Chapter Nine: Individual and Group Decision Making
Decision making is a process of specifying the nature of a particular problem or opportunity and selecting between available alternatives to solve a problem or capture an opportunity. Decision making has two aspects; the act and the process. The act involves choosing between alternatives. The processes consists of formulating, identification of the problem or opportunity and acquiring relevant information and the solution being the desired course of action. Individual decision making can consist of (a) the rational/classical model, (b) the administrative or bounded rationality model and (3) the retrospective decision-making model.
The rational or classical model is a seven step process, which begins with identifying problems and opportunities, depending on one's perception. The next step is developing objectives and criteria and assigning relative weightings. The third step is generating alternatives with the experience of past solutions and creative new solutions. Th fourth step is to analyse alternatives with minimally acceptable results, feasibility and best results. The fifth step is to select an alternative from weightings giving to selection criteria, the seventh to implement a decision, locating sources and reasons for reasons, chronology and sequence of actions, required resources and delegation of tasks. The seventh step is to monitor and evaluate results.
The bounded rationality model of Herbert Simon argues that decisions are not completely rational but rather that people usually settle for an acceptable rather than maximum option because the decisions they confront typically demands greater information processing than they have available. Decision-makers engage in heuristic rules that guide the search for alternatives into areas that have a high probability of success rather than analysing in detail. They also engage in satisficing, the tendency to accept the first alternative that meets minimum requirements rather than seeking for alternative that produces the best results. From the standpoint of bounded rationality firstly set the goal to pursued, establish what is an appropriate criterion level, employ heuristics to narrow the solution to a single primising alternative, if no feasible alternative is identified lower the aspiration level, evaluate the chosen alternative to determine its acceptability, if acceptable implement the decision. Following the implementation evaluate the ease with which the goal was attained and raise or lower the performance accordingly on future decisions.
The retrospective decision making model, or implicit favourite, focuses on how decision makers attempt to rationalise their choices after they are made. It often highlights issues of perceptual distortion, highlighting the positive features of the implicit favourite over the alternative and alerts to the possibility of intuitive decision making, the primarily subconscious process of identifying a decision and selecting a preferred alternive.
Decision types include programmed decisions, a standard response to a simple or routine problem or a non-programmed decision which is either poorly defined or novel. Lower-level managers spend much of their time with programmed decisions; high level managers with non-programmed decisions. A standard operating procedure assists in the establishment of programmed decisions. Decisions can also be put in a matrix of urgent and non-urgent. Gersham's law of planning states that there is a tendency of managers to deal with programmed and urgent decisions, leaving nonprogrammed/non-urgent decisions forgotten.
Good decisions come from decision-maker characteristics (knowledge, ability and motivation), problem-characteristics (unfamiliarity, ambiguity, complexity and instability) and decision-environment characteristics (irreversibility, significance, accountability, time and monetary constraints). To make better decisions manages must analyse the situation, scan the environment, think through the process, be creative, know the the right timing, increase their knowledge, and be flexible.
Group-decision making incorporates social interaction which complicates the process and can slow down the decision making and can inhibit management's need to act quickly and decisively which is imperative in a high-technology and changing environment. However it does have advantages; in establishing objectives it is superiors as there is greater cumulative knowledge. In identifying alternatives a greater variety is brought to the table. In evaluating alternatives group judgment is superior to individual judgment, however groups are inferior in carrying out the analysis. In choosing alternatives, group involvement leads to greater acceptance. In implementing the choice, individual responsibility however is superior to group responsibility. Other problems include the tendency towards groupthink, where agreement becomes dominant truncating criticism, which often occurs in highly cohesive groups, insulated from the outside and dominated by a leader; they tend to make few, if any, contingency plans. Victims of groupthink tend to collectively rationalise and discount warning signs and other negative feedback. A means to overcome groupthink is to formally introducte or value a devil's advocate or involve outside experts, and at times break the group up into subgroups to discuss problems.
Cross-functional teams working together in problem solving is an example of positive implementation of group decision making.
Escalating commitment is the tendency to exhibit greater levels of commitment to a decision as time passes and investments are made in the decision, even after significant evidence emerges indicating that the original decision was incorrect. The Vietnam war is a particular example. Prospective rationality, the belief that future courses of action are rational and correct, ensures that the incorrect decision is maintained in the hope that 'prosperity is just around the corner'. To avoid escalating commitment, sunk costs must be recognised. An atmosphere has to be created where consistency does not dominate. Like with groupthink, an individual serving as devil's advocate should be appointed.
To improve decision making, problem formulation can be improved by introducing structured debates on the subject. Multiple advocacy assigns several members to represent the opinions of various constituencies. A process of dialectical inquiry where a member(s) take the role of a questioning the underlying assumption can alos assist. To improve the generation of problem solutions, brainstorming activities generate many creative solutions without evaluating their merit. A Nominal Group Technique (NGT) is a process of having group members record their solutions, summarise all proposed solutions, and independently rank them until a favoured solution emerges. In contrast to NGT, the Delphi technique never allows decision participants to meet face-to-face but rather identifies a problem and offers solutions via a questionnaire.