11

Chapter TwelveChapter Twelve

Decision-Making ProcessesDecision-Making Processes

22

Today’s Today’s Business EnvironmentBusiness Environment

New strategiesNew strategies

ReengineeringReengineering

RestructuringRestructuring

Mergers/AcquisitionsMergers/Acquisitions

DownsizingDownsizing

New product/market developmentNew product/market development

. . . Etc.. . . Etc.

33

Decisions Made Inside the Decisions Made Inside the OrganizationOrganization

Complex, emotionally charged issuesComplex, emotionally charged issues

More rapid decisionsMore rapid decisions

Less certain environmentLess certain environment

Less clarity about means/outcomesLess clarity about means/outcomes

Requires more cooperationRequires more cooperation

44

A New Decision-Making A New Decision-Making ProcessProcess

Required becauseRequired because– no one person has enough info to make all no one person has enough info to make all

major decisionsmajor decisions– No one person has enough time and No one person has enough time and

credibility to convince manycredibility to convince many

Relies less on hard dataRelies less on hard dataGuided by powerful coalitionGuided by powerful coalitionPermits trial and error approachPermits trial and error approach

55

Steps in the Rational Approach to Steps in the Rational Approach to Decision-MakingDecision-Making

MonitorDecision

Environment

ImplementChosen

Alternative

DefineDecisionProblem

Specify Decision

Objectives

DiagnoseProblem

DevelopAlternativeSolutions

EvaluateAlternatives

ChooseBest

Alternative1

2

345

6

78

66

Trade-off

Trade-off

Trade-off

Constraints and Trade-offs Constraints and Trade-offs During Non-programmed Decision-During Non-programmed Decision-

MakingMaking

Personal Constraints:Desire for prestige, success;personal decision style; and

the need to satisfy emotional needs, cope with pressure,

maintain self-concept

Organizational Constraints:Need for agreement, sharedperspective, cooperation,

support, corporate culture and structure, ethical values

Bounded Rationality:Limited time, information,

resources to deal with complex,multidimensional issues

Decision/Choice:

Search fora high-quality

decisionalternative

Trade-off

Trade-off

Sources: Adapted from Irving L. Janis, Crucial Decisions(New York: Free Press, 1989); and A. L. George, PresidentialDecision Making in Foreign Policy: The Effective Use ofInformation and Advice (Boulder, Colo.: Westview Press, 1980).

77

Choice Processes in the Choice Processes in the Carnegie ModelCarnegie Model

Hold joint discussionand interpret goals and problems

Share opinions

Establish problem priorities

Obtain social supportfor problem, solution

Adopt the firstalternativethat is acceptableto the coalition

Conduct a simple,local search

Use established procedures ifappropriate

Create a solutionif needed

Managers havediverse goals,opinions, values,experience

Information is limitedManagers havemany constraints

Uncertainty Coalition Formation Search

Satisficing

Conflict

88

The Incremental Decision The Incremental Decision Process ModelProcess Model

· · Identification Phase Identification Phase– RecognitionRecognition– DiagnosisDiagnosis

Development PhaseDevelopment Phase– SearchSearch– ScreenScreen– DesignDesign

Selection PhaseSelection Phase– Judgment (evaluation – choice)Judgment (evaluation – choice)– Analysis (evaluation)Analysis (evaluation)– Bargaining (evaluation – choice)Bargaining (evaluation – choice)– AuthorizationAuthorizationDynamic FactorsDynamic Factors

99

Learning Organization Decision Process When Learning Organization Decision Process When Problem Identification and Problem Solution Are Problem Identification and Problem Solution Are

UncertainUncertain

When problem identification isuncertain, Carnegie model applies

Political and social process isneeded

Build coalition, seek agreement,and resolve conflict about goalsand problem priorities

When problem solution is uncertain, Incremental process model applies

Incremental, trial-and-errorprocess is needed

Solve big problems in little steps

Recycle and try again when blocked

PROBLEM IDENTIFICATION PROBLEM SOLUTION

1010

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

ProblemsSolutionsChoice

OpportunitiesParticipants

ProblemsSolutionsChoice

OpportunitiesParticipants

ProblemsSolutionsChoice

OpportunitiesParticipants

Choice OpportunitiesChoice Opportunities

Participants Participants

Middle Management

Problems Solutions

Solutions

Participants

ProblemsProblems

Solutions

ChoiceOpportunities

Problems

Participants

Participants

Solutions

Department A Department B

1111

Certain Uncertain

Contingency Framework for Using Contingency Framework for Using Decision ModelsDecision Models

ProblemConsensus

Individual: Rational Approach Computation

Organization: Management Science

Individual: Bargaining, Coalition Formation

Organization: Carnegie Model

Individual: Judgment Trial-and-error

Organization: Incremental Decision Process Model

Individual: Bargaining and Judgment Inspiration and ImitationLearning Organization: Carnegie and Incremental Decision Process Models, Evolving to Garbage Can

SolutionKnowledge

Certain

Uncertain

4

21

3

1212

Special Decision CircumstancesSpecial Decision Circumstances

High-Velocity EnvironmentsHigh-Velocity Environments

Decision Mistakes and LearningDecision Mistakes and Learning

Escalating CommitmentEscalating Commitment

1313

Decision StylesDecision Styles

WorkbookActivity

Your Your decisionsdecisions Approach usedApproach used

Advantages and Advantages and disadvantagesdisadvantages

Your Your recommended recommended decision styledecision style

1.1.

2.2.

Decisions by Decisions by othersothers

1.1.

2.2.