罗宾斯《管理学原理》

CHAPTER 4 - FOUNDATIONS OF DECISION MAKING

LEARNING OUTCOMES

After reading this chapter, students should be able to:

1. Describe the steps in the decision-making process.

2. Identify the assumptions of the rational decision-making model.

3. Explain the limits to rationality.

4. Define certainty, risk, and uncertainty as they relate to decision making.

5. Describe the actions of the bounded-rational decision maker.

6. Identify the two types of decision problems and the two types of decisions that are used to solve them.

7. Define heuristics and explain how they affect the decision-making process.

8. Identify four decision-making styles
9. Describe the advantages and disadvantages of group decisions.

10. Explain three techniques for improving group decision making.

Opening Vignette
SUMMARY

Coke versus Pepsi; these two companies have battled for dominance in the soft-drink market for decades.  Because stakes are so high, information on the competition is critical.  The extent to which executives from these two companies are willing to go to make their company number one may surprise you.  In early 2006, Pepsi executives received a letter on Coca-Cola letterhead that asked for $10,000. In exchange, Pepsi would receive trade secrets on the recipe for Coke products as well as a sample of a new product Coke was about to launch in the marketplace.  Only about five people in Coca-Cola have knowledge of that recipe; if Pepsi were to have knowledge of that recipe, Coke would be significantly affected. 

Instead of making the decision to spend the $10,000 and gain the secrets, Pepsi executives contacted the FBI.  One Pepsi spokesperson stated “competition must be fierce---but it also must be fair and legal.”  The FBI determined that the threat was real, and found that one of executive’s assistants at coke had stolen the recipe.  She and two accomplices were seen on hidden camera copying information and removing a sample of Coke’s new product from the premises.  FBI agents posed as Pepsi executives, and when the cash for information exchange took place, the culprits were apprehended and charged with wire fraud and unlawfully stealing and selling trade secrets from the Coca-Cola company. 

The ethical actions of the Pepsi executives are exemplary and Coke learned a very valuable lesson---they must review all security measures in protecting company secrets.  For this breach to occur---getting unauthorized access to something that was so critical to the company’s success---major internal controls and security procedures were lacking.   

Teaching Notes
Discuss this case with students, asking them

1) What do you think made it possible for Coke’s employees to conduct this unethical behavior?  (Loose control systems, lots of trust/no checking up on employees, lack of ethics training, possibly)

2) What do you see as the forces possibly driving this Coke employee’s behavior?  (competitive pressure, greed)

3) What do you see as the forces possibly driving the Pepsi executives’ behavior? (focus on fairness, setting and maintaining industry standards, ethics)

I. THE DECISION-MAKING PROCESS (PPT 4-2)

A. Introduction

1. See Exhibit 4-1 for examples of planning function decisions.

2. Decision-making is typically described as “choosing among alternatives.”

3. This is simplistic because decision-making is a process.

a) See Exhibit 4-2 illustrating the decision-making process.

II. WHAT DEFINES A DECISION PROBLEM?  (PPT 4-1, 4-2)

A. Introduction

1. The decision-making process begins with the identification of a problem (Step 1), a discrepancy between an existing and a desired state of affairs.

a) Car buying example.

2. Problem identification is subjective.

3. The manager who mistakenly solves the wrong problem perfectly is likely to perform just as poorly as the manager who fails to identify the right problem and does nothing.
a) How do managers become aware that they have a discrepancy?

b) Managers compare their current state of affairs and some standard.

1) Past performance.

2) Previously set goals.

3) Performance of some other unit within the organization or in other organizations.

4) A vehicle that runs.

B. What Is Relevant in the Decision-Making Process?

1. Once a problem is identified, the decision criteria must be identified (Step 2).

2. Car-buying example continued.

3. Every decision maker has criteria—explicitly stated or not—that guide his/her decision.

a) What is not identified is as important as what is.

4. If a decision maker does not identify a particular factor, it is treated as irrelevant.

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C. How Does the Decision Maker Weight the Criteria?

1. It is necessary to allocate weights to the items listed in Step 2 in order to give them their relative priority in the decision (Step 3).

2. A simple approach, give the most important criterion a weight of ten and then assign weights to the rest against that standard.

a) Exhibit 4-3 lists the criteria and weights for vehicle replacement decision.

3. Then the decision maker lists the alternatives that could succeed in resolving the problem (Step 4).

a) No attempt is made to appraise these alternatives, only to list them.

4. Once identified, the decision maker must critically analyze each alternative (Step 5).

a) Each alternative is evaluated by appraising it against the criteria and weights established in Steps 2 and 3.
 
1) Exhibit 4-4 shows the assessed values for each vehicle; it does not reflect the weighting done in Step 3. 

b) If you multiply each alternative assessment against its weight, you get Exhibit 4-5.

c) Notice that the weighting of the criteria has changed the ranking of alternatives in our example.

D. What Determines the Best Choice?

1. The critical act of choosing the best alternative from among those enumerated and assessed (Step 6).

a) Car example, Exhibit 4-5.

E. What Is Decision Implementation? (PPT 4-3)

1. The decision may still fail if it is not implemented properly (Step 7).

2. Decision implementation includes conveying the decision to those affected and getting their commitment to it.

3. The people who must carry out a decision are most likely to enthusiastically endorse the outcome if they participate in the decision-making process.

F. What is the Last Step in the Decision Process?

1. The last step (Step 8) appraises the result of the decision to see whether it has corrected the problem.

2. Did the alternative chosen in Step 6 and implemented in Step 7 accomplish the desired result?

Teaching Notes  _______________________________________________________________________
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III. MAKING DECISIONS: THE RATIONAL MODEL

A. Introduction

1. Managerial decision-making is assumed to be rational. (PPT4-4)

a)  Managers make consistent, value-maximizing choices within specified constraints.

2. A decision maker who was perfectly rational would be fully objective and logical.

a) He or she would carefully define the problem and have a clear and specific goal.

b) The steps in the decision-making process would consistently lead to selecting the alternative that maximizes that goal.

c) Exhibit 4-6 summarizes the assumptions of rationality. 

3. The assumptions of rationality often do not hold true, because the level of certainty that the rational model demands rarely exists. 

4. Most managers try to assign probabilities to outcomes that may result.

a) This process is called dealing with risk.

5. Decisions made with limited information are made under a condition of uncertainty.

B. Why is Creativity Important in Decision Making?

1. The rational decision maker needs creativity—the ability to produce novel and useful ideas.

a) Different from what’s been done before and appropriate to the problem or opportunity presented.

2. Creativity allows the decision maker to appraise and understand the problem more fully, including “seeing” problems other can’t see.

3. Creativity’s most obvious value is in helping the decision maker identify all viable alternatives.

Developing Your Creativity Skill
Becoming Creative

About the Skill
Creativity is a frame of mind.  You need to open your mind to new ideas.  Every individual has the ability to be creative, but many people simply don’t try to develop that ability.  In contemporary organizations, those people may have difficulty being successful.  Dynamic environments and managerial chaos require that managers look for new and innovative ways to attain their goals, as well as those of the organization.
The following are suggestions for developing your creativity by opening your mind up to new ideas, a critical skill for you as a manager:

1) Think of yourself as creative.
2) Pay attention to your intuition.
3) Move away from your comfort zone.
4) Engage in activities that put you outside your comfort zone.
 5) Seek a change of scenery.
 6) Find several right answers.
7) Play your own devil’s advocate.
8) Believe in finding a workable solution.
9) Brainstorm with others.
10) Turn creative ideas into action.

Practicing the Skill
How many words can you make using the letters in the word Brainstorm?  There are at least 95.

Teaching Tips
Allow students a set time to work as individuals on this exercise.  Perhaps 3-5 minutes.  Emphasize the importance of not talking—NO collaboration.

Call time and ask students to total their word list.  Emphasize there is still NO collaborating or sharing of word lists.

At this point, you can ask for a response to categories by a show of hands (number who created 5 or more words, 15 or more, 25 or more, etc.) until people with the most words are recognized.

You might also want to write on the board the words created by the students, polling students around the room until no additional words are left.

You can stop at this point and discuss why some people may have created more words than others.  Did the class as a whole (with each student’s individual words included on the board) create more words than any one individual student? You might ask the students about working in groups for another project requiring creativity.  If they were to work in groups on such an exercise or project, you might ask their opinions about group formation.  Based on the outcomes of the previous exercise, would they want homogeneous vs. heterogeneous groups?  What factors would be the basis of those groupings? Should groups be created based on their productivity as individuals?  Why or why not?  What would be the expected impact on group effectiveness?

C. What is Creative Potential? (PPT 4-5)

1. Most people have creative potential.

a) They have to get out of the psychological ruts.

b) They have to learn how to think about a problem in divergent ways.

2. People differ in their inherent creativity.

a) Exceptional creativity is scarce.

b) A study of lifetime creativity of 461 men and women.

1) Fewer than 1 percent were exceptionally creative.

2) 10 percent were highly creative.

3) About 60 percent were somewhat creative.

3. Individual creativity requires expertise, creative-thinking skills, and intrinsic task motivation
(See Exhibit 4-7).  (PPT 4-5)

a) Expertise is the foundation of all creative work.

b) Creative-thinking skills encompasses personality characteristics associated with creativity, the ability to use analogies, as well as the talent to see the familiar in a different light.

1) Individual traits associated with the development of creative ideas include
intelligence, independence, self-confidence, risk-taking, an internal locus of control,
tolerance for ambiguity, and perseverance in the face of frustration.

c) Intrinsic task motivation is the desire to work on something because it’s interesting, involving, exciting, satisfying, or personally challenging.

1) Determines the extent to which individuals fully engage their expertise and creative skills.

2) Creative people often love their work, to the point of seeming obsessed.

4. Five organizational factors can impede creativity.

a) Expected evaluation—focusing on how your work is going to be evaluated.

   Surveillance—being watched while you’re working.
  External motivators—emphasizing external, tangible rewards.

  Competition—facing win-lose situations with your peers.

  Constrained choices—being given limits on how you can do your work.

IV. THE REAL WORLD: MODIFICATIONS OF THE RATIONAL MODEL

A. Introduction   (PPT 4-6)

1. Most of us make decisions on the basis of incomplete information.

2. When we are faced with complex problems, most of us respond by reducing the problem to something we can readily understand.

    We satisfice:  seek solutions that are satisfactory and sufficient—or just good enough.

    When managers face a simple problem having few alternatives, when time pressures are minimal, and when the cost of seeking and evaluating alternatives is low—the rational model provides a good description of the decision-making process.

    Studies often challenge one or more of the assumptions of rationality.

a) They suggest that decision-making often veers from the logical, consistent, and systematic process.

b) Despite the limits to perfect rationality, managers are expected to appear to follow the rational process.

  “Good” decision makers are supposed to do certain things: identify problems, consider alternatives, gather information, behave thoughtfully, and act decisively but prudently.

  Managers signal that they are competent and that their decisions are the result of intelligent and   rational deliberation.

   The process they follow is frequently referred to as bounded rationality.

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B. What Is Bounded Rationality? (PPT 4-6)

1. Management theory is built on the premise that individuals act rationally.

2. The essence of managerial jobs revolves around the rational decision-making process.

  However, few people actually behave rationally.
3. Herbert Simon found that within certain constraints, managers do act rationally.

4. Because it is impossible for human beings to process and understand all the information necessary, they construct simplified models that extract the essential features from problems.

a) Bounded rationality, decision makers behave rationally within the limits of the simplified or bounded model.

b) The result is a satisficing decision; the solutions are “good enough.”

5. How do managers’ actions within these boundaries differ from actions within the rational model?

a) Once a problem is identified, the search for criteria and alternatives begins.

1) This list of criteria is generally limited and made up of the more conspicuous  
   choices.

b) Simon found that decision makers focus on easy-to-find choices—those that are highly visible.

c) This means developing alternatives that vary only slightly from past decisions about similar problems.

d) Once this limited set of alternatives is identified, decision makers begin reviewing them.

1) The review will not be exhaustive.

e) They review alternatives only until an alternative that is sufficient is found.

1) The first alternative to meet the “good enough” criterion ends the search.

(a) Accept offer as cash flow manager with mid-sized firm 60 miles from home at starting salary of $44,500.

(b) Further searching would have revealed an opening for a cash flow manager with a Fortune 1000 firm 25 miles from home at a starting salary of $48,000.

(c) You stopped searching when the first job was found because it was “good enough.”

f) What are the implications of bounded rationality on the manager’s job? In situations in which the assumptions of perfect rationality do not apply (including many of the most important and far-reaching decisions that a manager makes), the details of the decision-making process are strongly influenced by the decision maker’s self-interest, the organization’s culture, internal politics, and power considerations.

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C. Are Common Errors Committed in the Decision-Making Process?  (PPT 4-7)

1. Making decisions is making choices.

2. Behaviors that speed up the process, judgmental shortcuts, are called heuristics.

3. Two forms--availability and representative.

a) Both types create biases in a decision maker.

b) Another bias is the tendency to escalate commitment to a failing course of action.

4. Availability heuristic.

a) The tendency for people to base their judgments on information that is readily available.

1) Events that invoke strong emotions, that are vivid to the imagination, or that have recently occurred create a strong impression.

2) We are likely to overestimate the frequency of the occurrence of unlikely events.
 
   Example, fear of flying.

5. Representative heuristic

a) Literally millions of recreational league players dream of turning professional.

b) In reality, most have a better chance of becoming medical doctors than ever playing in the NFL.

c) Representative heuristic causes individuals to match the likelihood of an occurrence with something that they are familiar with.

6. Organizational instances of representative heuristic.

a) Predicting the future success of a new product by relating it to a previous product’s success.

b) No longer hiring college graduates from a particular college program because the last three hired from that program were poor performers.

7. Escalation of Commitment

a) Example, blackjack.

b) An increased commitment to a previous decision despite negative information.

c) The tendency to “stay the course,” despite negative data.

d) Some of the most notorious events involving escalation of commitment were decisions made by presidents of the United States.

1) Lyndon Johnson’s administration increased bombing in North Vietnam, despite
       continual information that bombing was not achieving their objective.

2) Richard Nixon refused to destroy his secret White House tapes.

8. George H. W. Bush believed that, given his popularity after Operation Desert Storm and the fall of the Soviet Union, he had only to pay attention to foreign affairs to win the 1992 presidential election.

9.  At Allfirst Financial (a U.S. subsidiary of Allied Irish Banks), a Baltimore trader continued to trade the yen in hopes of recouping his initial losses—his actions led to a $691 million loss to the bank.

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V. DECISION MAKING: A CONTINGENCY APPROACH

A. Introduction

1. Types of problems faced by managers often determine how a problem is treated.

B. How Do Problems Differ?  (PPT 4-8) 
 
1. Some problems are straightforward. The goal of the decision maker is clear, the problem familiar, and information about the problem easily defined and complete.

a) Examples of well-structured problems include a supplier’s tardiness with an important delivery, a customer’s wanting to return an Internet purchase, etc.

2. Many situations, however, are ill-structured problems. They are new or unusual. Information about such problems is ambiguous or incomplete.

a) Examples of ill-structured problems include the decision to enter a new market segment, to hire an architect to design a new office park, etc.

C. How Does a Manager Make Programmed Decisions? (PPT 4-9)

1. Programmed, or routine, decision making is the most efficient way to handle well-structured problems.

2. When problems are ill structured, managers must rely on nonprogrammed decision making.

a) Automotive mechanic example.

3. Decisions are programmed to the extent that they are repetitive and routine and to the extent that a specific approach has been worked out for handling them.

a) Programmed decision making is relatively simple and tends to rely heavily on previous solutions.

b) The develop-the-alternatives stage is given little attention because programmed decision making becomes decision making by precedent.

4. A procedure is a series of interrelated sequential steps that a manager can use when responding to a well-structured problem.

a) The only real difficulty is in identifying the problem.

b) Once the problem is clear, so is the procedure.

c) Example of purchasing manager and request for 250 copies of Norton Antivirus Software 

5. A rule is an explicit statement that tells a manager what he or she ought or ought not to do.

  a)  Rules are frequently used with a well-structured problem because they are simple to follow and ensure consistency.

6.   A policy provides guidelines to channel a manager’s thinking in a specific direction.

a) In contrast to a rule, a policy establishes parameters for the decision maker rather than specifically stating what should or should not be done.

b) Example, “we promote from within, whenever possible.”

c) Analogy, think of the Ten Commandments as rules and the U.S. constitution as policy.

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D. In What Ways Do Nonprogrammed Decisions Differ from Programmed Decisions?

1. Examples of nonprogrammed decisions:  deciding whether to acquire another organization, deciding which global markets offer the most potential, engineering work processes to improve efficiency, etc.

2. Such decisions are unique and nonrecurring, involving an ill-structured problem with no cut-and-dried solution.

The creation of a new organizational strategy is an example of a nonprogrammed decision.
a) Example, Amazon.com Jeff Bezos’ strategy to “get big fast”

1) Bezos’ strategy to “get big fast” helped the company grow but at the cost of perennial financial losses.
2) To make a profit, Bezos made decisions affecting how the company operated, including allowing other sellers to sell their books at Amazon. For the first time, Amazon made a profit. 

E. How Can You Integrate Problems, Types of Decisions, and Level in the Organization?

1. Exhibit 4-8 describes the relationship between types of problems, types of decisions, and level in the organization.

2. Well-structured problems are responded to with programmed decision making.

a) Lower-level managers essentially confront familiar and repetitive problems.

3. Ill-structured problems require nonprogrammed decision making.

a) The problems confronting managers up the organizational hierarchy are more likely to become ill structured.

4. Few managerial decisions are either fully programmed or fully nonprogrammed.

5. Organizational efficiency is facilitated by the use of programmed decision making.

a) Whenever possible, management decisions are likely to be programmed.

b) There are strong economic incentives for top management to create policies, standard operating procedures, and rules to guide other managers.

c) Programmed decisions minimize the need for managers to exercise discretion.

d) This benefit is important because discretion costs money.

Ethical Dilemma in Management
Stem-Cell Research
SUMMARY
Advanced Cell Technology is embarking on a major activity—“to produce the world’s first-ever cloned human embryo…a microscopic version of an already living person.”  Michael West, Chief Executive of Advanced Cell Technology and Robert Lanza, VP of Medical and Scientific Development  has begun implementation of this goal by seeing women to serve as egg donors.  As the stem cells are captured, the embryo is destroyed.  Stem cells are believed to be able to develop into human tissue that could help cure a variety of diseases, or even repair a severed spinal cord.
Advanced Cell Technology’s goal, of course, is facing a major debate.  If such research is proven effective, many diseases as we know them today—like Parkinson’s Disease and Muscular Dystrophy—could be eliminated.  Similar research is being conducted in other parts of the globe—such as Europe where it has received support.  To assist in these endeavors in an attempt to ensure the highest ethics enter into all decisions made, Michael West has formed an ethical board of advisors—consisting of scientists and professors of religion.
Critics of such research see this differently.  They view stem cell research as the next step toward cloning humans—and at times, liken it to creating a “great society.”  Religious groups, too, have voiced this concern over Advanced Cell’s decisions, claiming that they are working in an area that they shouldn’t.  The federal government has also entered into the discussion, with President George W. Bush
 setting specific regulations on what kind of stem cell research is funded by the government.  Even some Advanced Cell ethics board members have resigned, complaining that Advanced Cell is more interested in “obtaining patents in the field and using the board as a rubber stamp.”

Questions
1. Do you believe that a company like Advanced Cell Technology can make ethical decisions in this arena when so much is at stake?

2. Should public opinion keep a company from doing something simply because it is unpopular—even though it is legal?  What’s your opinion?

Teaching notes
1. Students may hold strong, and opposing, positions about the issue of stem-cell research.  It is important that focus be placed on their reasoning process and their realization of the difficulty of the practical realities of their position.

2. Begin this exercise by asking students to create an argument for stem-cell research or against stem-cell research to present to the Advanced Cell board of advisors.

3. Have students create this argument by addressing the following items.

 Who are the stakeholders? Who has a vested interest in the decision and will be affected by it? Rank their importance and explain the ranking.

 What is the real problem?

 What choices does Advanced Cell have? Are there other alternatives that would help them address the problem?

4. Have students present their arguments in class, allowing other teams to critique their decision-making process.

F. In What Ways Does Technology Assist Decision Making? (PPT 4-10)

1. Expert systems use software programs to encode the relevant experience of an expert and allow a system to act like that expert in analyzing and solving ill-structured problems.

a) Use specialized knowledge about a particular problem area rather than general knowledge that would apply to all problems.

b) Use qualitative reasoning rather than numerical calculations.

c) Perform at a level of competence that is higher than that of non-expert humans.

d) Guide users through problems by asking them a set of sequential questions about the
situation and drawing conclusions based on the answers given.

2. Neural networks are the next step beyond expert systems.

a) Use computer software to imitate the structure of brain cells and connections among them.

b) People can’t easily assimilate more than two or three variables at once, but neural networks can perceive correlations among hundreds of variables.

c) Example, most banks today use neural networks to flag potential credit card fraud and it’s more likely that the majority of credit card transactions flagged will be actual cases of fraud.  Also, fraudulent activities on a credit card can be uncovered in a matter of hours with neural networks.

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VI. DECISION-MAKING STYLES

A. Introduction

1. Every decision maker brings a unique set of personal characteristics to his or her problem-solving efforts.

2. Researchers have sought to identify different decision-making styles.

B. Decision-Making Styles 

1. The basic premise is that individuals differ along two dimensions.

2. The first is the way they think.

a) Some decision makers are logical and rational, processing information sequentially.

b) Some individuals who think creatively and use their intuition, see matters from a big picture perspective.

3. The second dimension focuses on individuals’ tolerance for ambiguity.

a) Some have a high need for consistency and order and seek to minimize ambiguity.

b) Others tolerate high levels of uncertainty, processing many thoughts at the same time.

4. When we diagram these two dimensions, four decision-making styles are formed.

a) These styles are directive, analytic, conceptual, and behavioral.

b) See Exhibit 4-9.

5. The directive style.

a) Represents a decision-making style characterized by low tolerance for ambiguity and a rational way of thinking.
b) These individuals are logical and efficient and typically make fast decisions that focus on the short term.

6. The analytic style.

a) Characterized by high tolerance for ambiguity combined with a rational way of thinking.

b) These individuals prefer complete information before making a decision, typically carefully considering many alternatives.

7. The conceptual style.

a) Tends to be very broad in outlook and typically will look at many alternatives.

b)   Tends to focus on the long run and look for creative solutions.

8. The behavioral style.

a) Reflects an individual who thinks intuitively but has a low tolerance for uncertainty.

b) These decision makers work well with others, are open to suggestions, and are concerned about the individuals who work for them.

9. Most managers posses characteristics of more than one style. 

10. See information about Self-Assessment #20, #21.  

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VII.  MAKING DECISIONS IN GROUPS

A.   Do managers make a lot of decisions in groups?

1) Many decisions in organizations, especially important decisions that have far-reaching effects on organizational activities and personnel, are typically made in groups.

  2) In many cases, these groups represent people who will be most affected by the decisions.

 3) Managers spend a significant portion of their time in meetings.

B.  What Are the Advantages of Group Decision Making?  (PPT 4-11)

1) Individual and group decisions have their own set of strengths—neither is ideal for all situations.

2) Group decisions provide more complete information than do individual ones.

3) A group will bring a diversity of experiences and perspectives to the decision
process.

4) Groups also generate more alternatives.

a)  Quantity and diversity of information are greatest when group members represent different specialties.

5) Group decision making increases acceptance of a solution.

6) This process increases legitimacy.

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C.  What Are the Disadvantages to Group Decision Making? (PPT 4-11)

1)  First, they are time-consuming.

2)  There may also be a situation in which there is minority domination.

a) Members of a group are never perfectly equal.

b) A minority that dominates a group frequently has an undue influence on the final decision.

3) Another problem focuses on the social pressures to conform in groups.

a)  Irving Janis’ groupthink—a form of conformity in which group members withhold deviant, minority, or unpopular views in order to give the appearance of agreement.
 
4) Finally, there is ambiguous responsibility. In a group decision, the responsibility of
any single member is watered down.

5) Groupthink applies to a situation in which a group’s ability to appraise alternatives objectively and arrive at a quality decision is jeopardized.

a) Because of pressures for conformity, groups often deter individuals from critically appraising unusual, minority, or unpopular views.

b) Consequently, there is a deterioration of an individual’s mental efficiency, reality testing, and moral judgment.

6) How does groupthink occur?

a) Group members rationalize any resistance to the assumptions they have made.

b) Members apply direct pressures on those who momentarily express doubts about any of the group’s shared views or who question the arguments favored by the majority.

c)  Those members who have doubts or hold differing points of view seek to avoid deviating from what appears to be group consensus.

d) There is an illusion of unanimity. Silence is assumed as being in full accord.

7) Does groupthink really hinder decision making?

a)Yes.

8) Groupthink can be minimized if:

a) the group is cohesive.

b)  it fosters open discussion.

c)  is led by an impartial leader who seeks input from all members.

D. When Are Groups Most Effective? (PPT 4-12)

1)Group decisions tend to be more accurate.

2) On the average, groups make better decisions than individuals—although groupthink may occur.

3) If decision effectiveness is defined in terms of speed, individuals are superior.

4) If creativity is important, groups tend to be more effective than individuals.
 
5) If effectiveness means the degree of acceptance the final solution achieves, then groups are better.

6) The effectiveness is also influenced by the size of the group.

a) The larger the group, the greater the opportunity for heterogeneous representation.

b) A larger group requires more coordination and more time to allow for contributions.

c) A minimum of five to a maximum of about fifteen is best.

d) Because five and seven are odd numbers, strict deadlocks are avoided.

7)  Effectiveness should not be considered without also assessing efficiency.

a) Groups almost always are less efficient than the individual decision maker.
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E.  How Can You Improve Group Decision Making?

1)   Three ways of making group decision making more creative:  brainstorming, the nominal group technique, and electronic meetings.

2)   What is brainstorming? 

a)  A relatively simple technique for overcoming pressures for conformity.

b)  It utilizes an idea-generating process that specifically encourages any and all alternatives.

1) A half-dozen to a dozen people sit around a table.

2) The leader states the problem clearly, ensuring understanding by all participants.

3) Members then “free-wheel” as many alternatives as they can in a given time.

4) No criticism is allowed; all the alternatives are recorded.

a.Brainstorming is merely a process for generating ideas.

 3) How does the nominal group technique work?
 
a)  The technique restricts discussion during the decision-making process.

b)  Group members must be present, but they are required to operate independently.

c)  They secretly write a list of general problem areas or potential solutions.

d)  The chief advantage is that it permits a formal meeting but does not restrict independent thinking.

  4) How can electronic meetings enhance group decision making?
 
a)  This approach—called the electronic meeting—blends the nominal group technique with computer technology.

b)  Once the technology for the meeting is in place, the concept is simple.

c)  Numerous people sit around a horseshoe-shaped table that is empty except for a series of computer terminals.

d)  Issues are presented to participants, who type their responses onto their computer screens.

e)  Individual comments, as well as aggregate votes, are displayed on a projection screen in the room.

f)  The major advantages of electronic meetings are anonymity, honesty, and speed.

1) Participants can anonymously type any message they want, and it will flash on the screen for all to see at the push of a board key.

2) It is fast—chitchat is eliminated, discussions do not digress, and many participants can “talk” at once without interrupting the others.

5)  Experts claim that electronic meetings are significantly faster and much cheaper than
traditional face-to-face meetings.

a)  Nestle example.

6)  Drawbacks.

a)  Those who can type quickly can outshine those who may be verbally eloquent but are lousy typists.

b)  Those with the best ideas don’t get credit for them.

c)  The process lacks the informational richness of face-to-face oral communication.
 
7)  The future of group decision making is very likely to include extensive usage of electronic
meetings.

8)  A variation of the electronic meeting is the video conference.

a)  By linking together media from different locations, people can have face-to-face meetings even when they are thousands of miles apart.
 
b)  This has enhanced feedback among the members, saved countless hours of business travel, and ultimately saved companies hundreds of thousands of dollars.

Teaching Notes  _______________________________________________________________________
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  VIII.  NATIONAL CULTURE AND DECISION-MAKING PRACTICES (PPT 4-13)

  A. Introduction

1)  Research shows that, to some extent, decision-making practices differ by country.

2) Two decision variables.

a)  The way decisions are made:  Who makes the decision?

b)  The degree of risk a decision maker is willing to take.

3)  India, power distance and uncertainty avoidance are high.

a)  Only very senior-level managers make decisions, and they are likely to make safe ones.

4)  Sweden, power distance and uncertainty avoidance are low.

a)  Swedish senior managers tend not to be afraid to make risky decisions and also push decisions down in the ranks.

5)  Egypt, where time pressures are low, managers make decisions at a slower and  more deliberate pace than managers in the United States.
 
6)  Italy, history and traditions are valued, managers tend to rely on tried and proven alternatives.

7)  Decision making in Japan is much more group oriented than in the United States.

a)  The Japanese value conformity and cooperation.

b)  Japanese CEOs collect a large amount of information, to build consensus, called “ringisei.”

c)  Managerial decisions take a long-term perspective.

8)  France, autocratic decision making is widely practiced, and managers avoid risks.
 
 9) Managerial styles in Germany reflect the German culture’s concern for structure and order, extensive rules and regulations, and managers accept that decisions must go through channels.

10)  Managers who deal with employees from diverse cultures need to recognize what is common and accepted behavior regarding decision making.

11)  Managers who can accommodate diversity in decision-making philosophies and practices can expect a high payoff.

Teaching Notes  _______________________________________________________________________
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Review, Comprehension, Application
Chapter Summary

1.    Decision making is an eight-step process:  (1) identify a problem, (2) identify decision criteria, (3)
      allocate weights to the criteria, (4) develop alternatives, (5) analyze alternatives, (6) select an
      alternative, (7) implement the alternative, and (8) evaluate decision effectiveness.

2.   The rational decision model assumes that the decision maker can identify a clear problem, has no
      goal conflict, knows all options, has a clear preference ordering, keeps all preferences constant, has
      no time or cost constraints, and selects a final choice that maximizes his or her economic payoff.

3. Rationality assumptions do not apply in many situations because problems are not simple, goals are not clear, alternatives are many, and there are time and cost constraints.  In addition, decision makers sometimes increase commitment to a previous choice to confirm its original correctness; prior decision precedents constrain current choices, and most organizational cultures discourage taking risks and searching for innovative alternatives.

4. Certainty implies that a manager can make an accurate decision because the outcome of every alternative is known.  Because this is often not the case, risk involves assigning probabilities to outcomes that may result.  When decision makers have neither full knowledge of the problem nor a reasonable probability of what may happen, they must make their decisions under a condition of uncertainty.

5. In the bounded-rational decision-making process, decision makers construct simplified models that extract essential features from the problems they face without capturing all their complexity.  They then attempt to act rationally within this simplified model.

6. Managers face well-structured and ill-structured problems.  Well-structured problems are straightforward, familiar, easily defined, and solved using programmed decisions such as procedures, rules, and policies.  Ill-structured problems, on the other hand, are new or unusual, involve ambiguous or incomplete information, and are solved using nonprogrammed decisions.

7. Heuristics are shortcuts decision makers can take to speed up the decision-making process.  Heuristics commonly exist in two forms—availability and representative.  Both types create biases in a decision maker’s judgment.

8. The four decision-making styles are the directive style (characterized by low tolerance for ambiguity and a rational way of thinking), the analytic style (characterized by high tolerance for ambiguity combined with a rational way of thinking), the conceptual style (characterized by a very broad outlook and a tendency to look at many alternatives), and the behavioral style (characterized by intuitive thinking and a low tolerance for uncertainty).

9. Groups offer certain advantages—more complete information, more alternatives, increased acceptance of a solution, and greater legitimacy.  On the other hand, groups are time consuming, can be dominated by a minority, create pressures to conform, and cloud responsibility.

10. Three ways of improving group decision making are brainstorming (utilizing an idea-generating process that specifically encourages any and all alternatives while withholding any criticism of those alternatives), the nominal group technique (a technique that restricts discussion during the decision-making process), and electronic meetings (the most recent approach to group decision making, which blends the nominal group technique with sophisticated computer technology).
Companion Website
We invite you to visit the Robbins/DeCenzo Companion Website at www.prenhall.com/robbins for the chapter quiz and student PowerPoints.

 Diversity Perspectives: Communication and Interpersonal Skills, by Carol Harvey and June Allard
1.  How could the director change the perceptions of the majority about the vocal  minority and vice versa?
To avoid perceptions based on physical interaction, where overtalking, ignoring and physical appearance have effect, meetings could be help electronically.  Everyone then would get a change to have his/her say without being shut out or intimidated.  This can help with the problem of scheduling meetings at times when some members cannot attend.  (The downside of this is whether everyone has access to electronic communication and is comfortable using it.)
     In face-to-face meetings a strong chairperson can do much to give everyone equal “air time,” (even going so far as to allot everyone so many minutes), but cannot totally overcome the perceptions of superiority and inferiority imposed by physical appearance.
     Brainstorming is a good technique for hearing from everyone.

2.  What could the director do to structure committee interactions to reduce minority domination?
The director or whoever chairs the council must take a firm stand.  Insisting on hearing from everyone, perhaps timing each member’s minutes on the floor.
     If subcommittees are formed, then everyone serves on only one committee and the vocal minority and other members are mixed on all committees and the minority do not always serve as chairs of the committees (divide and conquer technique).  The chair must be alert to keep minorities from coalescing and caucusing.
     When it comes time to make decisions, intimidation can be avoided by voting by mail, closed ballot, electronically, etc. 

3.  What could the director do to better define the committee tasks to reduce minority domination?
The key is to structure the problem into phases/tasks from the very outset and to conduct any face-to-face meetings with a written agenda.  Again, electronic meetings and votes taken by mail, closed ballot or electronically help.

Reading for Comprehension
1. Explain how decision making is related to the planning process.
Answer – Planning encompasses defining the organization’s objectives or goals, establishing an overall strategy, and developing a comprehensive hierarchy of plans to integrate and coordinate. It is concerned with ends (what is to be done) and with means (how it is to be done). The decision-making process begins with the existence of a problem, a discrepancy between an existing and a desired state of affairs. It is critical to supporting and adjusting plans in order to achieve the goals and objectives established in the plan.

2. How is implementation important to the decision-making process?
Answer – The decision may still fail if it is not implemented properly. Decision implementation includes conveying the decision to those affected and getting their commitment to it. The people who must carry out a decision are most likely to enthusiastically endorse the outcome if they participate in the decision-making process.

3. What is a satisficing decision? How does it differ from a maximizing decision?
Answer – It is the construction of simplified models that extract the essential features from problems. Decision makers behave rationally within the limits of the simplified or bounded model. The result is a satisficing decision, the solutions are “good enough.”

Simon found that decision makers focus on easy-to-find choices—those that are highly visible. This means developing alternatives that vary only slightly from past decisions about similar problems. Once this limited set of alternatives is identified, decision makers begin reviewing them. The review will not be exhaustive. They review alternatives only until an alternative that is sufficient is found.

4. How do creativity, certainty, risk, and uncertainty affect individuals when they make a decision? Answer – Creativity is the ability to produce novel and useful ideas.  It allows the decision maker to appraise and understand the problem more fully, including “seeing” problems others can’t see.  It helps the decision maker identify all viable alternatives.

The assumptions of rationality often do not hold true, because there rarely exists the level of certainty that the rational model demands. Most managers try to assign probabilities to outcomes that may result. This process is dealing with risk. Decisions made with limited information because of a lack of full knowledge of the problem and the degree of probability can’t be determined are made under a condition of uncertainty.

5. How does escalation of commitment affect decision-making?
Answer – The escalation of commitment represents the tendency to stay the course, despite negative data that suggest one should do otherwise.

6. What is groupthink? What are its implications for decision-making?
Answer – Irving Janis termed groupthink, a form of conformity in which group members withhold deviant, minority, or unpopular views in order to give the appearance of agreement. As a result, groupthink undermines critical thinking in the group and eventually harms the quality of the final decision.

Groupthink applies to a situation in which a group’s ability to appraise alternatives objectively and arrive at a quality decision is jeopardized. Because of pressures for conformity, groups often deter individuals from critically appraising unusual, minority, or unpopular views. Consequently, there is a deterioration of an individual’s mental efficiency, reality testing, and moral judgment.

Linking Concepts to Practice

1. Describe a decision you have made that closely aligns with the assumptions of perfect rationality. Compare this with the process you used to select your college. Is there a departure from the rational model in your college decision? Explain.
Answer – Students’ answers will vary. Students should take all eight steps into consideration and may have some difficulty in applying all the steps. This may show that their college choice was a satisficing decision.

2. Is the order in which alternatives are considered more critical under assumptions of perfect rationality or bounded rationality? Why?
Answer – Yes, as decision makers focus on easy-to-find choices—those that are highly visible. This means developing alternatives that vary only slightly from past decisions about similar problems. Once this limited set of alternatives is identified, decision makers begin reviewing them. They review alternatives only until an alternative that is sufficient is found. An escalation of commitment is the increased commitment to a previous decision despite negative information. The further increase of commitment to the original solution may be an effort to demonstrate that their initial decision was not wrong.

3. Explain how a manager might deal with making decisions under conditions of uncertainty.
Answer – He/she would assign degrees of probability to the various alternatives considered and choose the decision with the highest probability of a beneficial outcome.

4. “With more and more managers using computers, they’ll be able to make more rational decisions.”  Do you agree or disagree with the statement? Why?
Answer – Students should realize that technology helps decision making, it doesn’t make decisions. The human factor—hidden agendas, power relationships, office politics, etc., will still be present. Students should tie their answer into the characteristics of the technology, however.

The electronic meeting blends the nominal group technique with computer technology. Numerous people sit around a horseshoe-shaped table that is empty except for a series of computer terminals. Issues are presented to participants, who type their responses onto their computer screens. Individual comments, as well as aggregate votes, are displayed on a projection screen in the room. The major advantages of electronic meetings are anonymity, honesty, and speed. Participants can anonymously type any message they want, and it will flash on the screen for all to see at the push of a board key. It is fast—chitchat is eliminated, discussions do not digress, and many participants can “talk” at once without interrupting the others. But there are drawbacks. Those who can type quickly can outshine those who may be verbally eloquent but are lousy typists. Those with the best ideas don’t get credit for them. The process lacks the informational richness of face-to-face oral communication.

5. Why do you think organizations have increased the use of groups for making decisions during the past twenty years? When would you recommend using groups to make decisions?
Answer – Students should see a significant increase in the use of groups. It is certainly in all the literature, but their individual experience may vary. Many decisions in organizations, especially important decisions that have far-reaching effects on organizational activities and personnel, are typically made in groups. In many cases, these groups represent people who will be most affected by the decisions. Managers spend up to 40 percent or more of their time in meetings. Groups are most effective if creativity is important, if effectiveness means the degree of acceptance of the final solution, then groups are better, and if the group is relatively small in size.

Integrative Chapter Skills

Knee Deep into Project X
Purpose: The purpose of this case is to introduce students to the difficulties associated with making decisions when things are going badly.

Students should be asked to read the following scenario from their text:
5 years ago you were responsible for a major research and development project of a new product that would improve the navigation systems found in automobiles. This would save a lot of expense and would be quite marketable in the industry. Over the past years your company has invested a substantial amount of money in this project. In fact the 25 million you have invested was more than the combined amount you had invested in all other research projects. Your company has spent considerable time and money on this project. The researchers mention that the project is somewhat near completion. They estimate that it is about another year away with full funding. Currently, you have allocated 5 million dollars toward this project for the upcoming year.

Last month you discovered some disturbing news. A close competitor of yours has been quietly working on a very similar process. They announced major breakthroughs in the news regarding their product. It appears that they will beat you to the market with a superior process that will be less costly than yours. You have investigated this further since the announcement and it has been confirmed. The question you now face how does that news affect your allocation of 10 million dollars that your company had planned to invest across 3 different research projects. The amount that you had allotted for project X was 5 million. The engineers mention that if you were to double this investment you could greatly increase your chances to arrive at market with your competitors. However, they mention that regardless of what you invest, the technology of the competitors will leave them with a less costly product of superior quality.

There are two other projects in very early stages of completion. Project Y is a project that you started last year related to a different stamping process. The upside in regards to potential return on investment is quite modest. However, there will be very little competition here because one of the elements to this improvement is under patent and you are protected for many years. Your overall assessment of project Y is that there is very little risk in pursuing this further, however the potential amount of return would be quite modest. The potential for a different project was quickly realized after you began project Y. Project Z would use the patent for a very different application in regards to how the stamping machines themselves function. This research idea was developed by several of your top researchers. The potential income generated by this product if successful would be very high. However, you note that there are several risks involved. First, it will be critically important to keep the key engineers in the company. Recently, there was been stiff competition between similar organizations to draw top talent away. Second, the researchers acknowledge that this alternative structure is quite risky. On the one hand, the potential market can be as large enough to more than pay for all of the previous research expenditures for all of the projects over the past several years. On the other hand, the pursuit of this project will entail bidding wars for key researchers and expose the existing researchers for bidding from other firms which might be very costly to the company. Therefore, although the potential windfall for the organization is quite large, the potential risk is also high.

Instruction to group
Your task is to debate the various research projects. You have a total of $10,000,000 dollars to allocate to the 3 projects. You can distribute the funds any way you choose. However, it will take a minimum of $2,000,000 dollars to keep any one project going. Any fewer amounts would be wasteful as the project could not sustain itself over the course of the next year. Any amount over $5,000,000 dollars for project X and 2,500,000 dollars for project Y and project Z would quicken the completion date of the project and incrementally increase the probability of improvements in the final product.
 Once you decide the various allocations for the projects construct a short report that detailing and justifying your allocation choices. This report is to be delivered to the key shareholders in your organization.

Teaching Tips:
Students’ answers will vary.  However, after listening to their presentation, ask the students what kind of decision making process they used to decide the allocations.  Also, ask then what kinds of decision styles are present in their team (e.g. analytical, conceptual, etc) , and to provide support for how they arrived at their conclusions.  Finally, the students can be asked to reflect if any heuristics were operating in their decision making process; if so, which ones? 
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