rational decision making.ppt
- 1. RATIONAL Decision Making in organizations
- 2. 2 RATIONAL Decision Making in organizations • The evolution of decision making theory , is characterized by a multiplicity of theories and models. • Modern companies need both differentiation and integration. Decisions ideally need to be rational (objective, impersonal, unemotional) in order to facilitate a smooth running and goal attainment
- 3. RATIONAL Decision Making in organizations
- 4. 4 RATIONAL Decision Making in organizations • Decisions are associated with management, and they are concerned with allocation and exercise of power. They shape the future & direction of the company as well as the lives of people within and outside. • Decisions are to be made at the operational level as well as at the strategic level. • The issues of who is involved ,who is left out , who is in position to exercise influence ,who is able to introduce items onto the decision making agenda or keep them off are central to the understanding of the politics of organizational behavior. • Studying decision making is important to understand how & why organizations come to be and what they are or what they will be.
- 5. 5 Decision A decision is a choice made between two or more available alternatives. All organizational members make decisions
- 6. 6 Model of the Decision-Making Process (Basic model) Identify Existing Problem List Alternative Problem Solutions Select Most Beneficial Alternative Implement Chosen Alternative Gather Problem- Related Feedback
- 7. 7 Models of decision making • The subject of decision making crosses several academic disciplines ranging from rational choice models , various modeling techniques , mathematics , statistics to the behavioral aspects which are handled by psychologists and social psychologists who in their turn concentrate on individual cognitive behavior.
- 8. 8 I . Managerial Rationality in decision making • Neo-classical economic assumptions of the rational choice model of decision making :- – At the level of the organization , managers make rational decisions & without compunction (anxiety) – Decisions are consistent , value-maximizing choices within specified constraints ( predetermined criteria , rules , procedures…) – Decisions made by groups within organizations will be equally rational . – Decisions are thought to be arrived at by a step-by-step process which both logical , linear and sequential and is one whole procedure. – Alternative evaluation is done according to a predetermined criteria. – Zey (1992) has shown this kind of logic. To him the implicit assumption is that if individuals behave in accordance with rationality then little or no interference is required by super-ordinate bodies.
- 9. 9 Assumptions Of Rationality Rational Decision Making Single, well- defined goal is to be achieved All alternatives and consequences are known Preferences are clear Preferences are constant and stable No time or cost constraints exist Final choice will maximize payoff Decision is having Consistency & acceptability
- 10. 10 A. Limitation of Rational Economic Man or “Rational Actor” • Simon (1945) – Decision makers are unable to operate under conditions of perfect rationality, because they are constrained by the (1) complexity of modern organization and (2) by their own limited cognitive capacities. – Problems definition and decisions are unclear / or open to varying interpretations . – Information about alternatives may be unavailable , incomplete or misrepresented . Also the criteria by which potential solutions are to be evaluated are often uncertain or controversial (not agreed upon ) . – Time & energy available is limited & finite.
- 11. 11 Limitations ( CONT) • The outcome is “satisfying” rather than optimizing choice. Due to what said previously: – The absolutely rational model is beyond reach – Managers operate within a “bounded rationality” as result of human & organizational constraints. – Managers behavior is said to be reasoned (intend to operate rationally ). Here deviations are unintended , accidental and undesired it is not irrational . • Human weakness and demands that stem from within and outside organization limits the degree of rationality.
- 12. 12 Types of Problems and Decisions (Simon 1960) • The below continuum of dimension represents an early but significant step in distinguishing the characteristics of decision and associating them with types of process. • Even so and despite limitations , Simon said that different types of decisions can be processed in different ways. Some decisions may approximate to rationality others may not. Programmed Decisions Nonprogrammed Decisions
- 13. 13 Limitation (CONT.) • Programmed Decisions - used to address well and clear structured and routine problems , occur more frequently& are more comprehensible .They are often made lower down in organization and are operational in nature & usually are left to subordinates. – Straightforward, familiar, and easily defined ( ex. routine , tested protocols or procedures.) .This would:- • Minimize the need for managers to use discretion ( i.e. judgment or individual choice ) • Facilitate organizational efficiency • Procedure - series of interrelated sequential steps used to respond to a structured problem • Rule - explicit statement of what to do or not to do • Policy - guidelines or parameters for decision making
- 14. 14 Limitation ( CONT.) • Nonprogrammed Decisions - used to address poorly- structured problems that have not been encountered in quite the same way before (mostly strategic decisions) – New, unusual problems for which information is ambiguous or incomplete. – More frequent among higher-level managers since are oriented towards more significant areas in organizations. – Present a challenge to them , since they tend to shape actions for future which is implicitly uncertain & worrying. – Have consequential repercussions ( Indirectly widespread) and have worrying implications for managers – Will set precedents for other decisions which would follow
- 15. 15 III. Factors influencing decision making process • Not all decisions are made in the same way, so what factors influence the process ? • Bradford studies on 150 decisions in 30 organization ( manufacturing& servicing) in England found :- • 3 kind of decision making processes :- i. Sporadic ( occurring in a scattered , single instance occasional scarce) – Information used are uneven in quality (bad and good). – Information come from a range of sources and their scope is for negotiation – This kind of process is informally spasmodic and protracted ( delayed , stretched , elongated)
- 16. 16 Factors influencing process ii . Fluid ( Opposite of sporadic ) – Steadily paced ( slow steps) – Less informally and more formally channeled . Formal interactions and the process flows more thru formal meetings with fewer impediments and delays. – Faster decisions (made in month rather than Years) iii . Constricted (share some characteristics of the previous ones but with some distinctive features) – Less fluid than the fluid – Less sporadic than the sporadic – Tend to revolve around central figures such as finance or production directors who draws on a wide range of expertise in other departments before arriving at a decision – In short they are narrowly channeled
- 17. 17 Factors influencing process • The concept of politically and complexity are the primary explanation of why strategic decisions follow a certain process and who will be involved. A- Politically ( refers to the degree of influence which is brought to bear on a decision & how this influence is distributed within and without the organization.) – All decisions draw in a specific “Decision set" of interest : those who have stake in the outcome . These are drawn from inside & outside the organization like:- • Individuals • Departments • Divisions • Owners • Suppliers • Government agencies…
- 18. 18 Factors influencing process B- Complexity ( refers to problems encompasses decisions) – Reasons for complexity are varied . Some decisions are more unusual than others where by some :- • May require more information from more diverse sources • Would have more serious widespread consequences • Could set more fundamental precedent for the future – Decisions vary in terms of how comprehensive they are , since each decision process is made of various problems in which their complexity varies. Some are straightforward others are problematic depending on the nature of issues involved.
- 19. 19 III. Strategies & Garbage-Cans model (Cohen 1972) • There is another body of thought other than the rational models and politicized views that tries to explain causal relationships between events and outcomes. • The Garbage-can models are found predominately:- - In organized anarchies (a social structure with law and order) - In Complex organizations whose internal processes are not really understood , even by people working for them. • In these situations Means & Ends of decisions become uncoupled or disconnected. – Here actions do not lead to expected outcomes . – Actions are hijacked along the way by other decisions and other actions
- 20. 20 III . Strategies & Garbage-Cans model (Cohen 1972) • Here decisions main components (i.e. problems solutions , participants and choice situation) pour into the organizational garbage-caning in a seemingly haphazard way. A stream of demands for the fluid attention & energy of decision-makers. If problem solution , participant and choice situation happen to collide appropriately, then a decision occurs. Here all participants move in & out of the decision making process. • The picture is of seeming Chaos and of disorder • The process is not truly random & can be predicted to some extent although it still can feel like chaos to participants
- 21. 21 Garbage Theory (Summery) • No agreement on neither goals nor the means of achieving them • Uncertainty and ambiguity. • Environment and technology are poorly understood. • Key actors move in and out the decision making process. • Complex organizations, internal processes are not understood even by those who work in them. • Means and ends of decisions become uncoupled. • Actions do not lead to the expected outcomes. • Problems, participants, solutions and choice situations come in a haphazard way. • Decisions don’t meet the problems. • Solutions exist before the problem. • There are underlying patterns of chaos and complexity theory!
- 22. 22 The Interest Dimension • The more political interest dimension runs from a purely problem- solving view to a negotiated order view in which diverse interests give a political color to decision-making. • In a pure problem solving: Goals are specified, targets set, satisfactory solutions are sought. • In political interest dimension: All activity is politically driven. • Simon’s description of decision-making is as a “new science”. It is “new” because Simon rejected the prevailing orthodoxy of his coeval economists, who believed economic models of individual choice behaviors could be applied directly to organizational decision processes. It is “scientific”, however, since Simon still held centrally the notion of problem-oriented behaviors from those involved.
- 23. 23 The Action Dimension • Decision-making may be viewed as running from the more coherent to the more chaotic. Authors who take a predominantly coherent view of process subscribe to the notion that decision process trajectories can be relatively sequenced and linear, and reflect attempts by decision-makers to achieve step by step progress toward stated goals or objectives. • Coherent view: decision making process relatively sequenced and linear, intended rationality. • Chaotic view : Coherence a myth, decision making random. Processes part of the embedded-ness of the organization and not always in control.
- 24. 24 The concept of decision • Let us suppose that the decision itself cannot be taken for granted? Suppose that the very ideas of ‘a decision’ is misleading? • According to writers such as Mintzberg & waters (1990) – Its gets in the way of understanding organizational process – There are inherent problems with concepts. One of these being that:- • While decision implies commitment to action, there are situations where actions are taken without decision having been made – The notion of decision is particularly unhelpful when thinking about strategies which organizations pursue • According to Silverman , Clegg & Goffman decision making is best studied by looking at – Interaction – Interpretations of meanings – Significance of symbols
- 25. 25 Overview Of Decision Making in Organization Decision-Making In organization limitations • Well-structured - programmed • Poorly structured - nonprogrammed Decision-Making Conditions Enactment of power •Power between interest groups • Differentiation •Ensemble de jeux •The second face of power •Influential power- holders •Incremental Factors influencing process Politics & complexity 3 kind of processes •Sporadic •Fluid •Constricted Decision-Making Approach • Rationality • Bounded Rationality • Strategies & Garbage-Cans model
- 26. 26 Overview Of Decision Making in Organization • Compare & Contrast – look for similarities & differences • Conclude – summarise, on balance, side you support and why? • Criticise – your judgement (with evidence and reasoning) on … • Define – precise meaning & examine range of existing definitions • Describe – a detailed account of … • Discuss – examine rationale & evidence behind the ‘for’ and ‘against’ • Evaluate / (Assess) – make an appraisal of the worth of … • Explain – give a plain account of … • Illustrate – use example (s) (verbal or graphic) to explain
- 27. RATIONAL Decision Making in organizations