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Roger N. Nagel © 2006
Organizational Behavior and Organizational Change
Decisions
Roger N. NagelSenior Fellow & Wagner Professor
Lehigh University
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Roger N. Nagel © 2006
Topics This PresentationDecision making in OB
Steps in the Decision-Making ModelCommon Biases and ErrorsIntuitive Decision MakingOrganizational Constraints on Decision MakersPotential Cultural Differences in Decision MakingEthics in Decision Making
Ways to Improve Decision MakingReducing Bias and Errors
“Organizational behavior”Eleventh Edition
By Steve RobbinsISBN 0-13-191435-9
Reference Book
“Organizational behavior”Eleventh Edition
By Steve RobbinsISBN 0-13-191435-9
Reference Book
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o r g a n i z a t i o n a l b e h a v i o ro r g a n i z a t i o n a l b e h a v i o r
stephen p. robbins
e l e v e n t h e d i t i o ne l e v e n t h e d i t i o n
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How Are Decisions Actually Made in Organizations
Simplifying
Individuals make decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity.
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How Are Decisions Actually Made in Organizations
How/Why problems are identifiedVisibility over importance of problem
» Attention-catching, high profile problems» Desire to “solve problems”
Self-interest (if problem concerns decision maker)
Alternative DevelopmentSatisfying: seeking the first alternative that solves problem.Engaging in incremental rather than unique problem solving through successive limited comparison of alternatives to the current alternative in effect.
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What should we do?
Identify Problems Opportunities Develop Alternative approaches
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1. Define the problem or opportunity.
2. Identify the decision criteria.
3. Allocate weights to criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.
1. Define the problem or opportunity.
2. Identify the decision criteria.
3. Allocate weights to criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.
Steps in the Decision-Making Model
E X H I B I T 5–3 Page 144
E X H I B I T 5–3 Page 144
Assumptions• Problem clarity• Known options• Clear preferences• Constant
preferences• No time or cost
constraints• Maximum payoff
Assumptions• Problem clarity• Known options• Clear preferences• Constant
preferences• No time or cost
constraints• Maximum payoff
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Discussion of steps and assumptions
What left out? What should be added?
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Assumptions• Problem clarity• Known options• Clear preferences• Constant
preferences• No time or cost
constraints• Maximum payoff
Assumptions• Problem clarity• Known options• Clear preferences• Constant
preferences• No time or cost
constraints• Maximum payoff
1. Define the problem.2. Identify the decision
criteria.3. Allocate weights to
criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.
1. Define the problem.2. Identify the decision
criteria.3. Allocate weights to
criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.
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The Three Components of CreativityCreativity
The ability to produce novel and useful ideas.
Three-Component Model of Creativity
Proposition that individual creativity requires expertise, creative-thinking skills, and intrinsic task motivation.
E X H I B I T 5–4 Page 146
E X H I B I T 5–4 Page 146
Source: T.M. Amabile, “Motivating Creativity in Organizations,” California Management Review, Fall 1997, p. 43.
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Common Decision Biases and Errors1. Overconfidence Bias
Believing too much in our own decision competencies.
2. Anchoring BiasFixating on early, first received information.
3. Confirmation BiasUsing only the facts that support our decision.
4. Availability BiasUsing information that is most readily at hand.
5. Representative BiasAssessing the likelihood of an occurrence by trying to match it with a preexisting category.
Page 148 -151
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Common Decision Biases and Errors
6. Escalation of CommitmentIncreasing commitment to a previous decision in spite of negative information.
7. Randomness ErrorTrying to create meaning out of random events by falling victim to a false sense of control or superstitions.
8. Hindsight BiasFalsely believing to have accurately predicted the outcome of an event, after that outcome is actually known.
Page 148 -151
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Rate the decision making of your subordinates. How often do they make each type of error?
1. Overconfidence Bias _______ (Never, occasionally, often)Believing too much in our own decision competencies.
2. Anchoring Bias _______ (Never, occasionally, often)Fixating on early, first received information.
3. Confirmation Bias _______ (Never, occasionally, often)Using only the facts that support our decision.
4. Availability Bias _______ (Never, occasionally, often)Using information that is most readily at hand.
5. Representative Bias _______ (Never, occasionally, often)Assessing the likelihood of an occurrence by trying to match it with a preexisting category.
6. Escalation of Commitment _______ (Never, occasionally, often)Increasing commitment to a previous decision in spite of negative information.
7. Randomness Error _______ (Never, occasionally, often)Trying to create meaning out of random events by falling victim to a false sense of control or superstitions.
8. Hindsight Bias _______ (Never, occasionally, often)Falsely believing to have accurately predicted the outcome of an event, after that outcome is actually known. Page 148 -151
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Intuition
Intuitive Decision MakingAn unconscious process created out of distilled experience.
Conditions Favoring Intuitive Decision Making1. A high level of uncertainty exists2. There is little precedent to draw on3. Variables are less scientifically predictable4. “Facts” are limited5. Facts don’t clearly point the way6. Analytical data are of little use7. Several plausible alternative solutions exist8. Time is limited and pressing for the right decision
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Different Approaches To Decisions
People differ along two dimensions1. The first is their way of thinking.
a. Some people are logical and rational. They process information serially.
b. Some people are intuitive and creative. They perceive things as a whole.
2. The second is a person’s tolerance for ambiguityc. Some people have a high need to minimize ambiguity.d. Others are able to process many thoughts at the same time.
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Decision-Style Model
E X H I B I T 5–5 Page 154
E X H I B I T 5–5 Page 154
Source: A.J. Rowe and J.D. Boulgarides, Managerial Decision Making, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29.
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Decision-Style Model: 4 Styles Of Decision Making
1. DirectiveLow tolerance for ambiguity and seek rationalityEfficient and logicalDecisions are made with minimal information and with few alternatives assessed. Make decisions fast and focus on the short-run.
2. AnalyticGreater tolerance for ambiguityDesire for more information and consideration of more alternativesBest characterized as careful decision makers with the ability to adapt
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Decision-Style Model: 4 Styles Of Decision Making
3. ConceptualTend to be very broad in their outlook and consider many alternativesTheir focus is long range, and they are very good at finding creative solutions to problems.
4. BehavioralCharacterizes decision makers who work well with othersConcerned with the achievement of peers and subordinates and are receptive to suggestions from others, relying heavily on meetings for communicatingTries to avoid conflict and seeks acceptance
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What Style do You Prefer? Why?
E X H I B I T 5–5 Page 154
E X H I B I T 5–5 Page 154
Source: A.J. Rowe and J.D. Boulgarides, Managerial Decision Making, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29.
(1)
(2)
(4)
(3)
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Organizational Constraints on Decision Makers
Performance EvaluationEvaluation criteria influence the choice of decisions.
Reward SystemsDecision makers make choices that are favored by the organization.
Formal RegulationsOrganizational rules and policies limit the alternative choices of decision makers.
System-imposed Time ConstraintsOrganizations require decisions by specific deadlines.
Historical PrecedentsPast decisions influence current decisions. Page 156
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We see the same thing but we see it differently!
How we see problems and or opportunities and make decisions is
shaped by our culture
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Potential Cultural Differences in Decision Making
Time orientationImportance of logic and rationalityBelief in the ability of people to solve problemsPreference for collective decision makingPrefer decision makers from own countryDistributed authority to components of organizationGlobal perspective in decision making
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Global perspective in decision making
Low
Distributed authority to components of organization
Increasing
Prefer decision makers from own country
High
Preference for collective decision making
Low
Belief in the ability of people to solve problems
High
Importance of logic and rationality
High
Time orientationShort
ChinaFill in for China
Cultural Decision MakingUSASelf evaluation
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Ethics in Decision MakingEthical Decision Criteria
Utilitarianism» Seeking the greatest good for the greatest
number.Rights
» Respecting and protecting basic rights of individuals such as whistleblowers.
Justice» Imposing and enforcing rules fairly and impartially.
Intellectual property» Making strong efforts to protect the IP rights of
others
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Intellectual property respect: Making strong efforts to protect the IP rights of others
High
Justice: Imposing and enforcing rules fairly and impartially
Medium
Rights: Respecting and protecting basic rights of individuals
High
Utilitarianism: Seeking the greatest good for the greatest number
Medium
ChinaFill in for China
Ethics in Decision MakingUSASelf evaluation
Do you agree with USA opinion? Fill in what you think!
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Ethics and National Culture
There are no global ethical standards.The ethical principles of global organizations that reflect and respect local cultural norms are necessary for high standards and consistent practices.
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Ways to Improve Decision Making
1. Analyze the situation and adjust your decision making style to fit the situation.
2. Be aware of biases and try to limit their impact.
3. Combine rational analysis with intuition to increase decision-making effectiveness.
4. Don’t assume that your specific decision style is appropriate to every situation.
5. Enhance personal creativity by looking for novel solutions or seeing problems in new ways, and using analogies.
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Toward Reducing Bias and Errors
Focus on goals.Clear goals make decision making easier and help to eliminate options inconsistent with your interests.
Look for information that disconfirms beliefs.Overtly considering ways we could be wrong challenges our tendencies to think we’re smarter than we actually are.
Don’t try to create meaning out of random events.Don’t attempt to create meaning out of coincidence.
Increase your options.The number and diversity of alternatives generated increases thechance of finding an outstanding one.
E X H I B I T 5–6E X H I B I T 5–6
Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164–68.
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Group Exercise
Each group should choose Exercise A or Exercise BFirst work as an individual and then share answers with your groupGroups then pick one to further develop and present to the class
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How could you improve decision making in your organization?
1. Identify a goal for the improvement2. Make a plan to achieve the improvement3. Define the benefits, metrics, and obstacles
you face in carrying out your plan4. Share your answers with your group and
pick one persons plan for the group to develop and present
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Intuitive Decision Making
1. Is intuitive decision making important in your organization?2. If yes, provide an example and identify which factors are
most important a. A high level of uncertainty existsb. There is little precedent to draw onc. Variables are less scientifically predictabled. “Facts” are limitede. Facts don’t clearly point the wayf. Analytical data are of little useg. Several plausible alternative solutions existh. Time is limited and pressing for the right decision
3. What should you be doing to improve? Provide a plan identifying steps you will take to improve.Identify benefits and obstacles to achieving your plan
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Groups present answers to the class
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XIE XIERoger N. Nagel
Wagner Professor and Senior Fellow CSE Department &
The Enterprise Systems Center at Lehigh University 200 West Packer Avenue
Bethlehem, Pennsylvania, 18015(610) 758-4086, (610) 868-0402 [fax]