Improving Group Decision Making

Improving Group Decision Making

Learning Outcomes

 

·         Describe the decision-making process (slide 4)
b) Explain the three approaches managers can use to make decisions (slide 15)
c) Describe the types of decisions and decision-making conditions managers face (slide 18?)
d) Discuss group decision making (slide 22)
e) Discuss contemporary issues in managerial decision making (slide 27)

 

a)    Describe the Decision Making Process

 

·         Decision making can be viewed as an eight-step process that involves identifying a problem, selecting an alternative, and evaluating the decision's effectiveness.
1) Identifying a problem
2) Identifying decision criteria
3) Weighing criteria
4) Development of alternatives
5) Analysis of alternatives
6) Selection of an alternative
7) Implementation of the alternative
8) Evaluation of decision effectiveness

 

1)    Identifying a decision problem

 

·         Problem: a discrepancy between an existing and a desired state of affairs

Ex: If a car is no longer worth repairing, then the best decision may be to purchase another car

 

2)    Weighing Criteria

 

·        
(allocate weights)

·         -Most important criterion assigned a weight of 10
-Other weights assigned against this standard

Ex: Price 10, interior comfort 8, durability 5, repair record 5, performance 3, handling 1.
Price is most important criterion in this person's decision

 

3)    Developing Alternatives

 

·         List alternatives that could solve the problem. The decision maker only lists the alternatives and does not attempt to appraise them in this step.

Ex: This person identified 12 cars as viable choices: Jeep Compass, Ford Focus, Hyundai Elantra, Ford Fiesta SES, Volkswagen Golf, Toyota Prius, Mazda 3 MTd, Kia Soul, BMW 335, Nissan Cube, Toyata Camry, and Honda Fit Sport MT.

 

4)    Analyzing Alternatives

 

·         Critically analyzing each alternative by appraising it against the criteria. The strengths and weaknesses of each alternative become evident when compared with the criteria and weights established in steps 2 and 3.

Ex: This person assessed the values that she put one each of her 12 alternatives after having test-driven each car. Some can be achieved objectively (price), however this assessment of how the car handles is a personal judgement. She can add up each of these numbers to get a general idea of car ranking.

 

5)    Select Best Alternative

 

·         If you multiply each alternative assessment against its weight, you get a new evaluation of each alternative.

Ex: In step 3, she weighted price as 10 for importance, so here, she multiplied Jeep Compass's 2 (determined in step 5 Analyzing Alternatives) x 10 = 20. Adding up these totals (interior comfort 10 x 8 = 80, etc.) may change the raking of alternatives.

 

6)    Implementing the Decsion

 

·         Conveying the decision to those affected and to obtaining their commitment. The people who must carry out a decision are more likely to enthusiastically endorse the outcome if they participate in the decision-making process.

 

7)    Evaluate the Decision

 

·         Appraising the outcome of the decision. Was the problem solved? Did the alternative chosen in step 6 and implemented in step 7 accomplish the desired result?

 

Common Errors

 

·         When managers make decisions, they may use "rules of thumb" or judgmental shortcuts called heuristics to simplify their decision making. However, heuristics are not reliable and can lead to error.

12 common decision errors and biases:
1) Overconfidence
2) Immediate gratification
3) Anchoring Effect - decision makers fixate on initial information - such as first impressions, ideas, prices, estimates - and then fail to adequately adjust for subsequent information
4) Selective Perception occurs when decision makers organize and interpret events based on their biased perceptions, which influence the information they pay attention to, the problems they identify, and the alternatives they develop
5) Confirmation bias - decision makers who seek out info that reaffirms their past choices and who discount info that contradicts past judgements
6. The Framing Bias - when decision makers select and highlight certain aspects of a situation while excluding others, downplaying other aspects, distorting what they see, and creating incorrect reference points
7. The Availability Bias - when decision makers focus on events most recent/vivid in their memory
8) Representation Bias - how decision makers assess the likelihood of an event based on how closely it resembles other events and then draw analogies and see identical situations where they don't necessarily exist
9) The Randomness Bias - when decision makers try to create meaning out of random events
10) The Sunk Costs Error - when decision makers forget that current choices can't correct the past. They incorrectly fixate on past expenditures of time, money, or effort rather than on future consequences when they assess choices
11) Self-Serving Bias - when decision makers take credit for their successes and blame failure on outside factors
12) Hindsight Bias - the tendency for decision makers to falsely believe that they would have accurately predicted the outcome of an event once that outcome is actually known

 

Three Approaches Managers Can Use to Make Decisions

 

·         Rational Decision Making
2. Bounded Rational Decision Making
3. Intuition

 

1.    Rational Decision Making

 

·         Choices that are consistent and value-maximizing within specified constraints.

-Being fully objective and logical
-Not realistic
-In a perfect world, the problem would be clear-cut and decision maker would have a specific goal and anticipate all possible alternatives and consequences
-Making decisions rationally would consistently lead to selecting the alternative that maximizes the likelihood of achieving that goal
-Need to assume managerial decisions are made in the best interests of the organization

 

2.    Bounded Rationality

 

·         -Satisfice - accepting solutions that are "good enough"
-Escalation of commitment - an increased commitment to a previous decision despite evidence that it may have been wrong

-Managers make decisions rationally but are limited (or bounded) by their ability to process information. Because they can't possibly analyze all the information on all alternatives, managers satisfice, rather than maximize.
-Decision making is also influence by the org's culture, internal politics, power considerations, and escalation of commitment.

 

3.    Intuitive Decision Making

 

·         Involves making decisions on the basis of experience, feelings, and accumulated judgement, which can complement both rational and bounded decision making.

5 aspects of intuition:
1) past experiences
2) feelings and emotions
3) skills, knowledge, and training
4) data from the subconscious
5) ethical values or culture

 

b)   Describe the types of decisions and decision-making conditions managers face

·        

Types of Problems

·         -Structured problem: straightforward, familiar, easily defined
-Unstructured problem: new or unusual situations for which information is ambiguous or incomplete

 

 

Types of Decisions

 

·         Programmed: Repetitive decisions that can be handled using a routine approach
-Managers can use 3 guides for making programmed decisions:
a) Procedures - a series of interrelated sequential steps that a manger can use when responding to a well-structured problem
b) Rules - an explicit statement that tells a manager what can or cannot be done
c) Policy - a guideline for making decisions

Non-programmed: Unique or unusual decisions that are not considered routine

 

 

Problems, Decision Types, and Organizational Levels

 

·         The relationship among types of problems, types of decisions, and one's level in the organization:
-Structured problems are handled with programmed decision making
-Unstructured problems require nonprogrammed decision making

 

Decision Making Conditions

 

·         -Certainty: a manager can make accurate decisions because the outcome of every alternative is known
-Risk: able to estimate the likelihood of certain outcomes based on data from past personal experiences or secondary info that lets the manager assign probabilities to different alternatives
-Uncertainty: not certain about the outcomes and can't even make reasonable probability estimates; choice of alternatives is influenced by the limited amount of information and by the psychological orientation of the decision maker

 

c)    How do Groups Make Decisions?

 

·         Decisions are often made by groups representing the people who will be most affected by those decisions.
-committees
-task forces
-review panels
-work teams

 

Advantages of Group Decision Making

 

·         -Diversity of experiences/perspectives
-More complete information
-More alternatives generated
-Increased acceptance of solution
-Increased legitimacy

 

Disadvantages of Group Decision Making

 

·         -Time-consuming
-Minority domination
-Ambiguous responsibility
-Pressures to conform

 

Groupthink

 

·         When a group exerts extensive pressure on an individual to withhold his or her different views in order to appear to be in agreement.

It hinders decision making and can jeopardize the quailty of the decision by:
-Undermining critical thinking in the group
-Affecting a group's ability to objectively appraise alternatives
-Deterring individuals from critically appraising unusual, minority, or unpopular views

How does it occur?
-Group members rationalize resistance to assumptions
-Members directly pressure those who express doubts or question the majority's views and arguments
-Members who have doubts or differing points o view avoid deviating from what appears to be group consensus
-An illusion of unanimity prevails. Full agreement is assumed if no one speaks up

How can it be minimized?
-Encourage cohesiveness
-Foster open discussion
-Have an impartial leader who seeks input from all members

 

Improving Group Decision Making

 

·         Make group decisions more creative by:
-Brainstorming
-The nominal group technique: restricts discussion during the decision-making process; group members gather but are required to operate independently, privately listing general problem areas or potential solutions
-Electronic meetings: blends nominal group technique with computer technology. Numerous people sit around a table with a computer terminal; issues are presented to participants who anonymously type their responses. Major advantage is anonymity, honesty, speed, and cost effectiveness - many participants can "talk" at once without disrupting others

 

d)   Contemporary Issues

 

·         Big Data: The vast amounts of quantifiable information that can be analyzed by highly sophisticated data processing.