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that contribute to different degrees of uncertainty as perceived by individuals involved in decision making.^
Twenty-two decision units are studied in
three manufacturing organizations (ten decision units) and in three research and development organizations (twelve decision
units). An organizational decision unit is
defined as a formally specified work group
within the organization under a superior
charged with a formally defined set of responsibilities directed toward the attainment
of the goals of the organization. Decision
making per se may be centered in the formal
leader and/or distributed to various members of the specific unit. Decision making
for this analysis is more broadly defined
than in most decision models to include
the gathering and processing of information
carried out by groups of individuals, which
precedes the actual choice process.
It should be emphasized that environ^ The research on which this article is based was
supported by a National Science Foundation Grant, mental uncertainty and the dimensions of
-\o. GS-3054. T_his assistance is gratefully acknowenvironment are defined here in terms
3 The author has also identified the types of struct^^al modifications decision units implement in making decisions under uncertainty and the relationship
between these adaptation processes and organizational effectiveness (Duncan 1971c).
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314
315
, , ,
(3) Orgamzational level component
( A ) Organizational obiectives and goals
,
,
(7) Socio-political component
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(B) Public political attitude towards industry
and its particular product
(G) Relationship with trade unions with jurisdiction in the organization
8) Technological component
(A) Meeting new technological requirements
of own industry and related industries m
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4. 4--U
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316
317
318
certaint}^ implemented here had to provide going to the moon or becoming a millionaire
an operationalization of the concept to which but he is less confident about the probability
actual organizational members could respond, estimates than under conditions of risk. The
Given the more specific mathematic defini- real question becomes one of how confident
tion of uncertainty by the information theo- the individual is in his estimate. In uncertain
rists (Gamer, 1962; Attneave, 1959), it was situations there is less predictability with
believed that these definitions were too ab- respect to the outcome of events than under
stract for managers to respond to.
conditions of risk. The present definition of
Environmental uncertainty was defined on uncertainty thus takes a broader perspective
the basis of the preliminar)^ research dis- and is concerned with the individual's abilcussed above (Duncan, 1968). Although ity to assign probabilities. It builds on both
there was difficulty in the preliminary re- the wide and narrow formulations to provide
search in getting respondents to verbalize a definition that is both comprehensive and
their views of uncertainty, there was a re- yet specific, so that it can be used in future
markable degree of similarity' in the way in research.
which the concept was ultimately defined.
Three components of uncertainty were mentioned by some or all of the eighteen individuals who gave a definition: (1) the lack
of information regarding the environmental
factors associated with a given decisionmaking situation, (2) not knowing the outcome of a specific decision in terms of how
much the organization would lose if the decision were incorrect, and (3) inability to
assign probabilities with any degree of confidence with regard to how environmental
factors are going to affect the success or
failure of the decision unit in performing its
function.
The first two components focus on the
general lack of information that is involved
in decision making. This is similar to Lawrence and Lorsch's (1967) broad formulation. The third component in the present
study is similar to narrower mathematical
definitions in its focus on assigned probabilities, but it does differ in a fundamental
way. Decision theorists (Knight, 1921; Luce
and Raiffa, 1957) have normally defined uncertainty as a situation where the individual
cannot assign probabilities to the outcome of
events. The third component of uncertainty
defined above seems to indicate that this
definition is too restricted. The individuals
in this preliminary research indicate that
they could assign probabilities to the outcome of events but that in uncertain situations the question becomes one of how sure
or confident the respondent is in his probability assessment. Thus, in uncertain situations the individual can still assign probabilities to the outcome of events, for instance,
TTxrrp^TiTATiVTY lV/fFAtiTTBTr
^ UNCERTAINTY MEASURE
Dimensions 1 and 2 of perceived environmental uncertainty are measured by scale
items similar to those in the Likert system
(Duncan, 1971a). The first dimensionlack
of information regarding the environmental
factors associated with a given decision-making situationcontains six scale items of
which the following is an example: how often
do you believe that the information you have
about this factor is adequate for decision
making?
The second dimensionnot knowing the
outcome of a specified decision in terms of
how much the organization would lose if
the decision were incorrectis composed of
six scale items. An example is: how often do
you feel you are unable to predict how this
factor is going to react to or be affected b)
decisions made in this group?
The response categories varied along a
five-point scale of: (1) never, (2) seldom,
(3) occasionally, (4) fairly often and (5) always. The factors taken into consideration
in decision making were identified by an
interview prior to administering the questionnaire. The environmental components in
Table 1 were used as a guide in this interview. In the interview decision unit members
might indicate that they took Factor A (exproduction department), Factor B (exmarketing department). Factor C (excustomer
demand) into consideration in decision
making. Each decision unit member was
then asked to answer each question in the
scales for the first two dimensions of perceived environmental uncertainty for each
319
I the factors taken into consideration in de- the individual's degree of ability to assign
cn making. Individuals then received an probabilities as to the effect of a given factor
ivei age score on each of the questions on on the success or failure of the unit in perie scales for the first and second dimensions forming its function. For each factor he indiV means of the following formula:
cates that he takes into consideration in deci-
HYPOTHESES
Both the simple-complex and static-dynamic dimensions are important in deter-
320
Simple
Gomplex
Gelll:
low perceived uncertainty
Gell2:
moderately low perceived uncertainty
Static
Dynamic
these two dimensions for the combined in- uncertaint\' is predicted to be high. Botli
ternal and external environment. Thus, Table Thompson (1967), in his theoretical analysis
2 is a simplified presentation in that there is of organizational adaptation, and Ud\
no distinction being made between the in- (1959), in his comparative research, indicated that environmental uncertainty internal and external environment.^
From this simplified typolog)' the following creased when organizational environments
were changing and heterogeneous. Here, it
hypotheses can be derived.
Hypothesis one. Decision units with is predicted that decision unit members will
simple-static environments (Cell 1) will ex- not have the relevant information available
perience the least perceived environmental for the factors associated with a decision, so
uncertainty. In environments that are char- the outcome of the decision cannot be asacterized by simple-static dimensions where sessed.
Hypothesis three. Decision units with
there is a smaller number of relatively similar,
unchanging factors considered in decision simple-dynamic environments (Cell 3) ^^ill
making, little uncertainty is expected to exist. experience greater perceived environmental
Here, decision unit members are predicted uncertainty than individuals in decision units
to be able to have the relevant information with complex-static environments (Cell 2)
regarding the factors associated with a deci- Decision units having simple-dynamic environments (Cell 3) are predicted to have a
more difficult time obtaining the relevant
o The sample size of this research did not allow for
this more differentiated analysis (Duncan 1971a). information for decision making than units
Since the unit of analysis is the organizational decision unit, responses obtained from
decision unit members on all the items on
a variable are pooled to reflect the degree of
the given variable experienced bv the unit
as a whole. This is accomplished in three
steps. First, a mean score on each of the
items of a variable is computed for each
type of social role in the decision unit.
Second, the decision unit's score for a given
321
1 + 3 + 5 = 3 = median
322
323
Simple
Complex
Celll:
Cell 2:
research and
development
organizations
manufacturing
organizations
#
#
#
#
#
#
Static
manufacturing
organizations
1
2
3
4
5
7
research and
development
organizations
#20
#22
#23
#6
#10
N= 7
Cell 4:
Cell 3:
manufacturing
organizations
research and
development
organizations
# 9
#13
#11
#14
Dynamic
N= 4
manufacturing
organizations
research and
development
organizations
#12
#15
#16
#17
#18
#19
#21
N= 7
N= 4
Number of
observations
Research and
development
organizations
Manufacturing
organizations
Research and
development
organizations
Manufacturing
organizations
* p < 0.001
t p < 0.01
Means
12
600.25
10
296.00
Standard
de\iation
Student's
T-test
Simple-complex variable
117.738
4.388*
Degree of
freedom
Bartlett's
test results
20
20
203.277
12
Static-dynamic variable
6.774
1.092
3.453f
10
5.014
1.301
324
Number of
observations
Research and
development
organizations
Manufacturing
organizations
Standard
deviations
Means
12
43.967
12.345
10
29.610
7.354
Student's
T-test
3.224*
Degree of
freedom
Bartlett's
test results
20
* p < 0.01
co2 = 0.299
TABLE 6. ANALYSIS OF VARIANCE
ENVIRONMENTAL TYPE AND
PERCEIVED UNCERTAINTY
Source
Mean
square
Degree of
freedom
F-test
Between
Within
829.896
44.316
18.727*
18
C02
0.001
0.707
Source of
variance
Sum of
squares
Degree of
freedom
Mean
square
F ratio
A = simple-complex
B = static-dynamic
AXB
Total between cells
Total within cells
462.656
1,341.926
75.775
1,880.357
797.693
1
1
1
3.00
18.00
462.656
1,341.926
75.775
10.438*
30.504*
1.710
* p < 0.01
Rank order of cell means predicted
low to high uncertainty:
Cell I: static-simple
Cell II: static-complex
Cell III: dynamic-simple
Cell IV: dynamic-complex
44.316
Static
Dynamic
IV 51.729
Gells
compared
Difference
bet^veen cells
I & IV
I & III
I & II
II & IV
II & III
III & IV
25.769
12.377
5.675
10.094
6.702
13.392
Gritical
difference
for t, 18
degrees of
freedom
p < 0.01
p < 0.01
NS
p < 0.01
NS
p < 0.01
325
326
327