Decision-Making Processes
Chapter
12
Organization Theory and Design
Eleventh Edition
Richard L. Daft
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Brainstorming
Types of Decisions
• Organizational decision making – The process of
identifying and solving problems.
1. Problem Identification: monitoring information about
environmental and organizational conditions to determine if
performance is satisfactory and to diagnose the cause of
shortcomings.
2. Problem Solution: alternative courses of action are considered
and one alternative is selected and implemented.
• Programmed Decisions – repetitive and well defined.
Ex.: replace an office copy machine, reimburse
managers for travel expenses.
• Nonprogrammed Decisions – novel and poorly
defined . Ex.: strategic partnership, merger, layoffs.
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Decision Making in Today’s
Environment
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Individual Decision Making
It can be described in two ways;
• Rational approach – ideal method for how managers
should make decisions
• Bounded rationality perspective – how decisions are
made under severe time and resource constraints
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Steps in the Rational Approach
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Rational Perspective to DM
1. Monitor the environment: reviews financial
statements, performance evaluations, industry indices,
competitors’ activities, etc.
2. Define the problem: identify where, when, who was
involved, who was affected, and how current activities
are influenced.
3. Specify decision objectives: what performance
outcomes should be achieved by a decision.
4. Diagnose the problem: analyze the cause(s) of the
problem.
5. Develop alternative solutions: various options available
to achieve desired objectives.
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Rational Perspective to DM
6. Evaluate alternatives: merits of each alternative are
assessed, as well as the probability that it will achieve
the objectives.
7. Choose the best alternative: select a single
alternative that has the best chance for success.
8. Implement the chosen alternative: giving directions
to ensure that the decision is carried out.
• N.B.: The first four steps in this sequence are the
problem identification stage, and the next four steps
are the problem solution stage of decision making.
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Bounded Rationality Perspective
• Managers have no enough time and mental capacity
and hence cannot evaluate every goal, problem, and
alternative.
• Nonprogrammed decisions: managers may try to
follow the steps in the rational decision making
process, but they also have to rely on experience and
intuition.
• Constraints and Tradeoffs
– Constraints impinge the decision maker.
• The Role of Intuition
– Experience and judgment rather than logic.
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Constraints and Tradeoffs
During Nonprogrammed Decision Making
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Exercise
• Managers should use the most objective,
rational process possible when making a
decision!
Organizational Decision Making
Management Science Approach
Carnegie Model
Incremental Decision Model
Garbage can model
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Management Science Approach
• Organizational decision making is the analog to the
rational approach by individual managers.
• Use of statistics/ mathematics to identify relevant
variables.
• Remove human element from calculations.
• Very successful for military problems, WW II.
• Good tool for decisions where variables can be
indentified and measured.
• A drawback of management science is that quantitative
data are not rich and lack tacit knowledge.
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Carnegie Model
• Coincides with the bounded rationality approach to
individual decision making.
• A final choice was based on a coalition among
managers .. Why?
1. Goals are often ambiguous.
2. Decision reached will be supported by interested
parties.
• Decisions are made to satisfice rather than to
optimize problem solutions: a satisfactory rather
than a maximum level of performance, enabling
them to achieve several goals simultaneously.
Carnegie Model
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Exercise
When a manager knows the best solution
to a serious organizational problem and
has the necessary authority, it is best to
simply make the decision and implement
it rather than involve other managers in
the decision process!
Incremental Decision Model
• Focuses on the structured sequence of activities
from discovery to solution.
• Large decisions are a collection of small choices
combined together.
• Organizations move through several decision
points and may hit barriers along the way
(decision interrupts) are barriers!
– Identification Phase
– Development Phase
– Selection Phase
– Dynamic Factors
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The Incremental Decision Model
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Problem Identification and
Problem Solution
When problem and problem solution are uncertain
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Garbage Can Model
• It deals with the flow of multiple decisions.
• Explain decision making in high uncertainty - organized
anarchy:
– Problematic preferences
– Unclear, poorly understood technology
– Turnover
• It assumes that organizations are far from perfect and
operate as anarchies resulting into chaos.
• It is characterized by an absence of formal DM process.
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Consequences of the
Garbage Can Model
1. Solutions may be proposed even when problems
do not exist. Ex.: adoption of computers in
organizations.
2. Choices are made without solving problems.
3. Problems may persist without being solved.
4. A few problems are solved.
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Illustration of Independent Streams of Events in
the Garbage Can Model of Decision-Making
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Contingency Framework for
Using Decision Models
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Excercie
Making a poor decision can help a manager and
organization learn and get stronger!
Design Essentials
• Most decisions are not made in a logical manner
• Individuals make decisions, but organizational decisions are not
made by a single individual
• Conflict exists when problems are not agreed on
• The garbage can model has become a description of decision-
making
• Organizations operate in high-velocity environments
• Allowing biases to cloud decision making can have negative
consequences
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