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Introduction to Organizational Behavior

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Chapter 18 : Decision Making

The Nature of Decision Making

Decision Rationality

Types of Decisions

Programmed Decisions
Non-programmed Decisions

Models of Behavioral Decision Making

Economic Rationality Model
Simon's Bounded Rationality Model
The Judgmental Heuristics and Biases Model
The Social Model

Behaviorally Oriented Decision-Making Techniques

Traditional Participative Techniques
Modern Participative Techniques

Creativity and Decision Making

Group Decision Making

Group Polarization
Groupthink and Group Problem Solving

Chapter Summary

Decision making is an integral function of management. Decision making involves selecting or choosing a particular course of action from among the various alternatives available in the decision making situation. The process of decision making, as described by Herbert A.Simon, involves 3 phases, namely intelligence activity phase, design activity phase and choice activity phase. The intelligence activity phase relates to identification of the problem. The design activity phase includes developing and analyzing various courses of action and the choice activity phase involves choosing the best course of action.

Rationality in decision making refers to the appropriateness of the chosen means towards accomplishment of the end objectives. Decisions made by managers may be programmed or non-programmed in nature depending upon the frequency of occurrence of the decision making situation. A programmed decision is the decision that is made when the decision maker has adequate information pertaining to the decision making situation. These decisions are routinely made decisions. Non-programmed decisions, on the other hand, are the decisions made in situations which occur rarely or are unfamiliar. In this case, the process of decision making involves identification and evaluation of alternatives without the aid of a decision rule.

The role and importance of human behavior is emphasized by the behavioral model of decision making. Four variations of behavioral models are discussed in the chapter. The economic rationality model assumes that the decision maker is perfectly rational while deciding over a particular course of action and follows a logical and systematic sequence of actions. Simon's bounded rationality model proposes that decision makers operate with a 'bounded' rationality. Bounded rationality is said to occur when decision makers get satisfied with a 'less-than-ideal' solution to a particular problem. The judgmental heuristics and biases model takes the bounded rationality model a step ahead by clearly identifying the cognitive biases of the decision maker that influence his decisions. This model identifies three biases - the availability, representative and the anchoring and adjustment heuristics.

Finally the social model, in contrast to the economic rationality model, states that human feelings and emotions, by and large, affect the decisions made by the decision maker.
Behaviorally oriented decision making techniques emphasize the importance of employee participation in the process of decision making. Increased employee participation leads not only to better understanding of the decision making situation but also helps identify a wider range of alternatives for the problem on hand. Besides, increased employee participation in decision making results in increasing employee productivity and job satisfaction, apart from reducing employee turnover.

The Scanlon Plan is one of the most important traditional participative techniques of decision making. It involves creation of formal committees to encourage labor participation in the decision making process. Introduction of suggestion boxes is another technique of problem solving. On the other hand, quality circles and self-managed teams are examples of modern participative techniques of decision making.

Organizations, of late, have realized the importance of creativity in the process of decision making. Individuals or organizations are said to be creative when they not only identify the problem accurately but also possess the ability of generating innovative alternatives to the given problem solving situation. Two major dimensions of creativity are divergent thinking and cognitive complexity. Divergent thinking refers to 'out-of-box' or innovative thinking. Cognitive complexity describes the extent to which an individual uses elaborate, intricate and complex stimuli towards solving philosophical or abstract problems. These two dimensions affect the degree of creativity among different individuals.

Decision making in a group involves two phenomena - group polarization and groupthink. Group polarization refers to the shift of employee attitude towards a more extreme and reinforced state after a discussion within the group, than was the state before the discussion. Groupthink, on the other hand, happens when the group decides upon a course of action which is accepted by a majority of its members, even before actually discovering all the alternative solutions to the problem.

The most common forms of group problem solving are brainstorming, nominal group technique and the Delphi technique. Brainstorming aims at generating all possible alternatives to a given problem without actually attempting to evaluate or assess these alternatives. The nominal group technique involves employee participation in problem solving, without the need for any verbal or physical interaction among the members. The nominal group technique nullifies the dysfunctional effects of group decision making.

The Delphi technique is similar to the nominal group technique with a difference that in Delphi technique, the participants do not actually meet at a common place. Instead, these members are informed about the problem through mails and are requested to post their opinions about the problem on hand. Depending upon the decision making situation, managers employ any of the problem solving techniques.

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