Chapter Twelve

Decision-Making Processes

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Todays Business Environment

New strategies Reengineering Restructuring Mergers/Acquisitions Downsizing New product/market development . . . Etc.
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Decisions Made Inside the Organization

Complex, emotionally charged issues More rapid decisions Less certain environment Less clarity about means/outcomes Requires more cooperation

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A New Decision-Making Process

Required because

no one person has enough info to make all major decisions No one person has enough time and credibility to convince many

Relies less on hard data Guided by powerful coalition Permits trial and error approach
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Steps in the Rational Approach to Decision-Making

Implement Chosen Alternative Choose Best Alternative Monitor Decision Environment Define Decision Problem

7 6

2 3

Evaluate Alternatives

Specify Decision Objectives

Develop Alternative Solutions

Diagnose Problem

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

Limited time, information, resources to deal with complex, multidimensional issues

Bounded Rationality:

Trade-off

Trade-off Trade-off

Desire for prestige, success; personal decision style; and the need to satisfy emotional needs, cope with pressure, maintain self-concept

Personal Constraints:

Trade-off

Search for a high-quality decision alternative

Decision/ Choice:

Organizational Constraints:
Need for agreement, shared perspective, cooperation, support, corporate culture and structure, ethical values

Trade-off

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

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Choice Processes in the Carnegie Model

Uncertainty
Information is limited Managers have many constraints

Coalition Formation
Hold joint discussion and interpret goals and problems Share opinions Establish problem priorities Obtain social support for problem, solution

Search
Conduct a simple, local search Use established procedures if appropriate Create a solution if needed

Conflict
Managers have diverse goals, opinions, values, experience

Satisficing
Adopt the first alternative that is acceptable to the coalition 12-7

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The Incremental Decision Process Model

Identification Phase Recognition Diagnosis Development Phase Search Screen Design Selection Phase Judgment (evaluation choice) Analysis (evaluation) Bargaining (evaluation choice) Authorization Dynamic Factors
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Learning Organization Decision Process When Problem Identification and Problem Solution Are Uncertain
PROBLEM IDENTIFICATION PROBLEM SOLUTION
When problem solution is uncertain, Incremental process model applies Incremental, trial-and-error process is needed Solve big problems in little steps Recycle and try again when blocked

When problem identification is uncertain, Carnegie model applies Political and social process is needed Build coalition, seek agreement, and resolve conflict about goals and problem priorities

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

Problems Solutions Middle Management Participants Problems Solutions Choice Opportunities Participants Participants

Choice Opportunities Department A Problems Solutions Choice Opportunities Participants Solutions Solutions Choice Opportunities Problems Participants

Choice Opportunities Department B Problems Solutions Choice Opportunities Participants Problems Solutions

Problems Thomson Learning 2004 Participants

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Contingency Framework for Using Decision Models

Certain Certain 1 Problem Consensus 2 Uncertain

Individual: Rational Approach Computation Organization: Management Science

Individual: Bargaining, Coalition Formation Organization: Carnegie Model

Solution Knowledge

3 Individual: Judgment Trial-and-error Organization: Incremental Decision Process Model Thomson Learning 2004

Uncertain

4 Individual: Bargaining and Judgment Inspiration and Imitation Learning Organization: Carnegie and Incremental Decision Process Models, Evolving to Garbage Can 12-11

Special Decision Circumstances

High-Velocity Environments Decision Mistakes and Learning Escalating Commitment

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Workbook Activity

Decision Styles
Your decisions Approach used 1. 2. Decisions by others 1. 2.
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Advantages and disadvantages

Your recommended decision style

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