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Chapter 11

Chapter 11 Organizational Behaviour

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BUS 2090
Hassan Wafai

Chapter 11 Individuals, Groups & Organizations Decision Making What is Decision Making? Decision Making: The process of developing a commitment to some cause of action  Decisions involve making a choice among several alternatives  Decision making is a process that involves thought and reasons why you make the choice  Usually involves the commitment of resources such as time, money, personnel etc.  Can also describe it as a from of problem solving  A problem exists b/t some existing state & some desired state Well-Structured Problems Well-Structured Problems: A problem for which the ending state is clear, the desired state is clear, and how to get from 1 state to another is fairly obvious  These problems are simple and arouse little controversy Program: A standardized way of solving a problem  Programs short-circuit the decision making process by letting the decision maker go directly from problem identification to solution  Some are formal and some just exist “in head” Ill-Structured Problems Ill-Structured Problems: A problem for which the existing & desired states are unclear & the method of getting to the desired state is unknown  These problems are generally unique/unusual  Tend to be complex & involve a high degree of uncertainty  They frequently arouse controversy ad conflict among the people who are interested in the decision  Problems cant be solved through programmed decisions  Need to gather much more info The Compleat Decision Maker – A Rational Decision-Making Model  Model demonstrates that once a problem is identified, a search for new info begins  The info clarifies the nature of the problem and suggests alternative solutions  Solutions are evaluated and the best is chosen for implementation  The chosen solution is monitored over time to evaluate effectiveness  If there are issues, recycling may be affected Perfect vs. Bounded Rationality Perfect Rationality: A decision Strategy that is completely informed, perfectly logical & oriented toward economic gain The Economic Man ...  This person is the perfect, cool, calculating decision maker  This person can gather info about problems and solutions without cost and is thus completely informed  This person has only ONE criteria for decision making – economic gain  In reality this person doesn’t exist Bounded Rationality: A decision strategy that relies on limited info & that reflects time constraints and political considerations  While managers try to act rationally, they are limited in their capacity to acquire & process info  There are constraints & political considerations (Need to please others etc.) Framing: Aspects of the presentation of info about a problem that are assumed by decision makers  Could include assumptions about boundaries of problem, possible outcomes of decision, or the reference points used to decide if a decision is successful Cognitive Biases: Tendencies to acquire & process info in an error-prone way  Biases constitute assumptions & shortcuts can improve decision-making efficacy Problem Identification & Framing Bounded rationality can lead to difficulties in problem identification… 1.Perceptual Defense: The perceptual system may act to defend the perceiver against unpleasant perceptions 2. Problem defined in terms of functional specialty: Selective perception can cause decision makers to view a problem as being in the domain of their own specialty even when some other perspective might be warranted 3. Problem defined in terms of solution: “Jumping to a conclusion” 4. Problem diagnosed in terms of symptoms: The real problem might not be able to be been seen simply by surface symptoms Information Search  This info search may clarify the nature or extent to a problem and begin to suggest alternative solutions  The info search may be slow & costly Problems… Too Little Info Several cognitive biases contribute to not acquiring enough info…  People tend to be mentally lazy & use the info that is most readily available to them which a lot of the time is memory  Often people are overconfident in their decision making Confirmation Bias: The tendency to seek out info that conforms to ones own definition of the solution to a problem Too Much Info Information Overload: The reception of more information than is necessary to make effective decisions  Can lead to errors, omissions, delays & cutting corners  Managers often request info they never use  People value paid advice more over unpaid advice Alternative Development, Evaluation & Choice Maximization: The choice of the decision alternative w/ the greatest expected value  For decision-maker working under bounded rationality, this is difficult b/c he may not know all the alternative solutions, may be ignorant of the ultimate values & probabilities of success of solutions etc. Cognitive Biases again come into play…  People avoid incorporating known existing data about the likelihood of event into their decisions  Large samples permit more confidence than small samples  Decision makers often over estimate the odds of complex chains of events occurring  People aren’t good at revising estimates of probabilities and values as they acquire additional info Anchoring Effect: The inadequate adjustment of subsequent estimates from an initial estimate that serves as an anchor  Its possible to reduce some of these cognitive bases by making people more accountable for their decisions  Requiring reports, formal presentations of how decision was reached etc.  The decision maker that is bounded by realty will have to factor in criteria so evaluate alternative solutions Sacrificing: Establishing an adequate level of acceptability for a solution to a problem and then screening solutions until one that exceeds this level is found  The decision maker frequently sacrifices Risky Business  Usually there is risk when choosing between decision alternatives  Research shows that when people view a problem as a choice of losses, they tend to make risky decisions, rolling the dice in the face of a sure loss  When people frame the alternatives as a choice between gains, they tend to make conservative decisions, protecting a sure win Solution Implementation  When a decision is made to choose a particular solution to a problem, the solution must be implemented  The bounded decision maker will attempt to facto
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