PROBLEM SOLVING AND DECISION MAKING

INTRODUCTION
Although everyone in an organization makes decisions, decision making is particularly important
to managers. In fact, that is why we say that decision making is the essence of management. And
that is why managers—as they plan, organize, lead, and control—are called decision makers. The
fact that almost everything a manager does involves making decisions does not mean that
decisions are always time-consuming, complex, or evident to an outside observer. Most decision
making is routine. Every day of the year you make a decision about what to eat for dinner. It is
no big deal. You have made the decision thousands of times before. It is a pretty simple decision
and can usually be handled quickly. It is the type of decision you almost forget is a decision. And
managers also make dozens of these routine decisions every day, such as, for example, which
employee will work what shift next week, what information should be included in a report, or
how to resolve a customer’s complaint. Keep in mind that even though a decision seems easy or
has been faced by a manager a number of times before, it still is a decision.
To a great extent, the successes or failures that a person experiences in life depend on the
decisions that he or she makes. Why and how did these people make their respective decisions?
In general, what is involved in making good decisions? One decision may make the difference
between a successful career and an unsuccessful one. A decision is choosing among alternatives.
Decision theory is an analytic and systematic approach to the study of decision making. What
makes the difference between good and bad decisions? A good decision is one that is based on
logic, considers all available data and possible alternatives, and applies the quantitative approach
we are about to describe. Occasionally, a good decision results in an unexpected or unfavourable
outcome. But if it is made properly, it is still a good decision. A bad decision is one that is not
based on logic, does not use all available information, does not consider all alternatives, and does
not employ appropriate quantitative techniques. If you make a bad decision but are lucky and a
favourable outcome occurs, you have still made a bad decision. Although occasionally good
decisions yield bad results, in the long run, using decision theory will result in successful
outcomes.
A problem is a discrepancy between ideal and actual conditions. Problem solving and decision
making are required to carry out all management functions. For example, when managers
control, they must make a series of decisions about how to solve the problem of getting
performance back to standard. Decision making can be seen as the heart of management. A
distinguishing characteristic of a manager’s job is the authority to make decisions.

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HOW DO PROBLEMS DIFFER?
Some problems are straightforward. The goal of the decision maker is clear, the problem
familiar, and information about the problem easily defined and complete. Examples might
include a supplier who is late with an important delivery, an operative not using personal
protective equipment or using the wrong timber size for a task. Such situations are called
structured problems. They align closely with the assumptions underlying perfect rationality.
Many situations faced by managers, however, are unstructured problems. They are new or
unusual. Information about such problems is ambiguous or incomplete. Examples of
unstructured problems include the decision to enter a new market segment, the procurement
method to use in a project, or to merge two organizations. So, too, is the decision to invest in a
new, unproven technology.

NON-PROGRAMMED VERSUS PROGRAMMED DECISIONS

Just as problems can be divided into two categories, so, too, can decisions. Programmed, or
routine, decision making is the most efficient way to handle structured problems. However, when
problems are unstructured, managers must rely on non-programmed decision making in order to
develop unique solutions. Managerial workers make a variety of decisions.
A problem that takes a new and an unfamiliar form or one that is complex or significant calls for
a non-programmed decision. A complex problem contains many elements. Significant problems
affect an important aspect of an organization, such as the introduction of a new service. Virtually
all strategic decisions are non-programmed. A well-planned and highly structured organization
reduces the number of non-programmed decisions. It does so by formulating policies to help
managers know what to do when faced with a problem. Many small firms do not offer much
guidance about decision making. A complex decision is more demanding than a less complex
decision, just as studying some subjects may be more difficult than studying others. Examples of
non-programmed decisions include deciding whether to acquire another organization, deciding
which global markets offer the most potential, or deciding whether to sell off an unprofitable
division. Such decisions are unique and non-recurring. When a manager confronts an
unstructured problem, no cut-and-dried solution is available. A custom-made, non-programmed
response is required. The creation of a new organizational strategy is a non-programmed
decision. This decision is different from previous organizational decisions because the issue is
new; a different set of environmental factors exists, and other conditions have changed.

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Programmed decisions are repetitive, or routine, and made according to a specific procedure.
Procedures specify how to handle these routine, uncomplicated decisions. 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. Because the problem is well structured, the
manager does not have to go to the trouble and expense of an involved decision process.
Programmed decision making is relatively simple and tends to rely heavily on previous solutions.
In many cases, programmed decision making becomes decision making by precedent. Managers
simply do what they and others have done previously in the same situation.

Structured problems are responded to with programmed decision making. Unstructured problems
require non-programmed decision making. Lower-level managers essentially confront familiar
and repetitive problems; therefore, they most typically rely on programmed decisions such as
standard operating procedures. However, the problems confronting managers are likely to
become less structured as they move up the organizational hierarchy. Why? Because lower-level
managers handle the routine decisions themselves and pass upward only decisions that they find
unique or difficult. Similarly, managers pass down routine decisions to their employees in order
to spend their time on more problematic issues. Few managerial decisions in the real world are
either fully programmed or fully non-programmed. Most decisions fall somewhere in between.
However, the necessity to control costs and other variables motivate them to create policies,
standard operating procedures, and rules to guide other lower-level managers. Programmed
decisions minimize the need for managers to exercise discretion. This factor is important because
discretion costs money. The more non-programmed decision making a manager is required to do,
the greater the judgment needed. Because sound judgment is an uncommon quality, it costs more
to acquire the services of managers who possess it.

STEPS IN PROBLEM SOLVING AND DECISION MAKING

Learning how to solve problems and make decisions properly is vitally important. It is observed
that many managers do not pay careful enough attention to the systematic process of decision
making. That may account for one of the reasons why project fail in terms of quality, cost and
time. The basic purpose of making a decision is to solve a problem, but you must analyse the
problem prior to making the decision. Problem solving and decision making can be divided into
many steps.
Identify and Diagnose the Problem

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Problem solving and decision making begin with the awareness that a problem exists. In other
words, the first step in problem solving and decision making is to identify a gap between desired
and actual conditions. Being attentive to the environment helps the manager identify problems,
such as noticing that the department is receiving frequent criticism from outsiders and insiders.
Sometimes a problem is imposed on a manager, such as when customer complaints increase. At
other times, he or she must search actively for a worthwhile problem or opportunity. For
example, a manager might actively pursue a problem by conducting an audit to find out why
former customers stopped patronising the company. A thorough diagnosis of the problem is
important because the real problem may be different from the one that is suggested by a first
look. The ability to think critically helps a person get at the real problem. To diagnose a problem
properly, you must clarify its true nature. A frequently cited example is that a manager might
attempt to reduce turnover by increasing wages. The manager assumes that workers would stay
with the company longer if their wages were higher. Yet the real problem is inflexible working
hours that are triggering turnover.
Identifying Alternatives
Once the decision situation has been recognized and defined, the second step is to identify
alternative courses of effective action. Developing both obvious, standard alternatives and
creative, innovative alternatives is generally useful. In general, the more important the decision,
the more attention is directed to developing alternatives. If the decision involves a multimillion-
dollar relocation, a great deal of time and expertise will be devoted to identifying the best
locations. Although managers should seek creative solutions, they must also recognize that
various constraints often limit their alternatives. Common constraints include legal restrictions,
moral and ethical norms, authority constraints, available technology, economic considerations,
and unofficial social norms.
Evaluating Alternatives
The third step in the decision-making process is evaluating each of the alternatives. It is
suggested that each alternative be evaluated in terms of its feasibility, satisfactoriness, and
consequences. The first question to ask is whether an alternative is feasible. Is it within the realm
of probability and practicality? For a small, struggling firm, an alternative requiring a huge
financial outlay is probably out of the question. Other alternatives may not be feasible because of
legal barriers. And limited human, material, and information resources may make other
alternatives impractical. When an alternative has passed the test of feasibility, it must next be
examined to see how well it satisfies the conditions of the decision situation. For example, a

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manager searching for ways to double production capacity might initially consider purchasing an
existing plant from another company. If more detailed analysis reveals that the new plant would
increase production capacity by only 35 percent, this alternative may not be satisfactory. Finally,
when an alternative has proven both feasible and satisfactory, its probable consequences must
still be assessed. To what extent will a particular alternative influence other parts of the
organization? What financial and non-financial costs will be associated with such influences?
Selecting the Best Alternative
Even though many alternatives fail to pass the triple tests of feasibility, satisfactoriness, and
affordable consequences, two or more alternatives may remain. Choosing the best of these is the
real crux of decision making. One approach is to choose the alternative with the optimal
combination of feasibility, satisfactoriness, and affordable consequences. Even though most
situations do not lend themselves to objective, mathematical analysis, the manager can often
develop subjective estimates and weights for choosing an alternative. Optimization is also a
frequent goal. Because a decision is likely to affect several individuals or units, any feasible
alternative will probably not maximize all of the relevant goals. Suppose that the manager of the
Kansas City Royals needs to select a new outfielder for the upcoming baseball season. Bill
hits .350 but sometimes has difficulty catching fly balls, Joe hits only .225 but is outstanding in
the field, and Sam hits .290 and is a solid but not outstanding fielder. The manager would
probably select Sam because of the optimal balance of hitting and fielding. Decision makers
should also remember that finding multiple acceptable alternatives may be possible; selecting
just one alternative and rejecting all the others might not be necessary. For example, the Royals’
manager might decide that Sam will start each game, Bill will be retained as a pinch hitter, and
Joe will be retained as a defensive substitute. In many hiring decisions, the candidates remaining
after evaluation are ranked. If the top candidate rejects the offer, it may be automatically
extended to the number-two candidate and, if necessary, to the remaining candidates in order.
Implementing the Chosen Alternative
After an alternative has been selected, the manager must put it into effect. In some decision
situations, implementation is fairly easy; in others, it is more difficult. In the case of an
acquisition, for example, managers must decide how to integrate all of the new business’s
activities, including purchasing, human resource practices, and distribution, into an ongoing
organizational framework. For example, when Hewlett-Packard made the decision to buy
Compaq Computer, managers estimated that it would take at least a year to integrate the two
firms into a single one. Similarly, the decision made by executives at American Airlines and US

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Airways to merge into a single airline will take two or three years to implement. Managers must
also consider people’s resistance to change when implementing decisions. The reasons for such
resistance include insecurity, inconvenience, and fear of the unknown. Managers should
anticipate potential resistance at various stages of the implementation process. Managers should
also recognize that even when all alternatives have been evaluated as precisely as possible and
the consequences of each alternative weighed, unanticipated consequences are still likely. Any
number of factors—such as unexpected cost increases, a less-than-perfect fit with existing
organizational subsystems, or unpredicted effects on cash flow or operating expenses—could
develop after implementation has begun.
Following Up and Evaluating the Results
The final step in the decision-making framework is to investigate how effectively the chosen
alternative solved the problem —that is, they should make sure that the chosen alternative has
served its original purpose. Controlling means ensuring that the results the decision obtained are
the ones set forth during the problem-identification step. If an implemented alternative appears
not to be working, the manager can respond in several ways. Another previously identified
alternative (the original second or third choice, for instance) could be adopted. Or the manager
might recognize that the situation was not correctly defined to begin with and start the process all
over again. Finally, the manager might decide that the original alternative is in fact appropriate
but has not yet had time to work or should be implemented in a different way. Failure to evaluate
decision effectiveness may have serious consequences.
Evaluating and controlling your decisions will help you improve your decision-making skills.
You can learn important lessons by comparing what actually happened with what you thought
would happen. You can learn what you could have improved or done differently and use this
information the next time you face a similar decision.

BOUNDED RATIONALITY AND INFLUENCES ON DECISION MAKING

Because so many factors influence the decision maker, decision making is usually not entirely
rational. Awareness of this fact stems from the research of psychologist and economist Herbert
A. Simon. He proposed that bounds (or limits) to rationality are present in decision making.
These bounds are the limitations of the human, particularly related to the processing and recall of
information. Bounded rationality means that people’s finite (somewhat limited) mental abilities,
combined with external influences over which they have little or no control, prevent them from
making entirely rational decisions.

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Research and opinion on bounded rationality emphasize that humans use problem-solving
strategies that are reasonably rapid, reasonably accurate, and in keeping with the quantity and
type of information available. In short, people making decisions do the best with what they have.
Often decision makers do not have the time or resources to wait for the best possible solution.
Instead, they search for satisficing decisions, those that suffice in providing a minimum standard
of satisfaction. Such decisions are adequate, acceptable, or passable. Many decision makers
stop their search for alternatives when they find a satisficing one. Successful managers recognize
that it is difficult to obtain every possible fact before making a decision. A top manager once
stated that, “If we want to be leaders, we’re going to have to make decisions with maybe 75
percent of the facts. If you wait for 95 percent, you are going to be a follower.” Affected by
bounded rationality, decision makers often use simplified strategies known as heuristics.
Heuristics help the decision maker cope with masses of information, but oversimplification can
lead to inaccurate or irrational decision making. A host of influences on the decision-making
process contribute to bounded rationality.
Intuition
Effective decision makers do not rely on analytical and methodological techniques alone. They
also use their hunches and intuition. Intuition is an experience-based way of knowing or
reasoning in which weighing and balancing evidence are done unconsciously and automatically.
Intuition is also a way of arriving at a conclusion without using the step-by-step logical process.
Intuition can be based mostly on experience or mostly on feeling. The fact that experience
contributes to intuition means that decision makers can become more intuitive by solving many
difficult problems because accumulated facts are an asset to intuition.
Personality and Cognitive Intelligence
The personality and cognitive intelligence of the decision maker influence his or her ability to
find effective solutions. A particularly relevant personality dimension is a person’s propensity for
taking risks. A cautious, conservative person typically opts for a low-risk solution. An extremely
cautious person may avoid making major decisions for fear of being wrong. Organizational
pressures can influence a person’s propensity for risk taking. In addition to being related to risk
taking, cautiousness and conservatism influence decisiveness, the extent to which a person
makes up his or her mind promptly and prudently. Good decision makers, by definition, are
decisive.
Perfectionism exerts a notable impact on decision making. People who seek the perfect solution
to a problem are usually indecisive because they hesitate to accept the fact that a particular

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alternative is good enough. Optimism versus pessimism is another relevant personality
dimension. Optimists are more likely to find solutions than are pessimists. Pessimists are more
likely to give up searching, because they perceive situations as being hopeless.
Cognitive (or traditional) intelligence carries a profound influence on decision-making
effectiveness. Today psychologists recognize other types of intelligence such as imagination,
adaptability, and practical intelligence. In general, intelligent and well-educated people are more
likely to identify problems and make sound decisions than are those who have less intelligence
and education. A notable exception applies, however.
Emotional Intelligence
How effective you are in managing your feelings and reading other people can affect the quality
of your decision making. For example, if you cannot control your anger, you are likely to make
decisions motivated by retaliation, hostility, and revenge. An example would be shouting and
swearing at your team leader because of a work assignment you received. Emotional intelligence
refers to qualities such as understanding one’s own feelings, empathy for others, and the
regulation of emotions to enhance living. This type of intelligence generally affects the ability to
connect with people and understand their emotions. If you cannot read the emotions of others,
you are liable to make bad decisions such as pushing your boss too hard to grant a request.
Emotional intelligence contains four key factors, all of which can influence the quality of our
decisions: self-awareness, self-management, social management and relationship management.
Quality and Accessibility of Information
Reaching an effective decision usually requires high-quality, valid information. The ability to
supply managers with high-quality information forms the major justification for information
systems. Part of having quality information is being able to base decisions upon solid data.
Accessibility may be even more important than quality in determining which information is used
or not used. Sometimes it takes so much time and effort to search for quality information that the
manager relies on lower-quality information that is close at hand. A frequent accessibility
problem is to rely on information from the Internet because it is easy to access, without stopping
to investigate the date or the source of the information. Quite often the information comes from
Wikipedia.
Political Considerations
Under ideal circumstances, managers make organizational decisions on the basis of the objective
merits of competing alternatives. In reality, many decisions are based on political considerations
such as favouritism, alliances, or the desire of the decision maker to stay in favor with people

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who wield power. Political factors sometimes influence which data are given serious
consideration in evaluating alternatives. The decision maker may select data that support the
position of an influential person whom he or she is trying to please. For instance, one financial
analyst, asked to investigate the cost-effectiveness of the firm owning a corporate jet, gave
considerable weight to the “facts” supplied by a manufacturer of corporate jets. This information
allowed her to justify the expense of purchasing the plane—the decision the CEO favoured.
Degree of Certainty
The more certain a decision maker is of the outcome of a decision, the more calmly and
confidently the person will make the decision. Degree of certainty is divided into three
categories: certainty, risk, and uncertainty.
DECISION MAKING UNDER CERTAINTY In the environment of decision making under
certainty, decision makers know with certainty the consequence of every alternative or decision
choice. Naturally, they will choose the alternative that will maximize their well-being or will
result in the best outcome. For example, let us say that you have N1,000 to invest for a 1-year
period. One alternative is to open a savings account paying 6% interest and another is to invest in
a government Treasury bond paying 10% interest. If both investments are secure and guaranteed,
there is a certainty that the Treasury bond will pay a higher return. The return after one year will
be N100 in interest.
DECISION MAKING UNDER UNCERTAINTY In decision making under uncertainty, there are
several possible outcomes for each alternative, and the decision maker does not know the
probabilities of the various outcomes. As an example, the probability that APC man will be
president of the Nigeria 25 years from now is not known. Sometimes it is impossible to assess
the probability of success of a new undertaking or product. Several criteria exist for making
decisions under these conditions, among them are:
1. Optimistic (maximax)
2. Pessimistic (maximin)
3. Criterion of realism (Hurwicz)
4. Equally likely (Laplace)
5. Minimax regret
Minimax Regret: This is based on opportunity loss or regret. Opportunity loss refers to the
difference between the optimal profit or payoff for a given state of nature and the actual payoff
received for a particular decision. In other words, it is the amount lost by not picking the best
alternative in a given state of nature.

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The first step is to create the opportunity loss table by determining the opportunity loss for not
choosing the best alternative for each state of nature. Opportunity loss for any state of nature, or
any column, is calculated by subtracting each payoff in the column from the best payoff in the
same column.
Using the opportunity loss (regret) table, the minimax regret criterion finds the alternative that
minimizes the maximum opportunity loss within each alternative. You first find the maximum
(worst) opportunity loss for each alternative. Next, looking at these maximum values, pick that
alternative with the minimum (or best) number. By doing this, the opportunity loss actually
realized is guaranteed to be no more than this minimax value.
DECISION MAKING UNDER RISK In decision making under risk, there are several possible
outcomes for each alternative, and the decision maker knows the probability of occurrence of
each outcome. We know, for example, the probability of rolling a 5 on a die is 1/6. In decision
making under risk, the decision maker usually attempts to maximize his or her expected
wellbeing. Decision theory models for business problems in this environment typically employ
two equivalent criteria: maximization of expected monetary value and minimization of expected
opportunity loss.
In decision theory, those outcomes over which the decision maker has little or no control are
called states of nature. Decision making under risk is a decision situation in which several
possible states of nature may occur, and the probabilities of these states of nature are known.
Expected Monetary Value
Given a decision table with conditional values (payoffs) that are monetary values, and
probability assessments for all states of nature, it is possible to determine the expected monetary
value (EMV) for each alternative. The expected value, or the mean value, is the long-run average
value of that decision.
The expected monetary value (EMV) for an alternative is just the sum of possible payoffs of the
alternative, each weighted by the probability of that payoff occurring.
EMV (alternative) = ∑XiP(Xi)
Where:
Xi = Payoff for the alternative in state of nature i
P(Xi) = Probability of achieving payoff Xi (i.e., probability of state of nature i)
∑ = Summation

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EMV (alternative) = (Payoff in 1 st state of nature) X (Probability of 1 st state of nature) + (Payoff
in 2nd state of nature) X (Probability of 2nd state of nature) + (Payoff in 3rd state of nature) X
(Probability of 3rd state of nature).
WORKED EXAMPLE
Raban is considering the possibility of opening a small interlocking business. The company’s
options are to open a small one, a medium-sized one, or none at all. The market for interlocking
can be good, average, or bad. The probabilities for these three possibilities are 0.2 for a good
market, 0.5 for an average market, and 0.3 for a bad market. The net profit or loss for the
medium-sized and small ones for the various market conditions are given in the following table.
Building no interlocking business at all yields no loss and no gain.
a. What do you recommend?
b. Develop the opportunity loss table for this situation. What decision would be made using
the minimax regret criterion?
Alternative Good market (N) Average market (N) Bad market (N)
Small interlocking 75,000 25,000 –40,000
biz
Medium-sized biz 100,000 35,000 –60,000
None at all 0 0 0

a. Since the decision-making environment is risk (probabilities are known), it is appropriate

to use the EMV criterion. The problem can be solved by developing a payoff table that
contains all alternatives, states of nature, and probability values
The expected monetary value (EMV) for an alternative is just the sum of possible payoffs of the
alternative, each weighted by the probability of that payoff occurring.
EMV (alternative) = ∑XiP(Xi)
Where:
Xi = Payoff for the alternative in state of nature i
P(Xi) = Probability of achieving payoff Xi (i.e., probability of state of nature i)
∑ = Summation
EMV (alternative) = (Payoff in 1 st state of nature) X (Probability of 1 st state of nature) + (Payoff
in 2nd state of nature) X (Probability of 2nd state of nature) + (Payoff in 3rd state of nature) X
(Probability of 3rd state of nature)
EMV (small site) = 0.2 X 75000 + 0.5 X 25000 + 0.3 (-40000) = N15500

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EMV (medium site) = 0.2 X 100000 + 0.5 X 35000 + 0.3 (-60000) = N19500
EMV (no site) = 0.2 X 0 + 0.5 X 0 + 0.3 X 0 = N0
Recommendation: To build medium interlocking site because it has the highest EMV of N19500
b. Develop the opportunity loss table for this situation. What decision would be made using
the minimax regret criterion?

Alternative Good market Average market Bad market Maximum

(N) (N) (N) (N)
Small interlocking 25,000 10,000 40,000 40,000
biz
Medium-sized biz 0 0 60,000 60,000
None at all 100000 35000 0 100000

The best payoff in a good market is 100,000, so the opportunity losses in the first column
indicate how much worse each payoff is than 100,000. The best payoff in an average market is
35,000, so the opportunity losses in the second column indicate how much worse each payoff is
than 35,000. The best payoff in a bad market is 0, so the opportunity losses in the third column
indicate how much worse each payoff is than 0. The minimax regret criterion considers the
maximum regret for each decision, and the decision corresponding to the minimum of these is
selected. The decision would be to build a small shop since the maximum regret for this is
40,000, while the maximum regret for each of the other two alternatives is higher as shown in the
opportunity loss table.

EVIDENCE-BASED MANAGEMENT
Rational perspectives on decision making have recently been reformulated under the concept of
evidence-based management. Stanford University Professors Jeffrey Pfeffer and Bob Sutton,
authors of Hard Facts, Dangerous Half-Truths, and Total Nonsense, have put out a call for a
renewed reliance on rationality in managerial decision making—an approach that they call
evidence-based management (EBM). “Management decisions,” they argue, “[should] be based
on the best evidence, managers [should] systematically learn from experience, and organizational
practices [should] reflect sound principles of thought and analysis.” They define evidence-based
management as “a commitment to finding and using the best theory and data available at the time
to make decisions,” but their “Five Principles of Evidence-Based Management” make it clear

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that EBM means more than just sifting through data and crunching numbers. Here is what they
recommend:
1. Face the hard facts and build a culture in which people are encouraged to tell the truth, even if
it is unpleasant.
2. Be committed to “fact-based” decision making—which means being committed to getting the
best evidence and using it to guide actions.
3. Treat your organization as an unfinished prototype—encourage experimentation and learning
by doing.
4. Look for the risks and drawbacks in what people recommend (even the best medicine has side
effects).
5. Avoid basing decisions on untested but strongly held beliefs, what you have done in the past,
or uncritical “benchmarking” of what winners do.
Pfeffer and Sutton are particularly persuasive when they use EBM to question the outcomes of
decisions based on “untested but strongly held beliefs” or on “uncritical ‘benchmarking.” Take,
for instance, the popular policy of paying high performers significantly more than low
performers. Pfeffer and Sutton’s research shows that pay-for-performance policies get good
results when employees work solo or independently. But it is another matter altogether when it
comes to collaborative teams—the kind of teams that make so many organizational decisions
today. Under these circumstances, the greater the gap between highest- and lowest-paid
executives, the weaker the firm’s financial performance. Why? According to Pfeffer and Sutton,
wide disparities in pay often weaken both trust among team members and the social connectivity
that contributes to strong team-based decision making.

GROUP PROBLEM SOLVING AND DECISION MAKING

We have described how individuals go about solving problems and making decisions. However,
groups make most major decisions in organizations. Group decisions result when several people
contribute to a final decision. Because so much emphasis has been placed on teams and
participative decision making, an increasing number of decisions are made by groups rather than
individuals. Group decision making is often used in complex and important situations such as
developing a new product or recommending employees with the best potential for promotion.
Advantages of Group Decision Making
1. First, the quality of the decision might be higher because of the combined wisdom of
group members.

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 2. A second benefit is a by-product of the first. Group members evaluate each other’s
thinking, so major errors are likely to be avoided.
3. Group decision making is helpful in gaining acceptance and commitment. People who
participate in making a decision will often be more committed to the implementation than
if they had not been consulted.
4. Groups can help people overcome blocks in their thinking, leading to more creative
solutions to problems.
Disadvantages of Group Decision Making
1. The group approach consumes considerable time and may result in compromises that do
not really solve the problem. An intelligent individual might have the best solution to the
problem; relying on his or her judgment could save time.
2. They may also be subject to minority domination, where members of a group are never
perfectly equal. They may differ in rank in the organization, experience, knowledge about
the problem, influence on other members, verbal skills, assertiveness, and the like. This
imbalance creates the opportunity for one or more members to dominate others in the
group. A minority that dominates a group frequently has an undue influence on the final
decision.
3. Another problem focuses on the pressures to conform in groups. For instance, have you
ever been in a situation in which several people were sitting around discussing a
particular item and you had something to say that ran contrary to the consensus views of
the group, but you remained silent? Were you surprised to learn later that others shared
your views and also had remained silent? What you experienced is what Irving Janis
called groupthink (a psychological drive for consensus at any cost). In this form of
conformity, 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.
4. And, finally, ambiguous responsibility can become a problem. Group members share
responsibility, but who is actually responsible for the final outcome? In an individual
decision, it’s clear who is responsible. In a group decision, the responsibility of any single
member is watered down.

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