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8 Decision Making LEARNING OUTCOMES After reading this chapter, you should be able to: 1. Demonstrate an understanding of the dynamics of the decision process 2. Apply models of decision making 3. Understand the dynamics of involving different parties in decision making 4. Apply techniques that can aid in decision making 5. Analyze information and data to arrive at alternative solutions 6. Evaluate the alternative solutions 7. Make informed decisions Breaking All the Rules: Steve Jobs The outstanding design and amazing success of Apple are no chance occurrence. Careful and almost maniacal attention to detail, razor focus on specific goals, and a top-down, quasi-tyrannical decisionmaking style from founder Steve Jobs were all part of the formula as were his vision, innovative genius, and charisma.1 In his now famous 2005 Stanford Commencement speech, Jobs encouraged graduates to take action and risks: \"Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. ... Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.\"2 During his career, Jobs made plenty of mistakes, many of them very public, but he also practiced the fundamentals of good decision making: clear goals, quality, focus, learning from mistakes, and passion for what you do. When in 2008, Apple's MobileMe was not meeting with success, Jobs berated the employees: \"You've tarnished Apple's reputation, you should hate each other for having let each other down.\"3 Jobs's focus and his vision are on the mind of every employee and every manager at all times. Because Jobs was aware of his crucial role in the company's success, he prepared Apple for his passing by institutionalizing the attention to detail, the secrecy, the constant feedback, and the sense of responsibility that he believed ensured success.4 While most businesses use the bottom line and profit and loss as criteria for decision making, Jobs considered them distractions. Instead, everyone at the top focuses on ideas and moves as a unified team, focusing on a few things, and moving to make changes sometimes days before a product is launched. Jobs's top-down and highly directive approach further relied on extensive feedback about everything. This constant feedback is used to continually and quickly correct course. A secret group of about 100 Apple people, from all ranks, was the sounding board for Jobs. Describing the members he said: \"That doesn't mean they're all vice presidents. Some of them are just key individual contributors. So when a good idea comes ... part of my job is to move it around [and] ... get ideas moving among that group of 100 people.\"5 Whenever you see a successful business, someone once made a courageous decision. Peter Drucker Stay committed to your decisions, but stay flexible in your approach. Tony Robbins Managers don't solve simple, isolated problems; they manage messes. Russell L. Ackoff Managers face numerous responsibilities and choices. Some of their decisions have limited impact, primarily within their organizations. But other decisions may affect the lives of thousands of people (or more), and they are decisions that just seem to cascade on one another. Imagine the situation faced by transportation officials in the Northeast Corridor when they discovered that a major section of Interstate 95 (I-95) between Philadelphia, Pennsylvania, and Wilmington, Delaware, had been undermined and that repairs would require completely shutting down a 10-mile section of the highway for several months. The decision to do so was itself a major move, affecting not only the incredibly high volume of traffic between New York and Washington, D.C., but also those who commute from Wilmington to Philadelphia to work every day. And, think of the decisions that flow from that. How do they reroute traffic? In so doing, what impact will the action have on businesses and residential neighborhoods adjacent to the detour? How can they minimize the difficulty? Can anyone encourage alternative modes of transportation, perhaps working with Amtrak to add additional commuter trains? What do they do with the cars that people would now want to park at the train station? And think of the issue from the standpoint of businesses affected by the closure. How can they make sure their employees will be able to get to work? How can they solve the inevitable transportation and logistics problems? Of course, not all decisions are, or should be, treated alike. Some require quick action, whereas others allow more time to decide. Imagine the difference in the I-95 example if, instead of being able to plan for several months for the shutdown, transportation officials were awakened in the middle of the night to learn that the highway was closed by a sudden gas explosion and needed to be shut down immediately and for the next several months. Of course, as we saw earlier, adding time pressures to already difficult situations makes them even more difficult. And as we know, in an increasingly complex world with high-speed information systems, decision makers must respond to events of enormous complexity within minutes or even seconds. Whatever the size and shape of the required decision, it is naive to think that time is always available to undertake a rational and calculated process. By the same token, it also is a mistake to think of decision making as simply a random process.6 Making Better Decisions Defining Decision Making Let's begin by defining organizational decision making as taking place when a person in authority identifies an important issue and carries out a process to make a choice that produces outcomes with consequences.7 Earlier research found the process to unfold in a sequence of actions that includes intelligence gathering, direction setting, the generation of alternatives, selection of a solution, and solution implementation.8 Organizational decision making: when a person in authority identifies an important issue and carries out a process to make a choice that produces outcomes with consequences SELF-ASSESSMENT 8.1 A DECISION DIAGNOSTIC Consider the last three meaningful decisions you have been involved in making and ask yourself the following questions: Did a decision need to be made? Were the decisions made the right choices? Were they made on a timely basis? Were the right people involved in the decision-making process? Was it clear to you: (1) who would make the recommendation, (2) who would be asked to provide input, (3) who had the final say, and (4) who would be responsible for implementation? Were the roles, process, and timeline adhered to by all parties involved? Were the decisions based on appropriate facts? When there was controversy, was it clear who had the final say? Were the right people brought in, and if not, who was left out and why? Did the organization's culture and incentives encourage those involved to make the right decision? Explain. Source: Adapted from Rogers, P., & Blenko, M. (2006). Who has the D? How clear decision roles enhance organizational performance. Harvard Business Review, 84(1), 52-61. There are several ways of thinking about the different types of decisions that leaders and managers must make. Some researchers have divided decisions into two types: (1) programmed decisions (which are repetitive and routine and for which a procedure or decision rule has been established or may be easily specified; for example, pricing policy or delegation of authority procedures) and (2) nonprogrammed decisions (which occur infrequently and are poorly structured). For nonprogrammed decisions, there is no apparent decision rule, and managers are required to engage in difficult problem solving.9 Decisions: choices made from two or more alternatives Programmed decisions: decisions that are repetitive and routine and for which a procedure or decision rule has been established or may be easily specified Nonprogrammed decisions: decisions for which there is no apparent decision rule, and managers are required to engage in difficult problem solving Risk may be viewed as an inescapable part of every decision.10 For most of the decisions that people make, the risks are small. But on a larger scale, the positive and negative implications can be enormous. At a minimum, decisions entail opportunity costs for paths not taken. Levels of Decision Making Interestingly, decisions differ at different levels of the organization, leading to another way of characterizing decisions. Decisions that take place at the top of the organization typically are labeled strategic or high-risk decisions. These may involve gathering intelligence, setting directions, uncovering alternatives, assessing these alternatives to choose a plan of action, or implementing the plan.11 For example, a strategic decision may be needed as the company ponders entering a new market. High levels of uncertainty and even the possibility of conflict often characterize these decisions, and external events often shape choices (see Figure 8.1). High-risk decisions: decisions that take place at the top of the organization and are often strategic On the other hand, low-risk decisions involve less uncertainty and occasionally permit a degree of delegation. For example, imagine that a change in an organization's benefits package seems advantageous. Such a change might come about by asking the human resources department to research available benefits and provide a recommendation to be approved by top management. Or there might even be more delegation. The human resources department might gather information from representatives of various stakeholder groups (including employees) invited to serve on a \"benefits committee.\" The final recommendation might even be left to the consensus reached by the committee. Figure 8.1 shows the types of decisions that we might expect to be made at different levels of the organization. From this figure, we may conclude that the more uncertain the conditions surrounding the required decision, the higher up in the organization the decision making is likely to take place. Or, to put it differently, nonprogrammed decisions are more likely to be found at the higher levels of the organization, and programmed decisions are more likely to be found at the lower levels. Low-risk decisions: decisions that involve little uncertainty FIGURE 8.1 DECISIONS AT VARIOUS ORGANIZATIONAL LEVELS Source: Based on Barney, J. B., & Griffin, R. W. (1992). The Management of Organizations. Boston: Houghton Mifflin. Decision Making and Problem Solving Decision making is a mechanism for making choices at each step of the problem-solving process. Problem solving is a set of activities designed to analyze a situation systematically and generate, implement, and evaluate solutions. Decision making is part of problem solving, and decision making occurs at every step of the problem-solving process. Problem: a discrepancy between what is actually occurring and the ideal or desired Effective decision makers know that very few problems or events are unique. Most are manifestations of underlying problems. Therefore, before attempting a quick fix on Problems A, B, C, and D, they will try to find the basic problem, E. Once E is solved, A, B, C, D, and any future problems stemming from E are eliminated. Thus, effective decision makers make few decisions. Indeed, managers often make more decisions than they need to make. Because the underlying causes of problems are not always obvious, problems are treated as unique. This results in managers treating symptoms rather than identifying and treating the root causes.12 It is important to remember that all problems require decisions, but not all decisions will require problem solving. \"If I were given one hour to save the planet, I would spend 59 minutes defining the problem and one minute resolving it,\" Albert Einstein said. Those were wise words, but from observation, most organizations don't heed them when tackling innovation projects. Indeed, when developing new products, processes, or even businesses, most companies aren't sufficiently rigorous in defining the problems they're attempting to solve and articulating why those issues are important. Business executive Chester Barnard is credited with importing the term decision making into the business world. Barnard's introduction of decision making changed how managers thought about what they did and spurred \"a new crispness of action and a desire for conclusiveness.\"13 Bottlenecks in Decision Making However, even organizations known for their decisiveness may experience ambiguity over who is accountable for the decision and as a result, the decision-making process can stall. Figure 8.2 presents the typical bottleneck in organizational decision making.14 Decision Making Takes a Toll FIGURE 8.2 BOTTLENECKS IN ORGANIZATIONAL DECISION MAKING For the manager, the central, functional, and internal bottlenecks are particularly relevant. In the case of the central versus business unit, think of where a policy decision lies: Should the decision to leave a package be made at headquarters, or by the sales people who know the customers? For the functional versus cross-function, consider who is responsible for identifying health care needs for the elderly: Are the needs the responsibility of the heart surgeon alone, or are there partners that should be brought to the decision making to provide for the comprehensive health and well-being of the patient? And finally, networks, collaborations, and contracting exemplify the accountability issues for decision making. For example, internal versus external accountability is questioned when garbage is not picked up in a neighborhood: Who will the residents call to report the problemthe city or the private company that has been contracted for pickup? BP came under heavy criticism for its decisions leading up to the Deepwater Horizon oil spill of 2010 that killed eleven people aboard the rig. Among other things, BP was criticized for selecting a well design that was less costly but prone to more risks. We might also consider the concept of \"decision debacles,\" decisions that go so wrong that they are reported by the media. In fact, one scholar found that half of all decisions fail.15 Executives facing new situations often employ the same strategies and tactics that proved successful in the past without questioning whether those strategies are appropriate for the new circumstances. This has been called the \"experience blind spot.\" While this danger can be particularly perilous for executives who move into a new role or company, this blind spot can also affect tenured executives who face unexpected crises, as experienced with Tony Hayward following the BP (British Petroleum) oil spill.16 Why Decisions Fail Not all failed decisions lead to media attention, but three common elements are found in debacles and failed decisions: (1) faulty decision practices, (2) premature commitments, and (3) misallocation of resources (such as time and money spent on analyses to justify the wrong problem). We have also discovered that the context has less influence on the selection of decision-making practices than previously thought. In other words, best practices can be followed regardless of the decision to be made and the circumstances surrounding it. The prospects of success also improve when managers work to uncover hidden concerns, take steps to manage the social and political forces, identify results, encourage innovation, and estimate risk.17 Ethical Decision Making Cognitive biases in decision making and the incentive systems they create can negatively skew behavior. In order to make ethical decisions, one must understand what is influencing the behavior. The five factors that influence ethical decision making18 are presented in Table 8.1. The Critical Decision TABLE 8.1 FACTORS IN ETHICAL DECISION MAKING In order for us to act on our values, we need skills with which to approach our decisions. When faced with many activities and counter-pressures, the manager needs to be able to think through the problems at hand. This requires not only the use of decision tools, but also the use of what Newell referred to as moral imagination.19 Moral imagination requires that we ask the right questions to act ethically. Komen Cancel's Charity Generating Alternatives Think of a situation that you currently are experiencing at work, at home, or at school. Or just use the following example. You have been offered a data-entry job in a local bank. The job pays well; in fact, it might pay better than the marketing job you have been planning on for the past 3 years. You have been working hard to complete your degree so as to pursue a career in marketing. Going to work at the bank would mean at least postponing graduation. Why is a choice necessary? Needing to choose implies that a gap exists between what is happening and what you would like to see occur. What alternatives exist in the situation that you are experiencing? The variations to the decision gap might look something like this: Something is wrong and needs to be corrected. Something is threatening and needs to be prevented. Something is inviting and needs to be accepted. Something is missing and needs to be provided. Wise Decision Making Were you able to come up with an action that would close the gap? For example, were you able to justify taking or not taking the job? Through this process, we can say that the decision-making process begins with the perception of a gap and ends with the action that will close or narrow the gap.20 CREATIVITY AND CHANGE CIRQUE DU SOLEIL The Circus of the Sun, better known as Cirque du Soleil, has had a remarkable history of growth and impact since its founding. In its first year, 1984, 73 people worked for Cirque. Today, Cirque has about 5,000 employees worldwide, including more than 1,300 artists. At the Montreal Headquarters alone, there are close to 2,000 employees. More than 100 million people have attended a Cirque du Soleil show since that first year and about fifteen million will see a Cirque show this year. However, early in 2013, a grim-faced Cirque founder Guy Lalibert, and Daniel Lamarre, the company's president, announced to staff that they had found it necessary to eliminate 400 jobs in the company. This cut was on top of another fifty jobs that were lost the year before. The two principals told the group that the cuts were necessary because of dramatically rising production costs, the strong Canadian dollar, and the worldwide economic downturn. As a result, despite strong ticket sales, the company simply wasn't making any money. In its glory days, Cirque thrilled audiences with a new concept of the circus, one based on contemporary music, colorful acrobatics, bright and inventive costumes, and a narrative framework. Throughout this period, company spokespersons maintained that the creativity energy of the company led all other decisions, including those that might be considered more \"business\" functions. Consequently, the company seemed to ignore rising expenses and the cost of mounting as many as nineteen shows worldwide, even as four critical shows had to be terminated. Observers contended the company was \"over-extended.\" However, Cirque continued to pursue its creative mission of \"invoking the imagination, provoking the senses, and evoking the emotions of people around the world.\" Again, it appeared that artistic decisions were leading even if they involved major business risks. Along the way, then, the company lost track of its competitive position and was shocked to find it was in financial trouble. Today Cirque faces a difficult decision concerning the future of its operations. Does it return to its traditional strategy of permitting the creative side to lead the companyor does it admit that times are different and that it must pay more careful attention to financial matters, cost containment, and marketing? This is the kind of decision that can make or break a companyeven a circus. 1. The last paragraph states the decision that Cirque faces. What further information would you want before deciding? 2. Who should be part of that decision? 3. What would you decide? Source: Company report, 2010. Retrieved from http://www.cirquedusoleil.com/en/~/media/about/globalcitizenship/pdf/Review/Review2005.pdf; Nelson Wyatt, \"Cirque du Soleil Announces 400 Lyoffs,\" Toronto Star, January 16, 2013. Retrieved from http://www.thestar.com/entertainment/stage/2013/01/16/cirque_du_soleil_an nounces_400_layoffs.print.xlink.html Implementing Good Decisions An effective manager has to identify which problems are within the scope of managerial decision making and then make an effective and responsible decision. A good decision in terms of effectiveness is one that is high in quality, is timely, and is both understandable and acceptable to those whose support is needed for implementation.21 Time must be spent early in the decision-making process to uncover hidden or ethical concerns.22 Ethical dilemmas may go undetected while decisions are made and surface later. This can be avoided if the decision maker takes steps to allow the exploration of ethical questions about a decision to be voiced as the decision-making effort unfolds.23 The defining characteristic of a high-performing organization is its ability to make good decisions in a timely manner. Table 8.2 presents key principles for successful decision making. TABLE 8.2 PRINCIPLES OF SUCCESSFUL DECISION MAKING Source: Based on Rogers, P., & Blenko, M. (2006). Who has the D? How clear decision roles enhance organizational performance. Harvard Business Review, 84(1), 52-61. What Would You Do? Your employees seem incapable of making a decision and keep bringing even the most trivial decisions to you. You consider this a waste of your time. Why do you think they are unable to make decisions? What would you do? As a manager, you must be aware of two initial steps in the decisionmaking process. First, you must identify the problem and its elements. In the problem-identification phase, you might ask questions such as the following. Is the problem easy to deal with? Might the problem resolve itself? Is this your decision to make? Is this a solvable problem within the context of the organization? In this process, you probably will want to keep in mind some appropriate models of decision making. Second, you will need to manage the involvement of others in the decision-making process, taking into account trade-offs between quality and speed. If quality is most important and you seek a decision that is accurate, creative, and likely to be accepted by others, then you probably will want to engage various individuals and groups in the decision-making process. In this way, you can have more people contributing ideas, you can divide up complex tasks, you can conduct a more thorough search for alternatives, and you probably can generate more alternatives and stimulate greater interest. But if efficiency is paramount and defined in terms of how quickly the decision is made, then you probably will have to resort to making the decision on your own. In the following subsections, we examine three aspects of the decision process: (1) models of decision making, (2) who should be involved, and (3) what techniques are available. Models of Decision Making Graham Allison developed three models for decision making after analyzing the Cuban missile crisis. In 1971, Graham Allison published The Essence of Decision, in which he analyzed the Cuban missile crisis that President Kennedy faced during the early 1960s. Although Allison's specific example is quite dated, the categories he developed to understand the decision process in this case remain extremely helpful and can be applied to other situations. Essentially, Allison suggested that there are three perspectives that one might use to analyze a major decision: (1) the rational model, (2) the organizational process model, and (3) the governmental politics model which we will refer to as the collaborative model. (These sometimes are identified as Model I, Model II, and Model III, respectively.) Allison's basic argument was that, depending on which model or perspective you employ to understand the decision process, you see different things. As an illustration, Allison described someone watching a chess match. Initially, most observers would assume that the chess players move the pieces in a strategic fashion toward the goal of winning the match. This way of understanding the situationfocusing on the goal as well as strategies and tactics to reach that goalis consistent with the rational model. But someone else might look at the same match and conclude that the players were not single individuals and that, instead, the game was being carried out by a loose alliance of semi-independent \"organizations,\" each moving its pieces (e.g., rooks, bishops, pawns) according to some standard operating procedures. This view would be consistent with the assumptions of the organizational process model. Finally, still another observer might watch the chess match and assume that the game was the result of a number of distinct players, with separate objectives but with shared power over the individual pieces, operating through a process of collegial bargaining.24 This view would be consistent with what we refer to as the collaborative model. In any case, Allison described the three models as conceptual lenses that magnify, highlight, and reveal but that also distort or blur our vision. He called for greater awareness of our choices among the three approaches. Decision-Making Process In the following subsections, we organize our discussion around these three perspectives of decision making (the rational model, the organizational process model, and the collaborative model). In each case, we examine the basic premises of Allison's approach as well as some of the prior thinking that led to Allison's formulation. Then we note some more recent interpretations of decision making that at least loosely correspond to Allison's three models. The Rational Model We begin with a general and familiar description of how decision making takes place, whether in organizations or by individuals. Within the organizational context, decision making is the process by which \"courses of action are chosen (from among alternatives) in pursuit of organizational goals.\"25 From an individual perspective, decision making can be expressed as a course of action chosen from among alternatives in pursuit of personal goals. Basically, when we think of decision making, we tend to think of a process involving the following five phases26 (see also Figure 8.3): Decision Making in Organizations 1. Pre-analysis phase. Situations are defined. 2. Analytic phase. Situations that affect goals are perceived, and information about them is gathered. 3. Design phase. Options are crystallized to deal with the situation. 4. Choice phase. Alternatives are evaluated, and the optimal choice is selected. 5. Implementation phase. The alternative that is chosen to meet the specific situation is implemented. In the rational model, these phases for decision making are performed deliberately and consciously, relying on the rationality of the decision maker's thoughts and behaviors. Allison27 proposed the rational model as the classical and dominant orientation to decision making. This model assumes \"human purposeness both in individual behavior and in the broader scope issues\" such as those found in organizations. Moreover, it assumes that individuals and groups behave rationally in decision making and when they take other actions. And to behave rationally generally is understood to mean that people try to maximize the value they receive in any situation. That is, they make value-maximizing choices. Rational model: phases for decision making are performed deliberately and consciously, relying on the rationality of the decision maker's thoughts and behaviors FIGURE 8.3 BASIC RATIONAL MODEL There actually are several variations on the theme of rationality. The classic \"economic man\" argument suggests that people consider all available alternatives and then make choices that maximize the values they receive. For example, if you are buying a car, then you get complete information on all cars that meet certain minimum criteria and then make the choice that provides the best valuethe best combination of price, features, and quality that you desire. But Herbert Simon,28 in his classic Administrative Behavior, argued that real people cannot quite handle all of the information that is available and that they do not have the decision-making prowess required to fit the assumptions of economic man. Instead, Simon suggested that, as humans, we have cognitive limits. Because we cannot deal with all of the possible aspects of a problem or process all of the information that might be available, we do the next best thing; we choose to tackle meaningful subsets thereof and make decisions that might not maximize value but are at least satisfactory or we \"satisfice.\" In the example of buying a car, instead of searching out all of the information available and making a purely rational decision, you are more likely to look at different cars until you find one that meets your minimum criteria. Then you buy that car. However, note that you still are seeking a rational decision; you just are limited in your capacity to achieve such a decision in all cases. Allison also equated the \"rational man\" with the classical economic man. In either case, our goal is to make value-maximizing choices to the extent that we can. Also included in the rational model are the assumptions that decisions are orderly (not disorderly), intentional (not unintentional), purposeful (not random), deliberate (not chaotic), consistent (not inconsistent), responsible (not irresponsible), accountable (not unaccountable), explainable (not unexplainable), and rational (not irrational). It is important to note that in a competitive world sometimes irrational decisions put us in a competitive advantage in that the competitors cannot anticipate the decision, for example in the case of pricing discounts. The result is a decision model characterized by rational calculation of the costs and benefits of various alternatives. Strategic Models Regardless of whether the assumptions of the rational model actually are carried out in practice, the model is attractive as a way of thinking about problems. Indeed, because it is so useful for explaining and predicting behavior, it is the model most familiar to us. Allison and Zelikow29 illustrated the pervasiveness of the model by asking individuals to react to another nation's unexpected behavior. They specified three occasions: (1) the expansion into Eastern Europe by Hitler, (2) the transfer of missiles into Cuba by the Soviet Union, and (3) the invasion of Kuwait by Iraq. The overwhelming response of those questioned was to make sense of what happened, to develop reasons and motivations, to explore the intentions of various actors, and to assume a careful and deliberate calculation of the consequences of various outcomes. In other words, they tried to fit these aggressive and risky situations into the rational model and assumed that the government action was primarily the result of a single actor behaving under the assumptions of rational behavior. So, even when other models might be more appropriate for explanation and prediction, we tend to rely on the rational model to make sense out of decisions. A recent study of almost 400 nonroutine organizational decisions found that \"a rational, goal-directed approach was the most effective way to search\" for solutions to problems.30 Setting goals clears ambiguity and increases the decision makers' chance of success. Euro Disney provides a good example of how important it is to take culture into consideration in decision making. Nathan Steele Studies The modern rational choice model introduces the element of selfinterest, which seeks to explain the inconsistencies between the rational goal of the organization and the individual interests of the actor.31 The notion of self-interest acknowledges that rationality is just one of the many potential influences on the decision-making process. Examples of other decision debacles include the British Millennium Dome and Euro Disney. The Dome, which opened on January 1, 2000, was hyped as a futuristic, flashy, and high-tech project to usher in the new millennium. Within weeks of opening, the project became a national embarrassment with high admission fees and lower than forecast attendance. Politicians argued over who was to blame. The government put 785 million pounds into the project and 175 million more to keep it afloat. Now, bidders plan to bulldoze the building and use its picturesque location on the River Thames to build something else. Euro Disney is another example of decision failure resulting from the building of the Disney park in France without, among other things, taking culture into consideration. An American park in the United States made \"Americana\" accessible to Europeans; yet in Europe it was less appealing. Disney applied its old formulas, replete with historical and cultural assumptions. It limited its downside cost risk but did not consider how to adapt to European culture to ensure revenues would cover the cost. Warning signs were ignored, although expressed at the press conference. Estimates of park and hotel use were overoptimistic, which suppressed the true risk of the project.32 How do decision debacles happen? Are they preventable? Can the risks and the magnitude of the losses be foreseen? Can a debacle be headed off with a midcourse correction? What lessons might we learn from experiences? Critics of the rational model argue that values and feelings play an important role in decision making. Day traders, for example, rely on industry strategies but also make decisions based on emotionnot all decisions are rational. There is a growing wave of criticism of the rational model. One part of this criticism is the recognition that values and feelings also play an important role in decision making.33 In addition, habits, moral feelings, and values that have nothing to do with rationality may guide our behavior.34 One study examined the influence of emotions on the decision making of traders in four City of London investment banks, a setting where work has been predominantly characterized as dominated by rational analysis. The conclusion was that emotions and their regulation play a central role in traders' decision making.35 Finally, others criticized the rational approach for its disregard of a holistic picture of human nature, which for us would include culture.36 Assuming consistency, intentionality, purposefulness, and rationality on the part of individuals invariably leads to misunderstandings and possibly false assumptions. Relying on other models as alternative conceptual lenses avoids this trap and can offer different insights by highlighting different aspects of the decision process. Future of Decision Making The Organizational Process Model An alternative to the rational model sees the organization as composed of many loosely allied units, each with its own set of leaders. One individual leader rarely can control the behavior of so many different units. To accomplish the necessary complex tasks, the behavior of a large number of individuals must be coordinated.37 According to Allison and Zelikow, Model I (the rational model) \"examines the logic of consequences,\" whereas Model II (the organizational process model) \"explains the logic of the action.\"38 The latter model includes the possibility of multiple agents in the decision-making process. But under this model, decision makers are constrained by standard operating procedures that tend to make decision outcomes somewhat predictable. Organizational process model: relies on incrementalism for decision making We can think of an organization as the pattern of communication and relationships in a group that provides each member with information and assumptions, goals, and attitudes that enter into his or her decisions. These patterns mean that individual members develop standard ways of reacting to situations they confront. \"A sales manager reacts like a sales manager because he occupies a particular organizational position, receives particular kinds of communications, is responsible for particular sub-goals, and experiences particular kinds of pressure.\"39 More generally, an organization's influence on decision making is exercised by (1) dividing tasks among its members, (2) establishing standard practices, (3) transmitting objectives throughout the organization, (4) providing channels of communication that run in all directions, and (5) training and indoctrinating its members with the knowledge, skills, and values of the organization.40 The five characteristics of the organizational behavior model are presented in Table 8.3. TABLE 8.3 CHARACTERISTICS OF ORGANIZATIONS UNDER THE ORGANIZATIONAL BEHAVIOR MODEL Source: Based on Allison, G., & Zelikow, P. (1999). Essence of decision: Explaining the Cuban Missile Crisis (2nd ed.). New York, NY: Longman. Incrementalism, an alternative to the rational model, is the key to the organizational process model. Charles Lindblom rejected the notion that most decisions are made by rational processes. Instead, he found that decisions are dependent on small incremental choices made in response to short-term conditions. His theory suggests that decision making is \"controlled infinitely more by events and circumstances than by the will of those in policy-making positions.\"41 According to Lindblom, the bargaining process characteristic of government produces incremental \"muddling through\" that is quite different from the comprehensive choices of a centralized authority acting according to the dictates of rationality. Inevitably, the analysis of alternatives for action and the choice of values and goals that inform the decision become so intertwined that they are indistinguishable. Incrementalism: decisions are dependent on small incremental choices made in response to short-term conditions Criticisms of the organizational process model include the fact that decision makers are prevented from forecasting the future and acting on the basis of a predetermined vision. Decision makers are forced to make incremental changes based on standard operating procedures. Critics also point out that organizations create their own institutionalized rationality.42 A study of hospitals and their use of cesarean sections illustrates this point. In an empirical study, Goodrich and Salancik found that the rates of cesarean sections for childbirth in hospitals were not related to best medical practice but rather were based on organizational standards of procedure.43 This case provides a vivid illustration of the concerns presented by using standard operating procedures instead of what is in the best interest of the mother's health. A related model emphasizes the legal aspects of decision making. In its most simple and direct form, law is concerned with the conduct of individuals in the context of the social, political, and economic order.44 The legal model consists of the sum total of principles and procedures that a society has adopted and relies on to function properly. In using this model for decision making, the law is used as a guiding principle, requiring reasoned decisions and fundamental fairness. Legal models are viewed as administrative tools in that \"they aid in decision making, enhance efficiency, reduce arbitrariness, improve morale, and provide defenses when agencies' actions are challenged.\"45 The legal model in the United States looks to the U.S. Constitution, laws, courts, and contractual obligations for specificity on procedures, requirements, and responsibilities. The Collaborative Model The collaborative decision-making model acknowledges that decisions in organizations are made through a collaborative process that, in reality, bears little resemblance to a single executive making a rational choice. Under the collaborative model, decisions are group efforts that involve bargaining among players with different and competing interests. The collaborative model is most readily understood by defining what it is not. First, it is not a model with a single unitary decision maker; rather, it involves a number of managers with their own agendas, priorities, and timetables. Second, this model does not focus on single strategic issues at stake in a decision but rather recognizes complex multilevel issues being considered by the group with multiple interests and agendas and operating in different social spheres simultaneously. Third, this model does not describe a single rational choice; instead, it offers the negotiations and compromises required in collaborating. Bargaining actually is a collection of decisions that often is assembled more haphazardly than logically. Most issuesfor example, the Asian economic meltdown, the proliferation of nuclear weapons, or trade with Chinaemerge piecemeal over time, one lump in one context, a second in another.46 Hundreds of issues compete for managers' attention every day. Each manager is forced to fix on the relevant issues for that day, deal with each on its own terms, and rush on to the next. Collaborative decision-making model: decisions in organizations are made through a collaborative process that bears little resemblance to a single executive making a rational choice Garbage Can Model The major contribution of the collaborative model is that it places the actor within a context. Each person is influenced by his or her position, perceptions, practices, and priorities. How problems are defined and how agendas are set are critical considerations in explaining decisions and their results. Issues originate from a variety of sources, ranging from pragmatic considerations to strategic goals and values. In addition, avoiding what Snyder47 refers to as \"the hubris trap,\" executives listen to the opinions of others. Carefully considering the input of others, be it agreement or dissent, is critical to making a fully informed decision. It may not change the path an executive takes in the end, but it offers a beneficial speed bump that ensures that several options are considered. For example, a potential increase in tuition at a private university involves various actors. How the potential increase is received will vary among the many actors affected by itthe parents or students paying tuition, employers covering employees' educational expenses, and the faculty and administration of the university. What would be the reaction of these actors? Can you think of additional actors on both the decisionmaking and receiving ends of the decision process? Other Decision Making Models Another popular approach to decision making bearing some resemblance to the collaborative model is what has been called the \"garbage can model.\" Cohen, March, and Olsen,48 whose original work focused on universities as a form of \"organized anarchy,\" developed the garbage can model. \"These organizations could then be viewed as having a collection of choice opportunities, solutions looking for problems, and participants looking for work.\"49 Choice opportunities are occasions when organizations are expected to produce decisions. For example, in the university setting, the administration may ask a university program to decide whether it would like to implement a doctoral program in the School of Management. Participants are characterized in terms of the energy they have available for problem solving. The school director would determine which faculty members would be available to work on the issue and are interested in doing so. The faculty members would be asked to participate in the decision-making process. Problems are characterized by how much energy will be required to make a choice. After selecting the faculty members, a committee chair would be assigned. The committee would decide on the issues that must be addressed, such as the curriculum, additional faculty, recruiting of students, and the energy required to supervise doctoral students. Solutions recognize the potential energy that is necessary to solve a problem. The committee would then make a decision, given to the department head, on whether or not to consider adding a doctoral program based on the resources that are available. Garbage can model: decision processes are affected by the timing of problems, solutions, participants, and choice opportunities, all of which are assumed to be independent Choice opportunities: occasions when organizations are expected to produce decisions GLOBAL SOCIETY ASIA'S SCOTTISH COMPANY Fans of James Clavell's novel Taipan may recognize aspects of the popular novel in one of Asia's largest multi-national enterprises, Jardine Matheson. The company was founded by two Scotsmen, William Jardine and James Matheson, in Hong Kong in 1832. The opium and cotton trades were the backbone of the company then; now the conglomerate has many different companies including supermarkets, construction and engineering, insurance, property investment, and hotels with 240,000 employees, and an impressive rate of growth and success.50 While still controlled by the descendants of the founders, and with a non-Chinese CEO, Henry Keswick, who is married to the Jardine side of the family, Jardine Matheson has developed a distinct culture that is a blend of its European roots with an unmistakable Asian influence based on the traditional Chinese business house or Hong structure. The company has a long and well-respected history in the region with many long-established relationships that are key to business success anywhere, but even more essential in Asia. It also has a strong social presence and expects its leaders to be involved in the life of the communities in which they operate primarily as a way of having access to information. Additionally, because it has always operated in an uncertain environment, the company has a strong focus on collaboration inside and outside the company.51 Its philanthropic arm, Mindset, focuses on educating people about mental health issues with 42 of the company's executives serving as ambassadors for the program.52 In order to develop its leaders in a global market with highly diversified companies, Jardine Matheson exposes its managers to management practices both inside and outside of the company and provides them with one of 200 well-trained performance coaches.53 They also put particular emphasis on learning about international best practice in order to prepare their managers for the complex environment they face through tightly structured training programs.54 1. How does Jardine Matheson prepare for uncertainty? 2. What tools do managers need to make decisions in such a global environment? Under this model, decision processes are affected by the timing of problems, solutions, participants, and choice opportunities, all of which are assumed to be independent. The choice opportunity is viewed as the garbage can in which the participants dump problems, solutions, and energy. Once the garbage can is full, or once all of the alternatives associated with it have been exhausted, it is removed from the decision-making process. The scenarios55 that would lead to using a full garbage can model are presented in Figure 8.4. Research revealed that \"decision making by flight is a regular feature of the usual decision processes of white-collar workers in Japanese firms.\"56 Takahashi found that an increase in workload increases the use of flight when an organization has a high degree of anarchy. He was not surprised by his findings and did not find the high flight ratio to mean failure in an organization with competent organizational workers. \"In fact, it is directly [the] responsible managers for efficiency who have the high flight ratio in comparison with the others in Japanese firms.\"57 This is attributed to bounded rationality, where the heavy workload makes it difficult for the organization to operate smoothly and satisfactorily.58 In addition, critics have noted that because, in this model, managers make decisions in small increments that make sense to them, they may simply generate actions that will make them look good59 or protect them from looking bad. In fact, an analysis of decision making during the Cuban missile crisis led to the conclusion that decisions were made to avoid failure rather than to achieve success.60 Finally, Mintzberg and colleagues61 studied how people actually choose from among alternatives by developing a content analysis of 25 strategic decisions. They found that judgmental, bargaining, and analytical approaches were used to evaluate alternatives. Judgment was evidenced by decision makers in applying their intuition to select among courses of action without explaining the reasoning or rationale. Bargaining was said to occur when parties to the decision negotiated to reach an agreement. Analysis was used to produce factual evaluation. Mintzberg and fellow researchers found that judgment was the method used most frequently and that analysis was the method applied least frequently. Bargaining was used when opposition arose. Groupthink Remodeled Who Should Be Involved in Decision Making? A major area of decision making addresses the question of who should be involved in the decision process. In this regard, there are three basic methods of decision making: (1) Authoritative decisions are those an individual makes alone or on behalf of the group. (2) Consultative decisions also are decisions an individual makes, but in this case they are made after seeking input from or consulting with members of the group. (3) Group decisions are those all members of the group make, ideally through consensus. Naturally there are advantages and disadvantages to each approach. As noted earlier, involving many people in the process may result in a better decision because many will have had the opportunity to think of the pros and cons and therefore will be more likely to support a decision in which they have been involved. On the other hand, involving many also may sacrifice efficiency given that the more people who are involved, the more time-consuming the decision-making process becomes. In group decision making, the process is slower than if an individual were to make the decision. Authoritative decisions: those an individual makes alone or on behalf of the group Consultative decisions: decisions an individual makes with input from others Group decisions: made by members of the group, ideally through consensus Involving the Group to Prevent Poor Decisions Moreover, there is the possibility of Groupthink, a mode of thinking that occurs when people are deeply involved in a cohesive group and their desire for unanimity offsets their motivation to appraise alternative courses of action. The individual's mental efficiency, reality testing, and moral judgment deteriorate as a result of group pressures.62 In 1971, Janis wrote, \"My belief is that we can best understand the various symptoms of groupthink as a mental effort among group members to maintain ... emotional equanimity by providing social support to each other.\"63 For example, imagine that you are part of a software company's sales team that has a number of sales calls to make on a daily basis. You have a staff meeting to determine the redesign of the office to allow for more open space. You prefer the current configuration that allows for more privacy. Your coworkers are sold on the open configuration and you do not want to be seen as the non-team player so you vote to go along with the redesign. Groupthink: a mode of thinking that occurs when people are deeply involved in a cohesive group and their desire for unanimity offsets their motivation to appraise alternative courses of action Managers can take several steps to prevent Groupthink (see Table 8.4). It requires critical thinking on the part of individuals and groups to avoid contamination of the process or goal displacement. Contamination of the process or goal displacement is encountered when the cohesion of the group overcomes the process for decision making or the goal for the assignment. Figure 8.4 presents the antecedents, symptoms, and consequences of Groupthink and may be utilized by the manager to diagnose and be aware that Groupthink is occurring in the team or organization. TABLE 8.4 PREVENTING GROUPTHINK Source: Adapted from Janis, I. L. (1982). Groupthink: Psychological studies of decisions and policy decisions and fiascoes. Boston, MA: Houghton Mifflin. FIGURE 8.4 ANTECEDENTS, SYMPTOMS, AND CONSEQUENCES OF GROUPTHINK Levels of Participation and Styles of Decision Making Vroom and Yetton64 provide a detailed formulation of the issue of participation called the Normative Decision Model. The model focuses on the question of when or under what circumstances managers should involve others in decision making. In this model, the matter of participation is viewed as more complex than simply having subordinates participate. Five different levels of participation or style of decision making are presented in Table 8.5. How Presidents Make Big Decisions TABLE 8.5 STYLES OF DECISION MAKING Source: Based on Vroom, V. H., & Yetton, P. W. (1973). Leadership and decision making. Pittsburgh, PA: University of Pittsburgh Press. To answer this question, the manager is advised to work through the decision tree presented in Figure 8.5. The decision tree initially appears complex but, in fact, is easy to use. One begins under Point A by asking Question A. (All questions must be answered with a yes or no. Answers of maybe or sometimes are not allowed.) Depending on the answer, one proceeds to either Question B (for a yes response to Question A) or Question D (for a no response to Question A). One continues answering questions as indicated on the decision tree until reaching an endpoint. Each endpoint is numbered and is followed by a listed set of participation levels. (These refer to the participation levels listed in Figure 8.5.) This is a \"feasible set,\" meaning that each of the levels listed in the set is likely to result in a successful outcome. But this does not mean that there is no reason to pick one style over another within the set, for the styles are ordered in terms of the amount of time it will take to reach a decision. The fastest approach is listed first, the next fastest is listed second, and so on. Again, the model takes into account the type of decision being made (a process aided by the decision tree) and then offers a level of participation that is most likely to be successful. There is one more question to consider when reviewing who should be involved: Are the decisions that we are making representative of the demographics of stakeholders? Let's examine why diversity should be considered in decision making. FIGURE 8.5 DECISION TREE FOR DETERMINING LEVELS OF PARTICIPATION Source: Adaptation of Table 2.1 from Vroom, V. H., & Yetton, P. W. (1973). Leadership and decision-making. Pittsburgh, PA: University of Pittsburgh. 1973. Reprinted by permission of the University of Pittsburgh Press. Diversity: Opportunities and Challenges for Decision Making As we discussed in Chapter 2, the current focus on diversity in the workplace results in part from demographic shifts of racial and ethnic minorities, women, and older workers in the domestic workforce, and pressures of globalization.65 The thought of diversity as being crucial for decision making has been around a long time: \"Persons drawn from diverse groups ... will bring to bear upon decisions and activities different perspectives, knowledge, values, and abilities. And the products of their interaction will very likely differ from the products where they are all of a single genre.\"66 This enhances the organization, as a diverse work environment provides an increased awareness of global opportunities, a more cogent approach to problem identification and solution, and a check on the insidious effects of Groupthink.67 Diversity in Decision Making More recent research has found that women managers are significantly more participative than their male counterparts. In general, participation is valued by direct reports, but this is truer for women than for men. Moreover, participative men and women are equally valued, but autocratic males are strongly preferred to autocratic females.68 Management of diversity may be seen as a new organizational paradigm where differences are recognized, valued, and engaged.69 The goal of managing diversity is to increase awareness of ethical questions related to difference in the workplace and to help managers engage in dialogue to solve complex moral issues.70 Effectively managing diversity increases creativity in decision making, reduces diversity-related conflict, improves cross-cultural understanding, and provides more functional interpretation of pluralistic differences.71 Europeans, Africans, Native Americans, Asians, and other racial groups possess unique cultural norms and values that affect their decisions.72 Diversity also provides challenges for decision making. For example, cultural differences create deviations from the rational model as we will see using the example of Indonesia. In the United States we emphasize rationality and problem solving, while in Indonesia, the focus is on accepting the situation as it is. Yet we do not, nor does the bulk of the literature on decision making, recognize that the cultural background of a decision maker can significantly influence the selection of problems, the tools used for analysis, the importance of logic and rationality, or whether the decision should be made individually or collectively.73 Cultures differ in their time orientation, the importance of rationality, their belief on individual problem solving, and their preference for collective decision making. What Do You Think? You are hiring a new employee for a management position in your organization. There are two candidates and they seem exactly even in all regardsexcept one is a liberal arts major and the other is a business major. Again, all else being equal, who would you hire? Andthe big questionwhy? Cultural diversity is not the only cause of challenges for decision making. You may recall in earlier chapters that some of these differences not only affect culture, but may also be influenced by personality, gender, and individual preferences. For example, a male manager may charge his largely female workforce with the responsibility of selecting the venue of the firm's next retreat. Yet he becomes extremely frustrated with how long the group takes to make the decision. From your readings in Chapter 2, what personal preferences may be having an impact on this situation? Techniques for Making Decisions There are a variety of techniques to assist you in various aspects of the decision-making process. In this section, we examine two popular techniques for securing more information and then discuss several others for choosing from among alternatives. Let's start by providing a framework for the process of decision making, or assigning clear and specific roles for the decision maker(s). The Decision-Making Primer You may recall earlier in the chapter the bottlenecks that can occur when employees do not feel accountable for the decision or when many are involved in the decision-making process. Rogers and Blenko74 have designed a process they refer to as RAPID for assigning clear roles and responsibilities. The elements of the process are as follows: Recommend. The responsibility of the person in this role is to make a proposal by gathering input and providing the right evidence and analysis to make a timely decision. Recommenders must have analytical skills, common sense, and organizational smarts. Agree. The Recommender has veto power over recommendations. In the event that agreement or consensus cannot be reached, the Recommender may need to go to the Decider. Input. People that are involved in the implementation are sought for recommendations. Successful implementation requires Input, although the Recommender is not bound by the recommendations. Decide. The Decider has responsibility for the ultimate decision and will ultimately be held accountable for the decision. The Decider may also resolve any impasse and commit the organization to implementation. Perform. A person or group of people, which may or may not include the decision makers, is now responsible for the implementation. We would add Feedback as a step to allow for review and adjustments as needed. Focus Groups Focus groups are a popular method for receiving input from a large number of individuals, serving as \"group interviews.\"75 A typical focus group consists of 10 to 12 people brought together to discuss a particular topic, usually with the help of a trained facilitator. Focus groups may be used for problem identification, planning, implementation, or assessment. Managers then use the data gathered from these meetings to make decisions. Participants make collages during a focus group for Suave conducted by Spark, a company that uses art and play in its focus groups to glean consumer's opinions. Focus groups require careful planning. Indeed, Morgan recommended that the planning occur throughout the whole project. He described the focus group process as consisting of four basic steps: 1. Planning. This step requires the anticipation of major decisions that will need to be made. 2. Recruiting. Having well-targeted participants is as important as asking good questions or using a skilled facilitator. \"Problems with recruitment are the single most common reason why things go wrong in focus group projects.\"76 3. Moderating. Effective recruiting and good questions will greatly aid the facilitator or moderator in the focus group endeavor. 4. Analysis and reporting. The information gathered during the focus group is finally analyzed and reported so that it can be used in the decision-making process. Focus groups can be used in many ways. For example, a nationwide gym owner wanted to know why its national campaign to promote membership among women had not increased membership. Focus groups indicated that the message in existing marketing, although welcoming of this population, did not mention availability of day care or programs for children. The focus groups resulted in including the availability of these resources in the advertising. Similarly, a large business wanted to increase sales to the African American community. Through a nationwide series of focus groups, the organization learned that it was virtually unknown to that community despite an advertising campaign that was geared to African Americans. Finally, a corporation facing major cutbacks wanted to provide a job counseling program that would be of practical use to its former employees. Focus groups revealed the need for different programs for those who wanted jobs in a similar industry as opposed to those who wanted to pursue new careers. Brainstorming Originally developed during the 1930s in the advertising industry, brainstorming is a method of generating a large number of ideas in a short period of time.77 More specifically, brainstorming typically is used to create ideas and generate alternatives. Brainstorming is one of the most widely used and, unfortunately, misused techniques for fostering creativity. The key concept behind brainstorming is to increase thinking creatively and generating solutions by prohibiting criticism. Its misuse most commonly takes the form of participants failing to understand or adhere to its ground rules. Brainstorming works best when the following guidelines are followed: Ideas Versus Vision 1. State the problem clearly and neutrally. It can be helpful to restate the problem using the phrase, \"How can I/we ... ?\" Post the stated problem where it can be easily seen. 2. Generate ideas using ground rules. Rules may include the following: There is no judgment made about the ideas as they are being generated, the objective is to generate the greatest quantity (not quality) of ideas, all ideas (even wild ones) are welcomed, and it is appropriate to embellish, or \"piggyback,\" on ideas. Group brainstorming sessions tend to work best when someone takes on the role of facilitator. The facilitator reminds the group of the ground rules and helps the group to enforce them, for example, by stopping participants who might begin evaluating other people's ideas. These ground rules are so important to successful brains