Business

Ethics
Decision Making

J. Oloba Z.
+256-785552288
Slide Outline
 Decision making
 Steps
 Models
 Managers & risk
Decision Making

?
 Decision Making
– The process by which managers
respond to opportunities and threats
that confront them by analyzing options
and making determinations about
specific organizational
goals and courses of
action.

7-4
 Decision Making
 Making decisions under conditions
of risk and uncertainty is one of the
most important activities that
managers engage in.
 Generally, there is a lack of
information and a limited amount of
time available to make the decision.
 Procrastinating and not making a
decision sometimes has greater risk
than making it.
5
Rational or ?

6
Creative Problem Solving Assessment
Decision-Making Skills
• Task skills
– Problem recognition and framing,
inference drawing, idea generation,
argument
• Relational skills
– Leadership, climate building,
conflict management
• Procedural skills
– Planning, process enactment
Typical Approaches to Decision Making

• Stay with the status quo

• Change as little as possible
• Delay and avoid making the
decision
• Choose the first likely solution

• Encourage considered and

thoughtful decision making
where all of the alternatives are
given a fair and thorough hearing
Effective Decisions
• Resources utilized effectively
• Time well used
• High quality decision (if possible
to know)
• Implemented by all group
members
• Problem solving ability of group
enhanced (or not lessened).
The Decision-Making Process

Programmed Decision –
• a simple, routine matter for
which a manager has an
established decision rule
Nonprogrammed Decision –
• a new, complex decision that
requires a creative solution
 Select the best
course of action

The
Decision-
Implement
the decision
Making
Process Gather
feedback

Follow up
 Recognize the problem and
the need for a decision

The
Decision-
Identify the objective of
the decision
Making
Process Gather and evaluate data
and diagnose the situation

List and evaluate

alternatives
 Models of Decision-Making

Effective decision

a timely decision
that meets a desired Rational Model
objective and is
acceptable to those Bounded Rationality
individuals affected Model
by it
Garbage Can Model
 Rationality - a logical,
step-by-step approach to
decision making, with a
Rational Model thorough analysis of
alternatives and their
consequences
1. The outcome will be completely rational
2. The decision maker uses a consistent system
of preferences to choose the best alternative
3. The decision maker is aware of all alternatives
4. The decision maker can calculate the
probability of success for each alternative
 Bounded Rationality - a
theory that suggests that
there are limits upon how
rational a decision maker
Bounded Rationality
can actually be
Model

1. Managers suggest the first satisfactory

alternative
2. Managers recognize that their conception of the
world is simple
3. Managers are comfortable making decisions
without determining all the alternatives
4. Managers make decisions by rules of thumb or
heuristics
 Garbage Can Model
Solutions

Garbage Can Model - Problems Choice

opportunities

a theory that contends Participants

that decisions in
organizations are
random and unsystematic

From M.D. Cohen, J.G. March, and J.P. Olsen in Administrative Science Quarterly 17 (March
1972) 1.25.
Reprinted by permission of the Administrative Science Quarterly
 The Quality, Timeliness, Acceptance, and
Ethical Appropriateness of a Decision
Influence its Effectiveness

Ethical
Quality + Timeliness + Acceptance +
Appropriateness
 A Manager’s Decision-Making Styles Will
Influence the Way She Attacks Problems
Right-brain thinkers tend
Left-brain thinkers tend to value to value
technical/task issues people/social issues

ANALYTIC CONCEPTUAL
High Cognitive A problem solver who analyzes A socially oriented person
Complexity alternatives and innovates who sees the big picture

DIRECTIVE BEHAVIORAL
Low Cognitive A rapid decision maker who A person who needs
Complexity expects results and relies on rules affiliation and wants to help
others
Managers Take Six Steps in Making an Effective
Decision Using the Rational Decision-Making
Process
ANALYZE THE SITUATION
•What are the key elements in the situation?
•What constraints affect the decision?
•What resources are available?

SET OBJECTIVES
•Is the problem stated clearly?
•Do people understand what they will work on?
•By what criteria will decision making be
judged?

SEARCH FOR ALTERNATIVES

•Do people involved in the problem make the
decision?
•Have they sought complete information?
•Do those with information make the decision?
•Do they use diversity to generate ideas?
•Are all ideas encouraged?
Managers Take Six Steps in Making an Effective
Decision Using the Rational Decision-Making
Process
EVALUATE THE ALTERNATIVES
•Do participants know that they are evaluating?
•Are criteria for assessment clear and understood?
•Are differences of opinion included in evaluation?
•Are some alternatives pilot tested?

MAKE THE DECISION

•Do employees know that they are making the decision?
•Are they aware if they are satisficing or optimizing?
•Do action plans fit with the decision?
•Are they committed to the decision?

EVALUATE THE DECISION

•Are responsibilities for data collection, analysis, and reporting
clear?
•Is there a comprehensive evaluation plan?
•Is there an evaluation schedule?
 Managers Can Ask These Questions
When Evaluating Objectives
Criteria Questions to Ask
Relevance Do the objectives relate to and support the basic purpose of
the organization?

Practicality Do the objectives recognize obvious constraints?

Challenge Do the objectives provide a challenge for managers at all

levels in the organization?

Measurability Can managers quantify the objectives?

Schedulability Can managers monitor the objectives at interim points to

ensure progress?

Balance Do the objectives provide a proper balance on all activities,

given organizational goals?
 Managers Can Ask These Questions
When Evaluating Objectives
Criteria Questions to Ask
Flexibility Are the objectives sufficiently flexible or is the organization
likely to find itself locked into a particular course of action?

Timeliness Given the organization’s environment , is this the proper time

to adopt these objectives?

Technology Do the objectives fall within the boundaries of current

technological development?

Growth Do the objectives help the organization grow, not just

survive?

Cost Do the objectives’ expected costs clearly outweigh their

effectiveness benefit?

Accountability Can managers assess the performance of those responsible

for attaining the objectives?
 Problems Randomly Attach to Solutions
in the “Garbage Can”
Solutions Problems

Problem A
+
Solution X

Problem C

Solution Y
Gathering Ideas
•Brainstorming

•The Nominal Group Technique

•The Affinity Diagram

•The Delphi Method

•Electronic Meetings
Brainstorming

•Topic
•Take turns sharing ideas
•Record each idea
•No comments/criticisms
•Keep the tempo moving
•One idea per turn
•Members may pass
•Keep going until ideas are
exhausted
 Mangers Should Follow This Advice
for Successful Brainstorming

•List all ideas.

•Do not Evaluate any ideas during the initial

stages.

•Encourage creativity.

•Offer ideas related to those already listed.

•Ask each participant to offer a specific number

(e.g. five to ten) of new ideas.

•Set a time for brainstorming.

 Managers Use an Affinity Diagram to Organize
Brainstorming in a Group of Employees

THEME
Why has the number of The employees
defects increased 10 times lack the right
in the past year? training

Equipment has not Quality control

been repaired in a procedures are
timely fashion inadequate

Materials received
from suppliers have
been defective
The product
design is Top management needs
faulty to reexamine workers’
training needs and find
ways to give them the
right training for their jobs.
The Nominal Group Technique
(Delbecq, Van de Ven and Gustafson, 1975)

A generic name for face-to-face group techniques in which

instructions are given to group members not to interact with each
other except at specific steps in the process.

•Silent idea generations,

•Round-robin sharing of ideas,
•Feedback to the group,
•Explanatory group discussion,
•Individual re-assessment, and
•Mathematical aggregation of revised
judgments.
7 Methods of Group Decision Making

• Decision by authority without group

discussion
• Decision by expert
• Averaging individual’s opinions
• Decision by authority with group
discussion Decision by minority
• Decision by majority
• Consensus
Affinity Diagram
Definition: A group decision-making technique designed to sort a
large number of ideas, process variables, concepts, and opinions
into naturally related groups. These groups are connected by a
simple concept.

Purpose: To sort a list of ideas into groups.

Guidelines:

Insure ideas are described with phrases or sentences.

Minimize the discussion while sorting --
discuss while developing the header
cards.
Aim for 5-10 groups.
If one group is much larger than others, consider splitting it.
How to Conduct an Affinity Sort:

• Clarify the list of ideas. Record them on small

cards.
• Randomly lay out cards on table, flipchart, wall,
etc.
• Sort the cards into "similar" groups in silence --
based on your gut reaction. If you don't like the
placement of a particular card -- move it.
Continue until consensus is reached.
• Create header cards consisting of a concise 3-5
word phrase description, the unifying concept
for the group. Place header card at top of
group.
• Discuss the groupings and try to understand
Tips
•Inquire if ideas are clarified.
•Use 3-5 words in the phrase on the header card to
describe the group.
•If possible, have groupings reviewed by non-team
personnel.
•To sort, physically get up and gather around the
area the cards are placed.
•Team members will ultimately reach agreement on
placement -- if for no other reason that exhaustion.
•Sorting begins when all team members are ready.
•If an idea fits in more that one category or group,
after discussion, make a second card and place in
both groups.
 Delphi Technique
•Problem stated
•Questionnaires
•Anonymous & Independent
•Compile results
•Distribute copies of results
•New round begins
•Does not require physical
presence
•Time consuming
Electronic Meetings
•Horseshoe-shaped table
•Up to 50 participants
•Issues are presented
•Responses typed
•Projection screen display
•Anonymity, honesty, & speed
•55% faster than traditional
•Lakcs credit
•Fastest typist gets there first
•No face-to-face interchange
Risk and the Manager
Risk aversion - the tendency to
choose options that entail fewer
risks and less uncertainty
Risk takers
– accept greater potential for loss
– tolerate greater uncertainty
– more likely to make risky decisions

Evidence: Successful Managers Take Risks

 Escalation of The tendency to
Commitment continue to
commit resources to a
losing
course of action
• Why it occurs
– humans dislike inconsistency
– optimism
– control
• How to deal with it
– split responsibility for decisions
– provide individuals with a graceful exit
– have groups make the initial decision
 Cognitive Style
Cognitive Style - an individual’s
preference for gathering information
and evaluating alternatives

Jungian theory offers a way of understanding and

appreciating differences among individuals.
 Jung’s Cognitive Style

Style Ideal Organization

ST Sensing/thinking Facts/ Impersonal Control

SF Sensing/feeling Facts & Org. relationships

NT Intuiting/thinking Broad issues/ Impersonal & ideal

NF Intuiting/feeling Serve humankind/General values

 Z Problem-Solving Model

Look at What alternatives

Sensing Intuition
the facts do the facts
and details suggest?

Can it be What impact

analyzed Thinking Feeling will it have on
objectively? those involved?

Figure from Type Talk at Work by Otto Kroeger and Janet M. Thuesen. Copyright © 1992 by Otto
and Janet M. Thuesen. Used by permission of Dell Publishing, a division of Random House. Inc.
 Influences on Decision-Making

Creativity - a
Intuition - fast, process influenced
positive force in by individual and
decision making organizational
utilized at a level factors that results
below in the production of
consciousness, novel and useful
involves learned ideas, products, or
patterns of both
information
 Four Stages of Creative Process

• Preparation - experience/
opportunity to build knowledge base
• Incubation - reflective, often
unconscious thought
• Illumination - insight into problem
• Verification - thinking, sharing,
testing the decision
 Influences on Creativity

• Individual examples • Organizational ex.

– Cognitive Processes – Flexible
• Divergent Thinking organization
• Associational structure
Abilities – Participative
– Personality Factors decision-making
• breadth of interests – Quality, supportive
• high energy relationships with
• self confidence supervisors
 Organizations Can Facilitate
Creative Decision-Making

• Reward creativity
• Allow employees to fail
• Make work more fun
• Provide creativity training
• Vary work groups (internal/external)
• Encourage creative stimuli (music, art, etc.)
 Participative Individuals who are affected
by decisions influence the

Decision Making making of those decisions

• Organizational Foundations
– Participative, supportive organizational culture
– Team-oriented work design
• Individual Prerequisites
– Capability to become psychologically involved
in participative activities
– Motivation to act autonomously
– Capacity to see the relevance of participation
for one’s own well-being
 Group Polarization

Group Polarization- tendency to shift toward more

extreme positions after group discussion

Risky Neutral Cautious

Two Brains, Two Cognitive Styles

Left Hemisphere Right Hemisphere

Verbal Nonverbal, visuospatial

Sequential, temporal, digital Simultaneous, spatial,
Logical, analytic analogical
Rational Gestalt, synthetic
Western thought Intuitive
Eastern thought

Ideal = “brain-lateralized” making use of

either or both sides, depending on situation

From Left Brain, Right Brain by Springer and Deutsch © 1989, 1985, 1981 by Sally Springer and Georg De
Used with permission by W.H. Freeman and Company
 Group Decision-Making
• Role of synergy - a positive force in
groups that occurs when group members
stimulate new solutions to problems
through the process of mutual influence
and encouragement in the group
• Role of social decision schemes - simple
rules used to determine
final group decisions Majority Wins

(prediction 80% correct) Truth Wins

Two-thirds Majority Wins

First-shift rule
 Group Decision-Making
Advantages 1) pressure in
groups to conform
1) more knowledge 2) domination by
through pooling of one forceful member
group resources or dominant clique
2) increased 3) amount of time
acceptance & required, because
commitment due group is slower
to voice in decisions than individual
3) greater under- to make a
standing due to decision
involvement in
decision stages

Disadvantages
 Group Phenomenon

Groupthink - a deterioration of
mental efficiency, reality testing,
and moral judgment resulting from
in-group pressures
Group polarization - the tendency for
group discussion to produce shifts
toward more extreme attitudes
among members
 Brainstorming
Nominal Group Technique
Self-Managed Teams

Group
Decision
Delphi Technique
Techniques

Quality Circles & Quality Teams

Devil’s Advocacy
Dialectical Inquiry
Technological Aids to Decision-Making

• Expert Systems - a programmed decision

tool set up using decision rules

• Decision Support Systems - computer

and communication systems that process
incoming data and synthesize pertinent
information for managers to use

• Group Decision Support Systems -

systems that use computer software and
communication facilities to support
group decision-making processes
 Ethics Check

• Is it legal?
– Does it violate law
– Does it violate
company policy
• Is it balanced?
– Is it fair to all
– Does it promote win-win
• How will it make me feel about myself
Enjoy Easy Life!