias – tendency to consider risks about gains differently than risks about lossesEscalation of commitment bias – tendency to stick to an ineffective course of action when it is unlikely that the bad situation can be reversed

12-14

Test Your Knowledge Which of the following will reduce escalation

of commitment? (A=Reduce, B=Won’t reduce)1. Set minimum targets for performance, and

have decision makers compare their performance with these targets

2. Have the same person have decision making authority over all aspects of an on-going project

3. Tie the person’s reputation to the success of the project

4. Provide more frequent feedback about project completion and costs

5. Make decision makers aware of costs of persistence

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Dynamics of Decision Making

Knowledge Management• Implementing systems

and practices that increase the sharing of knowledge and information throughout an organization.

What specific actions can organizations take to facilitate knowledge management?

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Forms of Knowledge

A. Troy is very effective at conducting client meetings. He knows what to say when and manages the discussion to maximize the impact of the meeting for all parties.

B. Sandra has established a process for efficiently and accurately conducting financial analyses. She has established a spreadsheet accompanied with a set of instructions.Which of the following types of information would be easier to share or capture? Why?

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Decision Making Styles

Individual’s decision making styles vary on two dimensions…..Value Orientation•Task vs. People/Social

Tolerance for Ambiguity•High vs. Low

Your book has a questionnaire to determine your style

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Decision Making Styles

Analytical Conceptual

Directive Behavioral

Tasks and TechnicalConcerns

People and SocialConcerns

Value Orientation

Low

High

Tole

ran

ce f

or

Am

big

uit

y

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Decision Making Styles

What is the best decision making style?What is the value of understanding decision making styles?

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Intuition in Decision Making

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Guidelines for Developing Intuitive Awareness

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Decision Tree for Ethical Decisions

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Group vs. Individual Decision Making

What are the advantages of group decision making?What are the disadvantages?

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Group-Aided Decision Making

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Test Your Knowledge

Which of the following research findings are true? (A-True, B-False)

1. Groups are more efficient than individuals.

2. Groups are more confident in their choices than individuals.

3. The larger the group, the poorer the decision quality.

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When to Use Groups for Decision Making

1) If additional information would increase the quality of the decision

2) If acceptance is important

3) If people can be developed through their participation

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BrainstormingBrainstorming process to generate a quantity of ideasQuantity is more important than qualityCriticism is withheldBuild on others ideasCreate status-free environment 12-28

Nominal Group Technique

1. Group meets to discuss a problem2. Individual generate ideas

independently3. Everyone shares an idea from his/her

list and they are recorded but not discussed

4. Group discusses all ideas5. Group members vote for their top

choices 12-29

Delphi Technique

1. Manager identifies an issue to investigate

2. Questionnaire is sent to others and returned to manager

3. Manager summarizes responds and sends feedback to participants

4. Participants send their feedback and comments

5. Cycle repeats until issue is resolve or all relevant information is gathered. 12-30

Creativity & InnovationCREATIVITY is thinking up new things. INNOVATION is doing new things. ~ Theodore Levitt

Process of developing something new or unique

Three types…CreationSynthesisModification 12-31

Model of Creativity

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Test Your Knowledge

Which of the following will foster creativity? (A-Yes, B-No)

1. Punishing mistakes or ideas that fail2. Allowing time for fun and playing around3. Holding people accountable for creative ideas4. Emphasize the importance of taking action or

generating output5. Encouraging discussion of “half-baked” ideas6. Rewarding creativity7. Establishing a rigid, hierarchical corporate

culture12-33