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Chapter 11
Making Decisions
LEARNING OBJECTIVES
After reading this chapter, you should be able to do the
following:
1. Understand what is involved in decision making.2. Compare and
contrast different decision-making models.3. Compare and contrast
individual and group decision making.4. Understand potential
decision-making traps and how to avoid them.5. Understand the pros
and cons of different decision-making aids.6. Engage in ethical
decision making.7. Understand cross-cultural differences in
decision making.
515
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11.1 Decision-Making Culture: The Case of Google
Chapter 11 Making Decisions
516
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Figure 11.1
Source:
http://en.wikipedia.org/wiki/File:Googleplex_Welcome_Sign.jpg by
Ardo191.
Google (NASDAQ: GOOG) is one of the best-known and most admired
companies around the world, so much sothat googling is the term
many use to refer to searching information on the Web. What started
out as astudent project by two Stanford University graduatesLarry
Page and Sergey Brinin 1996, Google became themost frequently used
Web search engine on the Internet with 1 billion searches per day
in 2009, as well as otherinnovative applications such as Gmail,
Google Earth, Google Maps, and Picasa. Google grew from 10
employeesworking in a garage in Palo Alto to 10,000 employees
operating around the world by 2009. What is the formulabehind this
success?
Google strives to operate based on solid principles that may be
traced back to its founders. In a world crowdedwith search engines,
they were probably the first company that put users first. Their
mission statementsummarizes their commitment to end-user needs: To
organize the worlds information and to make ituniversally
accessible and useful. While other companies were focused on
marketing their sites and increasingadvertising revenues, Google
stripped the search page of all distractions and presented users
with a blank pageconsisting only of a company logo and a search
box. Google resisted pop-up advertising, because the companyfelt
that it was annoying to end-users. They insisted that all their
advertisements would be clearly marked assponsored links. This
emphasis on improving user experience and always putting it before
making moremoney in the short term seems to have been critical to
their success.
Keeping their employees happy is also a value they take to
heart. Google created a unique work environmentthat attracts,
motivates, and retains the best players in the field. Google was
ranked as the number 1 Best Placeto Work For by Fortune magazine in
2007 and number 4 in 2010. This is not surprising if one looks
closer to howGoogle treats employees. On their Mountain View,
California, campus called the Googleplex, employees aretreated to
free gourmet food options including sushi bars and espresso
stations. In fact, many employeescomplain that once they started
working for Google, they tend to gain 10 to 15 pounds! Employees
have access togyms, shower facilities, video games, on-site child
care, and doctors. Google provides 4 months of paternal leave
Chapter 11 Making Decisions
11.1 Decision-Making Culture: The Case of Google 517
-
with 75% of full pay and offers $500 for take-out meals for
families with a newborn. These perks create a placewhere employees
feel that they are treated well and their needs are taken care of.
Moreover, they contribute tothe feeling that they are working at a
unique and cool place that is different from everywhere else they
mayhave worked.
In addition, Google encourages employee risk taking and
innovation. How is this done? When a vice president incharge of the
companys advertising system made a mistake costing the company
millions of dollars andapologized for the mistake, she was
commended by Larry Page, who congratulated her for making the
mistakeand noting that he would rather run a company where they are
moving quickly and doing too much, as opposedto being too cautious
and doing too little. This attitude toward acting fast and
accepting the cost of resultingmistakes as a natural consequence of
working on the cutting edge may explain why the company is
performingmuch ahead of competitors such as Microsoft and Yahoo!
One of the current challenges for Google is to expandto new fields
outside of their Web search engine business. To promote new ideas,
Google encourages allengineers to spend 20% of their time working
on their own ideas.
Googles culture is reflected in their decision making as well.
Decisions at Google are made in teams. Even thecompany management
is in the hands of a triad: Larry Page and Sergey Brin hired Eric
Schmidt to act as the CEOof the company, and they are reportedly
leading the company by consensus. In other words, this is not
acompany where decisions are made by the senior person in charge
and then implemented top down. It iscommon for several small teams
to attack each problem and for employees to try to influence each
other usingrational persuasion and data. Gut feeling has little
impact on how decisions are made. In some meetings,
peoplereportedly are not allowed to say I think but instead must
say the data suggest. To facilitate teamwork,employees work in open
office environments where private offices are assigned only to a
select few. Even Kai-FuLee, the famous employee whose defection
from Microsoft was the target of a lawsuit, did not get his own
officeand shared a cubicle with two other employees.
How do they maintain these unique values? In a company
emphasizing hiring the smartest people, it is verylikely that they
will attract big egos that may be difficult to work with. Google
realizes that its strength comesfrom its small company values that
emphasize risk taking, agility, and cooperation. Therefore, they
take theirhiring process very seriously. Hiring is extremely
competitive and getting to work at Google is not unlikeapplying to
a college. Candidates may be asked to write essays about how they
will perform their future jobs.Recently, they targeted potential
new employees using billboards featuring brain teasers directing
potentialcandidates to a Web site where they were subjected to more
brain teasers. Each candidate may be interviewed byas many as eight
people on several occasions. Through this scrutiny, they are trying
to select Googleyemployees who will share the companys values,
perform at high levels, and be liked by others within
thecompany.
Will this culture survive in the long run? It may be too early
to tell, given that the company was only founded in1998. The
founders emphasized that their initial public offering (IPO) would
not change their culture and they
Chapter 11 Making Decisions
11.1 Decision-Making Culture: The Case of Google 518
-
would not introduce more rules or change the way things are done
in Google to please Wall Street. But can apublic corporation really
act like a start-up? Can a global giant facing scrutiny on issues
including privacy,copyright, and censorship maintain its culture
rooted in its days in a Palo Alto garage? Larry Page is quoted
assaying, We have a mantra: dont be evil, which is to do the best
things we know how for our users, for ourcustomers, for everyone.
So I think if we were known for that, it would be a wonderful
thing.
Case written by [citation redacted per publisher request]. Based
on information from Elgin, B., Hof, R. D., &Greene, J. (2005,
August 8). Revenge of the nerdsagain. BusinessWeek. Retrieved April
30, 2010,
fromhttp://www.businessweek.com/technology/content/jul2005/tc20050728
_5127_tc024.htm; Hardy, Q. (2005,November 14). Google thinks small.
Forbes, 176(10); Lashinky, A. (2006, October 2). Chaos by design.
Fortune,154(7); Mangalindan, M. (2004, March 29). The grownup at
Google: How Eric Schmidt imposed bettermanagement tactics but didnt
stifle search giant. Wall Street Journal, p. B1; Lohr, S. (2005,
December 5). AtGoogle, cube culture has new rules. New York Times.
Retrieved April 30, 2010, from
http://www.nytimes.com/2005/12/05/technology/05google.html;
Schoeneman, D. (2006, December 31). Can Google come out to play?
NewYork Times. Retrieved April 30, 2010, from
http://www.nytimes.com/2006/12/31/fashion/31google.html;Warner, M.
(2004, June). What your company can learn from Google. Business
2.0, 5(5).
DISCUSSION QUESTIONS
1. Do you think Googles decision-making culture will help or
hurt Googlein the long run?
2. What are the factors responsible for the specific culture
that exists inGoogle?
3. What type of decision-making approach has Google taken? Do
you thinkthis will remain the same over time? Why or why not?
4. Do you see any challenges Google may face in the future
because of itsemphasis on risk taking?
Chapter 11 Making Decisions
11.1 Decision-Making Culture: The Case of Google 519
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11.2 Understanding Decision Making
LEARNING OBJECTIVES
1. Define decision making.2. Understand different types of
decisions.
Decision making1 refers to making choices among alternative
courses ofactionwhich may also include inaction. While it can be
argued that managementis decision making, half of the decisions
made by managers within organizationsultimately fail.Ireland, R.
D., & Miller, C. C. (2004). Decision making and firmsuccess.
Academy of Management Executive, 18, 812; Nutt, P. C. (2002). Why
decisionsfail. San Francisco: Berrett-Koehler; Nutt, P. C. (1999).
Surprising but true: Half thedecisions in organizations fail.
Academy of Management Executive, 13, 7590.Therefore, increasing
effectiveness in decision making is an important part ofmaximizing
your effectiveness at work. This chapter will help you understand
howto make decisions alone or in a group while avoiding common
decision-makingpitfalls.
Individuals throughout organizations use the information they
gather to make awide range of decisions. These decisions may affect
the lives of others and changethe course of an organization. For
example, the decisions made by executives andconsulting firms for
Enron ultimately resulted in a $60 billion loss for
investors,thousands of employees without jobs, and the loss of all
employee retirement funds.But Sherron Watkins, a former Enron
employee and now-famous whistleblower,uncovered the accounting
problems and tried to enact change. Similarly, thedecision made by
firms to trade in mortgage-backed securities is having
negativeconsequences for the entire economy in the United States.
All parties involved insuch outcomes made a decision, and everyone
is now living with the consequencesof those decisions.
1. Making choices amongalternative courses of action,including
inaction.
Chapter 11 Making Decisions
520
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Figure 11.2
It is important to remember that decisions have
consequences.
The New Yorker Collection. 2002. Leo Cullum from
cartoonbank.com. All rights reserved.
Types of Decisions
Most discussions of decision making assume that only senior
executives makedecisions or that only senior executives decisions
matter. This is a dangerousmistake.
- Peter Drucker
Despite the far-reaching nature of the decisions in the previous
example, not alldecisions have major consequences or even require a
lot of thought. For example,before you come to class, you make
simple and habitual decisions such as what towear, what to eat, and
which route to take as you go to and from home and school.You
probably do not spend much time on these mundane decisions. These
types ofstraightforward decisions are termed programmed decisions2,
or decisions that
2. Decisions that occur frequentlyenough that we develop
anautomated response to them.
Chapter 11 Making Decisions
11.2 Understanding Decision Making 521
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Figure 11.3
In order to ensure consistencyaround the globe such as at
thisSt. Petersburg, Russia, location,McDonalds Corporation
trainsall restaurant managers atHamburger University wherethey take
the equivalent to 2years of college courses and learnhow to make
decisions on the job.The curriculum is taught in 28languages.
Source:http://upload.wikimedia.org/wikipedia/commons/a/a2/McDonalds_in_St_Petersburg_2004.JPG.
occur frequently enough that we develop an automated response to
them. Theautomated response we use to make these decisions is
called the decision rule3. Forexample, many restaurants face
customer complaints as a routine part of doingbusiness. Because
complaints are a recurring problem, responding to them maybecome a
programmed decision. The restaurant might enact a policy stating
thatevery time they receive a valid customer complaint, the
customer should receive afree dessert, which represents a decision
rule.
On the other hand, unique and important decisionsrequire
conscious thinking, information gathering, andcareful consideration
of alternatives. These are callednonprogrammed decisions4. For
example, in 2005McDonalds Corporation became aware of the need
torespond to growing customer concerns regarding theunhealthy
aspects (high in fat and calories) of the foodthey sell. This is a
nonprogrammed decision, because forseveral decades, customers of
fast-food restaurantswere more concerned with the taste and price
of thefood, rather than its healthiness. In response to
thisproblem, McDonalds decided to offer healthieralternatives such
as the choice to substitute French friesin Happy Meals with apple
slices and in 2007 theybanned the use of trans fat at their
restaurants.
A crisis situation also constitutes a nonprogrammeddecision for
companies. For example, the leadership ofNutrorim was facing a
tough decision. They hadrecently introduced a new product, ChargeUp
withLipitrene, an improved version of their popular sportsdrink
powder, ChargeUp. At some point, a phone callcame from a state
health department to inform them of11 cases of gastrointestinal
distress that might berelated to their product, which led to a
decision to recallChargeUp. The decision was made without
aninvestigation of the information. While this decisionwas
conservative, it was made without a process that weighed the
information. Twoweeks later it became clear that the reported
health problems were unrelated toNutrorims product. In fact, all
the cases were traced back to a contaminated healthclub juice bar.
However, the damage to the brand and to the balance sheets
wasalready done. This unfortunate decision caused Nutrorim to
rethink the waydecisions were made when under pressure. The company
now gathers informationto make informed choices even when time is
of the essence.Garvin, D. A. (2006,January). All the wrong moves.
Harvard Business Review, 84, 1823.
3. Automated response toproblems that occur routinely.
4. Unique, nonroutine, andimportant. These decisionsrequire
conscious thinking,information gathering, andcareful consideration
ofalternatives.
Chapter 11 Making Decisions
11.2 Understanding Decision Making 522
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Decisions can be classified into three categories based on the
level at which theyoccur. Strategic decisions5 set the course of an
organization. Tactical decisions6are decisions about how things
will get done. Finally, operational decisions7 referto decisions
that employees make each day to make the organization run.
Forexample, think about the restaurant that routinely offers a free
dessert when acustomer complaint is received. The owner of the
restaurant made a strategicdecision to have great customer service.
The manager of the restaurantimplemented the free dessert policy as
a way to handle customer complaints, whichis a tactical decision.
Finally, the servers at the restaurant are making
individualdecisions each day by evaluating whether each customer
complaint received islegitimate and warrants a free dessert.
Figure 11.4 Examples of Decisions Commonly Made Within
Organizations
In this chapter we are going to discuss different
decision-making models designedto understand and evaluate the
effectiveness of nonprogrammed decisions. We willcover four
decision-making approaches, starting with the rational
decision-makingmodel, moving to the bounded rationality
decision-making model, the intuitivedecision-making model, and
ending with the creative decision-making model.
5. Decisions that are made to setthe course of an
organization.
6. Decisions about how things willget done.
7. Decisions employees makeeach day to make theorganization
function.
Chapter 11 Making Decisions
11.2 Understanding Decision Making 523
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Making Rational Decisions
The rational decision-making model8 describes a series of steps
that decisionmakers should consider if their goal is to maximize
the quality of their outcomes. Inother words, if you want to make
sure that you make the best choice, going throughthe formal steps
of the rational decision-making model may make sense.
Lets imagine that your old, clunky car has broken down, and you
have enoughmoney saved for a substantial down payment on a new car.
It will be the first majorpurchase of your life, and you want to
make the right choice. The first step,therefore, has already been
completedwe know that you want to buy a new car.Next, in step 2,
youll need to decide which factors are important to you. How
manypassengers do you want to accommodate? How important is fuel
economy to you? Issafety a major concern? You only have a certain
amount of money saved, and youdont want to take on too much debt,
so price range is an important factor as well. Ifyou know you want
to have room for at least five adults, get at least 20 miles
pergallon, drive a car with a strong safety rating, not spend more
than $22,000 on thepurchase, and like how it looks, you have
identified the decision criteria9. All thepotential options for
purchasing your car will be evaluated against these criteria.Before
we can move too much further, you need to decide how important
eachfactor is to your decision in step 3. If each is equally
important, then there is noneed to weigh them, but if you know that
price and mpg are key factors, you mightweigh them heavily and keep
the other criteria with medium importance. Step 4requires you to
generate all alternatives10 about your options. Then, in step 5,
youneed to use this information to evaluate each alternative
against the criteria youhave established. You choose the best
alternative (step 6), and then you would goout and buy your new car
(step 7).
Of course, the outcome of this decision will influence the next
decision made. Thatis where step 8 comes in. For example, if you
purchase a car and have nothing butproblems with it, you will be
less likely to consider the same make and model whenpurchasing a
car the next time.
8. A series of steps that decisionmakers should consider if
theirgoal is to maximize theiroutcome and make the bestchoice.
9. A set of parameters againstwhich all of the potentialoptions
in decision making willbe evaluated.
10. Other possible solutions to aproblem in a
decision-makingprocess.
Chapter 11 Making Decisions
11.2 Understanding Decision Making 524
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Figure 11.5 Steps in the Rational Decision-Making Model
While decision makers can get off track during any of these
steps, research showsthat searching for alternatives in the fourth
step can be the most challenging andoften leads to failure. In
fact, one researcher found that no alternative generationoccurred
in 85% of the decisions he studied.Nutt, P. C. (1994). Types
oforganizational decision processes. Administrative Science
Quarterly, 29, 414550.Conversely, successful managers know what
they want at the outset of the decision-making process, set
objectives for others to respond to, carry out an
unrestrictedsearch for solutions, get key people to participate,
and avoid using their power topush their perspective.Nutt, P. C.
(1998). Surprising but true: Half the decisions inorganizations
fail. Academy of Management Executive, 13, 7590.
The rational decision-making model has important lessons for
decision makers.First, when making a decision, you may want to make
sure that you establish yourdecision criteria before you search for
alternatives. This would prevent you fromliking one option too much
and setting your criteria accordingly. For example, letssay you
started browsing cars online before you generated your decision
criteria.You may come across a car that you feel reflects your
sense of style and you developan emotional bond with the car. Then,
because of your love for the particular car,you may say to yourself
that the fuel economy of the car and the innovative braking
Chapter 11 Making Decisions
11.2 Understanding Decision Making 525
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system are the most important criteria. After purchasing it, you
may realize thatthe car is too small for your friends to ride in
the back seat, which was somethingyou should have thought about.
Setting criteria before you search for alternativesmay prevent you
from making such mistakes. Another advantage of the rationalmodel
is that it urges decision makers to generate all alternatives
instead of only afew. By generating a large number of alternatives
that cover a wide range ofpossibilities, you are unlikely to make a
more effective decision that does notrequire sacrificing one
criterion for the sake of another.
Despite all its benefits, you may have noticed that this
decision-making modelinvolves a number of unrealistic assumptions
as well. It assumes that peoplecompletely understand the decision
to be made, that they know all their availablechoices, that they
have no perceptual biases, and that they want to make
optimaldecisions. Nobel Prize winning economist Herbert Simon
observed that while therational decision-making model may be a
helpful device in aiding decision makerswhen working through
problems, it doesnt represent how decisions are frequentlymade
within organizations. In fact, Simon argued that it didnt even come
close.
Think about how you make important decisions in your life. It is
likely that yourarely sit down and complete all 8 of the steps in
the rational decision-makingmodel. For example, this model proposed
that we should search for all possiblealternatives before making a
decision, but that process is time consuming, andindividuals are
often under time pressure to make decisions. Moreover, even if
wehad access to all the information that was available, it could be
challenging tocompare the pros and cons of each alternative and
rank them according to ourpreferences. Anyone who has recently
purchased a new laptop computer or cellphone can attest to the
challenge of sorting through the different strengths andlimitations
of each brand and model and arriving at the solution that best
meetsparticular needs. In fact, the availability of too much
information can lead toanalysis paralysis11, in which more and more
time is spent on gatheringinformation and thinking about it, but no
decisions actually get made. A seniorexecutive at Hewlett-Packard
Development Company LP admits that his companysuffered from this
spiral of analyzing things for too long to the point where
datagathering led to not making decisions, instead of us making
decisions.Zell, D. M.,Glassman, A. M., & Duron, S. A. (2007).
Strategic management in turbulent times:The short and glorious
history of accelerated decision making at
Hewlett-Packard.Organizational Dynamics, 36, 93104. Moreover, you
may not always be interested inreaching an optimal decision. For
example, if you are looking to purchase a house,you may be willing
and able to invest a great deal of time and energy to find
yourdream house, but if you are only looking for an apartment to
rent for the academicyear, you may be willing to take the first one
that meets your criteria of being clean,close to campus, and within
your price range.
11. A decision-making process inwhich more and more time isspent
on gathering informationand thinking about it, but nodecisions
actually get made.
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Making Good Enough Decisions
The bounded rationality model12 of decision making recognizes
the limitations ofour decision-making processes. According to this
model, individuals knowinglylimit their options to a manageable set
and choose the first acceptable alternativewithout conducting an
exhaustive search for alternatives. An important part of thebounded
rationality approach is the tendency to satisfice13 (a term coined
byHerbert Simon from satisfy and suffice), which refers to
accepting the firstalternative that meets your minimum criteria.
For example, many college graduatesdo not conduct a national or
international search for potential job openings.Instead, they focus
their search on a limited geographic area, and they tend toaccept
the first offer in their chosen area, even if it may not be the
ideal jobsituation. Satisficing is similar to rational decision
making. The main difference isthat rather than choosing the best
option and maximizing the potential outcome,the decision maker
saves cognitive time and effort by accepting the first
alternativethat meets the minimum threshold.
Making Intuitive Decisions
The intuitive decision-making model14 has emerged as an
alternative to otherdecision making processes. This model refers to
arriving at decisions withoutconscious reasoning. A total of 89% of
managers surveyed admitted to usingintuition to make decisions at
least sometimes and 59% said they used intuitionoften.Burke, L. A.,
& Miller, M. K. (1999). Taking the mystery out of
intuitivedecision making. Academy of Management Executive, 13,
9198. Managers makedecisions under challenging circumstances,
including time pressures, constraints, agreat deal of uncertainty,
changing conditions, and highly visible and high-stakesoutcomes.
Thus, it makes sense that they would not have the time to use
therational decision-making model. Yet when CEOs, financial
analysts, and health careworkers are asked about the critical
decisions they make, seldom do they attributesuccess to luck. To an
outside observer, it may seem like they are making guesses asto the
course of action to take, but it turns out that experts
systematically makedecisions using a different model than was
earlier suspected. Research on life-or-death decisions made by fire
chiefs, pilots, and nurses finds that experts do notchoose among a
list of well thought out alternatives. They dont decide between
twoor three options and choose the best one. Instead, they consider
only one option ata time. The intuitive decision-making model
argues that in a given situation,experts making decisions scan the
environment for cues to recognizepatterns.Breen, B. (2000, August).
Whats your intuition? Fast Company, 290; Klein, G.(2003). Intuition
at work. New York: Doubleday; Salas, E., & Klein, G. (2001).
Linkingexpertise and naturalistic decision making. Mahwah, NJ:
Lawrence Erlbaum Associates.Once a pattern is recognized, they can
play a potential course of action through toits outcome based on
their prior experience. Thanks to training, experience,
andknowledge, these decision makers have an idea of how well a
given solution may
12. According to this model,individuals knowingly limittheir
options to a manageableset and choose the firstacceptable
alternative withoutconducting an exhaustivesearch for
alternatives.
13. To accept the first alternativethat meets minimum
criteria.
14. Arriving at decisions withoutconscious reasoning. Themodel
argues that in a givensituation, experts makingdecisions scan
theenvironment for cues torecognize patterns.
Chapter 11 Making Decisions
11.2 Understanding Decision Making 527
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work. If they run through the mental model and find that the
solution will notwork, they alter the solution before setting it
into action. If it still is not deemed aworkable solution, it is
discarded as an option, and a new idea is tested until aworkable
solution is found. Once a viable course of action is identified,
the decisionmaker puts the solution into motion. The key point is
that only one choice isconsidered at a time. Novices are not able
to make effective decisions this way,because they do not have
enough prior experience to draw upon.
Making Creative Decisions
In addition to the rational decision making, bounded
rationality, and intuitivedecision-making models, creative decision
making is a vital part of being aneffective decision maker.
Creativity15 is the generation of new, imaginative ideas.With the
flattening of organizations and intense competition among
companies,individuals and organizations are driven to be creative
in decisions ranging fromcutting costs to generating new ways of
doing business. Please note that, whilecreativity is the first step
in the innovation process, creativity and innovation arenot the
same thing. Innovation begins with creative ideas, but it also
involvesrealistic planning and follow-through. Innovations such as
3Ms Clearview WindowTinting grow out of a creative decision-making
process about what may or may notwork to solve real-world
problems.
The five steps to creative decision making are similar to the
previous decision-making models in some keys ways. All the models
include problem identification,which is the step in which the need
for problem solving becomes apparent. If youdo not recognize that
you have a problem, it is impossible to solve it. Immersion isthe
step in which the decision maker consciously thinks about the
problem andgathers information. A key to success in creative
decision making is having oracquiring expertise in the area being
studied. Then, incubation occurs. Duringincubation, the individual
sets the problem aside and does not think about it for awhile. At
this time, the brain is actually working on the problem
unconsciously.Then comes illumination, or the insight moment when
the solution to the problembecomes apparent to the person,
sometimes when it is least expected. This suddeninsight is the
eureka moment, similar to what happened to the ancient
Greekinventor Archimedes, who found a solution to the problem he
was working on whiletaking a bath. Finally, the verification and
application stage happens when thedecision maker consciously
verifies the feasibility of the solution and implementsthe
decision.
15. The generation of new ideasthat are original, fluent,
andflexible.
Chapter 11 Making Decisions
11.2 Understanding Decision Making 528
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Figure 11.6 The Creative Decision-Making Process
A NASA scientist describes his decision-making process leading
to a creativeoutcome as follows: He had been trying to figure out a
better way to de-ice planes tomake the process faster and safer.
After recognizing the problem, he immersedhimself in the literature
to understand all the options, and he worked on theproblem for
months trying to figure out a solution. It was not until he was
sittingoutside a McDonalds restaurant with his grandchildren that
it dawned on him. Thegolden arches of the M of the McDonalds logo
inspired his solutionhe woulddesign the de-icer as a series of
Ms.In person interview conducted by author TalyaBauer at Ames
Research Center, Mountain View, CA, 1990. This represented
theillumination stage. After he tested and verified his creative
solution, he was donewith that problem, except to reflect on the
outcome and process.
How Do You Know If Your Decision-Making Process Is Creative?
Researchers focus on three factors to evaluate the level of
creativity in the decision-making process. Fluency16 refers to the
number of ideas a person is able togenerate. Flexibility17 refers
to how different the ideas are from one another. If youare able to
generate several distinct solutions to a problem, your
decision-makingprocess is high on flexibility. Originality18 refers
to how unique a persons ideasare. You might say that Reed Hastings,
founder and CEO of Netflix Inc. is a prettycreative person. His
decision-making process shows at least two elements ofcreativity.
We do not know exactly how many ideas he had over the course of
hiscareer, but his ideas are fairly different from each other.
After teaching math inAfrica with the Peace Corps, Hastings was
accepted at Stanford, where he earned amasters degree in computer
science. Soon after starting work at a softwarecompany, he invented
a successful debugging tool, which led to his founding of
thecomputer troubleshooting company Pure Software LLC in 1991.
After a merger andthe subsequent sale of the resulting company in
1997, Hastings founded Netflix,which revolutionized the DVD rental
business with online rentals delivered throughthe mail with no late
fees. In 2007, Hastings was elected to Microsofts board
ofdirectors. As you can see, his ideas are high in originality and
flexibility.Conlin, M.(2007, September 14). Netflix: Recruiting and
retaining the best talent. Business WeekOnline. Retrieved March 1,
2008, from
http://www.businessweek.com/managing/content/sep2007/ca20070913_564868.htm?campaign_id=rss_null.
16. The number of ideas a personis able to generate.
17. How different the ideas arefrom each other. If
individualsare able to generate severalunique solutions to a
problem,they are high on flexibility.
18. How unique a persons ideasare.
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Figure 11.7 Dimensions of Creativity
Some experts have proposed that creativity occurs as an
interaction among threefactors: peoples personality traits
(openness to experience, risk taking), theirattributes (expertise,
imagination, motivation), and the situational context(encouragement
from others, time pressure, physical structures).Amabile, T.
M.(1988). A model of creativity and innovation in organizations. In
B. M. Staw & L. L.Cummings (Eds.), Research in organizational
behavior, vol. 10 (pp. 123167) Greenwich,CT: JAI Press; Amabile, T.
M., Conti, R., Coon, H., Lazenby, J., & Herron, M.
(1996).Assessing the work environment for creativity. Academy of
Management Journal, 39,11541184; Ford, C. M., & Gioia, D. A.
(2000). Factors influencing creativity in thedomain of managerial
decision making. Journal of Management, 26, 705732; Tierney,P.,
Farmer, S. M., & Graen, G. B. (1999). An examination of
leadership and employeecreativity: The relevance of traits and
relationships. Personnel Psychology, 52,591620; Woodman, R. W.,
Sawyer, J. E., & Griffin, R. W. (1993). Toward a theory
oforganizational creativity. Academy of Management Review, 18,
293321. For example,research shows that individuals who are open to
experience, less conscientious,more self-accepting, and more
impulsive tend to be more creative.Feist, G. J. (1998).A
meta-analysis of personality in scientific and artistic creativity.
Personality andSocial Psychology Review, 2, 290309.
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OB Toolbox: Ideas for Enhancing OrganizationalCreativity
Team Composition
Diversify your team to give them more inputs to build on andmore
opportunities to create functional conflict while avoidingpersonal
conflict.
Change group membership to stimulate new ideas and
newinteraction patterns.
Leaderless teams can allow teams freedom to create withouttrying
to please anyone up front.
Team Process
Engage in brainstorming to generate ideas. Remember to set ahigh
goal for the number of ideas the group should come upwith,
encourage wild ideas, and take brainwriting breaks.
Use the nominal group technique (see Tools and Techniques
forMaking Better Decisions below) in person or electronically
toavoid some common group process pitfalls. Consideranonymous
feedback as well.
Use analogies to envision problems and solutions.
Leadership
Challenge teams so that they are engaged but not overwhelmed.
Let people decide how to achieve goals, rather than telling
them
what goals to achieve. Support and celebrate creativity even
when it leads to a mistake.
Be sure to set up processes to learn from mistakes as well. Role
model creative behavior.
Culture
Institute organizational memory so that individuals do not
spendtime on routine tasks.
Build a physical space conducive to creativity that is playful
andhumorousthis is a place where ideas can thrive.
Incorporate creative behavior into the performance
appraisalprocess.
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Sources: Adapted from ideas in Amabile, T. M. (1998). How to
kill creativity.Harvard Business Review, 76, 7687; Gundry, L. K.,
Kickul, J. R., & Prather, C. W.(1994). Building the creative
organization. Organizational Dynamics, 22, 2237;Keith, N., &
Frese, M. (2008). Effectiveness of error management training:
Ameta-analysis. Journal of Applied Psychology, 93, 5969. Pearsall,
M. J., Ellis, A. P. J.,& Evans, J. M. (2008). Unlocking the
effects of gender faultlines on teamcreativity: Is activation the
key? Journal of Applied Psychology, 93, 225234.Thompson, L. (2003).
Improving the creativity of organizational work groups.Academy of
Management Executive, 17, 96109.
There are many techniques available that enhance and improve
creativity. LinusPauling, the Nobel Prize winner who popularized
the idea that vitamin C could helpstrengthen the immune system,
said, The best way to have a good idea is to have alot of
ideas.Quote retrieved May 1, 2008, from
http://www.whatquote.com/quotes/linus-pauling/250801-the-best-way-to-have.htm.
One popular method ofgenerating ideas is to use brainstorming.
Brainstorming19 is a group process ofgenerating ideas that follow a
set of guidelines, including no criticism of ideasduring the
brainstorming process, the idea that no suggestion is too crazy,
andbuilding on other ideas (piggybacking). Research shows that the
quantity of ideasactually leads to better idea quality in the end,
so setting high idea quotas20, inwhich the group must reach a set
number of ideas before they are done, isrecommended to avoid
process loss and maximize the effectiveness ofbrainstorming.
Another unique aspect of brainstorming is that since the variety
ofbackgrounds and approaches give the group more to draw upon, the
more peopleare included in the process, the better the decision
outcome will be. A variation ofbrainstorming is wildstorming21, in
which the group focuses on ideas that areimpossible and then
imagines what would need to happen to make thempossible.Scott, G.,
Leritz, L. E., & Mumford, M. D. (2004). The effectiveness
ofcreativity training: A quantitative review. Creativity Research
Journal, 16, 361388.
19. A process of generating ideasthat follows a set of
guidelines,including not criticizing ideasduring the process, the
ideathat no suggestion is too crazy,and building on other
ideas(piggybacking).
20. A set number of ideas a groupmust reach before they aredone
with brainstorming.
21. A variation of brainstorming inwhich the group focuses
onideas that are impossible andthen imagines what wouldneed to
happen to make thempossible.
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Figure 11.8
Which decision-making model should I use?
KEY TAKEAWAY
Decision making is choosing among alternative courses of action,
includinginaction. There are different types of decisions ranging
from automatic,programmed decisions to more intensive nonprogrammed
decisions.Structured decision-making processes include rational,
bounded rationality,intuitive, and creative decision making. Each
of these can be useful,depending on the circumstances and the
problem that needs to be solved.
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EXERCISES
1. What do you see as the main difference between a successful
and anunsuccessful decision? How much does luck versus skill have
to do withit? How much time needs to pass to know if a decision is
successful ornot?
2. Research has shown that over half of the decisions made
withinorganizations fail. Does this surprise you? Why or why
not?
3. Have you used the rational decision-making model to make a
decision?What was the context? How well did the model work?
4. Share an example of a decision in which you used satisficing.
Were youhappy with the outcome? Why or why not? When would you be
mostlikely to engage in satisficing?
5. Do you think intuition is respected as a decision-making
style? Do youthink it should be? Why or why not?
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11.3 Faulty Decision Making
LEARNING OBJECTIVES
1. Understand overconfidence bias and how to avoid it.2.
Understand hindsight bias and how to avoid it.3. Understand
anchoring and how to avoid it.4. Understand framing bias and how to
avoid it.5. Understand escalation of commitment and how to avoid
it.
Avoiding Decision-Making Traps
No matter which model you use, it is important to know and avoid
the decision-making traps that exist. Daniel Kahnemann (another
Nobel Prize winner) and AmosTversky spent decades studying how
people make decisions. They found thatindividuals are influenced by
overconfidence bias, hindsight bias, anchoring bias,framing bias,
and escalation of commitment.
Overconfidence bias22 occurs when individuals overestimate their
ability topredict future events. Many people exhibit signs of
overconfidence. For example,82% of the drivers surveyed feel they
are in the top 30% of safe drivers, 86% ofstudents at the Harvard
Business School say they are better looking than theirpeers, and
doctors consistently overestimate their ability to detect
problems.Tilson,W. (1999, September 20). The perils of investor
overconfidence. Retrieved March 1,2008, from
http://www.fool.com/BoringPort/1999/BoringPort990920.htm. Muchlike
friends that are 100% sure they can pick the winners of this weeks
footballgames despite evidence to the contrary, these individuals
are suffering fromoverconfidence bias. Similarly, in 2008, the
French bank Socit Gnrale lost over$7 billion as a result of the
rogue actions of a single trader. Jrme Kerviel, a juniortrader in
the bank, had extensive knowledge of the banks control mechanisms
andused this knowledge to beat the system. Interestingly, he did
not make any moneyfrom these transactions himself, and his sole
motive was to be successful. Hesecretly started making risky moves
while hiding the evidence. He made a lot ofprofit for the company
early on and became overly confident in his abilities to makeeven
more. In his defense, he was merely able to say that he got carried
away.Therogue rebuttal. (2008, February 9). Economist, 386, 82.
People who purchase lotterytickets as a way to make money are
probably suffering from overconfidence bias. Itis three times more
likely for a person driving 10 miles to buy a lottery ticket to
bekilled in a car accident than to win the jackpot.Orkin, M.
(1991). Can you win? Thereal odds for casino gambling, sports
betting and lotteries. New York: W. H. Freeman.
22. What occurs when individualsoverestimate their ability
topredict future events.
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Figure 11.9
Source: [citation redacted perpublisher request]. Reprinted
bypermission.
Further, research shows that overconfidence leads to less
successfulnegotiations.Neale, M. A., & Bazerman, M. H. (1985).
The effects of framing andnegotiator overconfidence on bargaining
behaviors and outcomes. Academy ofManagement Journal, 28, 3449. To
avoid this bias, take the time to stop and askyourself if you are
being realistic in your judgments.
Hindsight bias23 is the opposite of overconfidence bias,as it
occurs when looking backward in time andmistakes seem obvious after
they have alreadyoccurred. In other words, after a surprising
eventoccurred, many individuals are likely to think that
theyalready knew the event was going to happen. This biasmay occur
because they are selectively reconstructingthe events. Hindsight
bias tends to become a problemwhen judging someone elses decisions.
For example,lets say a company driver hears the engine
makingunusual sounds before starting the morning routine.Being
familiar with this car in particular, the driver mayconclude that
the probability of a serious problem issmall and continues to drive
the car. During the day, thecar malfunctions and stops miles away
from the office.It would be easy to criticize the decision to
continue todrive the car because in hindsight, the noises heard
inthe morning would make us believe that the driver should have
known somethingwas wrong and taken the car in for service. However,
the driver in question mayhave heard similar sounds before with no
consequences, so based on theinformation available at the time,
continuing with the regular routine may havebeen a reasonable
choice. Therefore, it is important for decision makers toremember
this bias before passing judgments on other peoples actions.
Anchoring24 refers to the tendency for individuals to rely too
heavily on a singlepiece of information. Job seekers often fall
into this trap by focusing on a desiredsalary while ignoring other
aspects of the job offer such as additional benefits, fitwith the
job, and working environment. Similarly, but more dramatically,
liveswere lost in the Great Bear Wilderness Disaster when the
coroner, within 5 minutesof arriving at the accident scene,
declared all five passengers of a small plane dead,which halted the
search effort for potential survivors. The next day two
survivorswho had been declared dead walked out of the forest. How
could a mistake like thishave been made? One theory is that
decision biases played a large role in thisserious error, and
anchoring on the fact that the plane had been consumed byflames led
the coroner to call off the search for any possible
survivors.Becker, W. S.(2007). Missed opportunities: The Great Bear
Wilderness Disaster. OrganizationalDynamics, 36, 363376.
23. The opposite of overconfidencebias, as it occurs when
lookingbackward in time and mistakesseem obvious after they
havealready occurred.
24. The tendency for individuals torely too heavily on a
singlepiece of information.
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Framing bias25 is another concern for decision makers. Framing
bias refers to thetendency of decision makers to be influenced by
the way that a situation or problemis presented. For example, when
making a purchase, customers find it easier to letgo of a discount
as opposed to accepting a surcharge, even though they both
mightcost the person the same amount of money. Similarly, customers
tend to prefer astatement such as 85% lean beef as opposed to 15%
fat.Li, S., Sun, Y., & Wang, Y.(2007). 50% off or buy one get
one free? Frame preference as a function ofconsumable nature in
dairy products. Journal of Social Psychology, 147, 413421. It
isimportant to be aware of this tendency, because depending on how
a problem ispresented to us, we might choose an alternative that is
disadvantageous simplybecause of the way it is framed.
Escalation of commitment26 occurs when individuals continue on a
failing courseof action after information reveals it may be a poor
path to follow. It is sometimescalled the sunken costs fallacy,
because continuation is often based on the ideathat one has already
invested in the course of action. For example, imagine a personwho
purchases a used car, which turns out to need something repaired
every fewweeks. An effective way of dealing with this situation
might be to sell the carwithout incurring further losses, donate
the car, or use it until it falls apart.However, many people would
spend hours of their time and hundreds, eventhousands of dollars
repairing the car in the hopes that they might recover theirinitial
investment. Thus, rather than cutting their losses, they waste time
andenergy while trying to justify their purchase of the car.
A classic example of escalation of commitment from the corporate
world isMotorola Inc.s Iridium project. In the 1980s, phone
coverage around the world wasweak. For example, it could take hours
of dealing with a chain of telephoneoperators in several different
countries to get a call through from Cleveland toCalcutta. There
was a real need within the business community to improve
phoneaccess around the world. Motorola envisioned solving this
problem using 66 low-orbiting satellites, enabling users to place a
direct call to any location around theworld. At the time of idea
development, the project was technologically
advanced,sophisticated, and made financial sense. Motorola spun off
Iridium as a separatecompany in 1991. It took researchers a total
of 15 years to develop the product fromidea to market release.
However, in the 1990s, the landscape for cell phonetechnology was
dramatically different from that in the 1980s, and the
widespreadcell phone coverage around the world eliminated most of
the projected customerbase for Iridium. Had they been paying
attention to these developments, thedecision makers could have
abandoned the project at some point in the early 1990s.Instead,
they released the Iridium phone to the market in 1998. The phone
cost$3,000, and it was literally the size of a brick. Moreover, it
was not possible to usethe phone in moving cars or inside
buildings. Not surprisingly, the launch was afailure, and Iridium
filed for bankruptcy in 1999.Finkelstein, S., & Sanford, S.
H.
25. The tendency of decisionmakers to be influenced by theway
problems are presented.
26. When individuals continue ona failing course of action
afterinformation reveals it may be apoor path to follow.
Chapter 11 Making Decisions
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(2000, November). Learning from corporate mistakes: The rise and
fall of Iridium.Organizational Dynamics, 29(2), 138148. In the end,
the company was purchased for$25 million by a group of investors
(whereas it cost the company $5 billion todevelop its product),
scaled down its operations, and modified it for use by
theDepartment of Defense to connect soldiers in remote areas not
served by land linesor cell phones.
Why does escalation of commitment occur? There may be many
reasons, but twoare particularly important. First, decision makers
may not want to admit that theywere wrong. This may be because of
personal pride or being afraid of theconsequences of such an
admission. Second, decision makers may incorrectlybelieve that
spending more time and energy might somehow help them recovertheir
losses. Effective decision makers avoid escalation of commitment
bydistinguishing between when persistence may actually pay off
versus when it mightmean escalation of commitment. To avoid
escalation of commitment, you mightconsider having strict turning
back points. For example, you might determine upfront that you will
not spend more than $500 trying to repair the car and will sell
itwhen you reach that point. You might also consider assigning
separate decisionmakers for the initial buying and subsequent
selling decisions. Periodic evaluationsof an initially sound
decision to see whether the decision still makes sense is
alsoanother way of preventing escalation of commitment. This type
of review becomesparticularly important in projects such as the
Iridium phone, in which the initialdecision is not immediately
implemented but instead needs to go through a lengthydevelopment
process. In such cases, it becomes important to periodically assess
thesoundness of the initial decision in the face of changing market
conditions. Finally,creating an organizational climate in which
individuals do not fear admitting thattheir initial decision no
longer makes economic sense would go a long way inpreventing
escalation of commitment, as it could lower the regret the
decisionmaker may experience.Wong, K. F. E., & Kwong, J. Y. Y.
(2007). The role ofanticipated regret in escalation of commitment.
Journal of Applied Psychology, 92,545554.
Figure 11.10
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11.3 Faulty Decision Making 538
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Motorola released the Iridium phone to the market in 1998. The
phone cost $3,000 and it was literally the size of abrick.
Source:
http://upload.wikimedia.org/wikipedia/commons/b/b0/Iridium_phone.jpg.
So far we have focused on how individuals make decisions and how
to avoiddecision traps. Next we shift our focus to the group level.
There are manysimilarities as well as many differences between
individual and group decisionmaking. There are many factors that
influence group dynamics and also affect thegroup decision-making
process. We will discuss some of them in the followingsection.
KEY TAKEAWAY
Understanding decision-making traps can help you avoid and
manage them.Overconfidence bias can cause you to ignore obvious
information. Hindsightbias can similarly cause a person to
incorrectly believe in their ability topredict events. Anchoring
and framing biases show the importance of theway problems or
alternatives are presented in influencing ones decision.Escalation
of commitment demonstrates how individuals desire to beconsistent
or avoid admitting a mistake can cause them to continue to investin
a decision that is no longer prudent.
EXERCISES
1. Describe a time when you fell into one of the decision-making
traps.How did you come to realize that you had made a poor
decision?
2. How can you avoid escalation of commitment?3. Share an
example of anchoring.4. Which of the traps seems the most dangerous
for decision makers and
why?
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11.4 Decision Making in Groups
LEARNING OBJECTIVES
1. Understand the pros and cons of individual and group decision
making.2. Learn to recognize the signs of groupthink.3. Recognize
different tools and techniques for making better decisions.
When It Comes to Decision Making, Are Two Heads Better
ThanOne?
The answer to this question depends on several factors. Group
decision making hasthe advantage of drawing from the experiences
and perspectives of a larger numberof individuals. Hence, a group
may have the potential to be more creative and leadto more
effective decisions. In fact, groups may sometimes achieve results
beyondwhat they could have done as individuals. Groups may also
make the task moreenjoyable for the members. Finally, when the
decision is made by a group ratherthan a single individual,
implementation of the decision will be easier, becausegroup members
will be more invested in the decision. If the group is diverse,
betterdecisions may be made, because different group members may
have different ideasbased on their backgrounds and experiences.
Research shows that for topmanagement teams, diverse groups that
debate issues make decisions that are morecomprehensive and better
for the bottom line.Simons, T., Pelled, L. H., & Smith, K.A.
(1999). Making use of difference: Diversity, debate, decision
comprehensivenessin top management teams. Academy of Management
Journal, 42, 662673.
Despite its popularity within organizations, group decision
making suffers from anumber of disadvantages. We know that groups
rarely outperform their bestmember.Miner, F. C. (1984). Group
versus individual decision making: Aninvestigation of performance
measures, decision strategies, and process losses/gains.
Organizational Behavior and Human Performance, 33, 112124. While
groups havethe potential to arrive at an effective decision, they
often suffer from process losses.For example, groups may suffer
from coordination problems. Anyone who hasworked with a team of
individuals on a project can attest to the difficulty
ofcoordinating members work or even coordinating everyones presence
in a teammeeting. Furthermore, groups can suffer from groupthink.
Finally, group decisionmaking takes more time compared to
individual decision making, because allmembers need to discuss
their thoughts regarding different alternatives.
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Figure 11.12
Thus, whether an individual or a group decision is preferable
will depend on thespecifics of the situation. For example, if there
is an emergency and a decisionneeds to be made quickly, individual
decision making might be preferred.Individual decision making may
also be appropriate if the individual in question hasall the
information needed to make the decision and if implementation
problemsare not expected. On the other hand, if one person does not
have all theinformation and skills needed to make a decision, if
implementing the decision willbe difficult without the involvement
of those who will be affected by the decision,and if time urgency
is more modest, then decision making by a group may be
moreeffective.
Figure 11.11 Advantages and Disadvantages of Different Levels of
Decision Making
Groupthink
Have you ever been in a decision-making group that youfelt was
heading in the wrong direction but you didntspeak up and say so? If
so, you have already been avictim of groupthink. Groupthink27 is a
tendency toavoid a critical evaluation of ideas the group
favors.Iriving Janis, author of a book called Victims ofGroupthink,
explained that groupthink is characterizedby eight symptoms:Janis,
I. L. (1972). Victims ofgroupthink. New York: Houghton Mifflin.
27. A tendency to avoid a criticalevaluation of ideas the
groupfavors.
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In January 1986, the spaceshuttle Challenger exploded 73seconds
after liftoff, killing allseven astronauts aboard. Thedecision to
launch Challengerthat day, despite problems withmechanical
components of thevehicle and unfavorable weatherconditions, is
cited as an exampleof groupthink.Esser, J. K., &Lindoerfer, J.
L. (1989).Groupthink and the space shuttleChallenger accident:
Toward aquantitative case analysis.Journal of Behavioral
DecisionMaking, 2, 167177; Moorhead, G.,Ference, R., & Neck, C.
P. (1991).Group decision fiascoes continue:Space shuttle Challenger
and arevised groupthink framework.Human Relations, 44, 539550.
Source:
http://en.wikipedia.org/wiki/Image:Challenger_flight_51-l_crew.jpg.
1. Illusion of invulnerability is shared bymost or all of the
group members, whichcreates excessive optimism and encouragesthem
to take extreme risks.
2. Collective rationalizations occur, inwhich members downplay
negativeinformation or warnings that might causethem to reconsider
their assumptions.
3. An unquestioned belief in the groupsinherent morality occurs,
which mayincline members to ignore ethical or moralconsequences of
their actions.
4. Stereotyped views of outgroups are seenwhen groups discount
rivals abilities tomake effective responses.
5. Direct pressure is exerted on anymembers who express strong
argumentsagainst any of the groups stereotypes,illusions, or
commitments.
6. Self-censorship occurs when members ofthe group minimize
their own doubts andcounterarguments.
7. Illusions of unanimity occur, based onself-censorship and
direct pressure on thegroup. The lack of dissent is viewed
asunanimity.
8. The emergence of self-appointed mindguards happens when one
ormore members protect the group from information that runs
counterto the groups assumptions and course of action.
Chapter 11 Making Decisions
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OB Toolbox: Recommendations for Avoiding Groupthink
Groups should do the following:
Discuss the symptoms of groupthink and how to avoid them. Assign
a rotating devils advocate to every meeting. Invite experts or
qualified colleagues who are not part of the
core decision-making group to attend meetings and getreactions
from outsiders on a regular basis and share thesewith the
group.
Encourage a culture of difference where different ideas
arevalued.
Debate the ethical implications of the decisions and
potentialsolutions being considered.
Individuals should do the following:
Monitor personal behavior for signs of groupthink and
modifybehavior if needed.
Check for self-censorship. Carefully avoid mindguard behaviors.
Avoid putting pressure on other group members to conform. Remind
members of the ground rules for avoiding groupthink
if they get off track.
Group leaders should do the following:
Break the group into two subgroups from time to time. Have more
than one group work on the same problem if time
and resources allow it. This makes sense for highly
criticaldecisions.
Remain impartial and refrain from stating preferences at
theoutset of decisions.
Set a tone of encouraging critical evaluations
throughoutdeliberations.
Create an anonymous feedback channel through which allgroup
members can contribute if desired.
Sources: Adapted and expanded from Janis, I. L. (1972). Victims
of groupthink.New York: Houghton Mifflin; Whyte, G. (1991).
Decision failures: Why theyoccur and how to prevent them. Academy
of Management Executive, 5, 2331.
Chapter 11 Making Decisions
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Figure 11.13
Communicating is a key aspect ofmaking decisions in a group.
Inorder to generate potentialalternatives, brainstorming
andcritical thinking are needed toavoid groupthink.
2010 JupiterimagesCorporation
Tools and Techniques for Making Better Decisions
Nominal Group Technique (NGT)28 was developed to help with group
decisionmaking by ensuring that all members participate fully. NGT
is not a technique to beused routinely at all meetings. Rather, it
is used to structure group meetings whenmembers are grappling with
problem solving or idea generation. It follows foursteps.Delbecq,
A. L., Van de Ven, A. H., & Gustafson, D. H. (1975). Group
techniques forprogram planning: A guide to nominal group and Delphi
processes. Glenview, IL: ScottForesman. First, each member of the
group begins by independently and silentlywriting down ideas.
Second, the group goes in order around the room to gather allthe
ideas that were generated. This process continues until all the
ideas are shared.Third, a discussion takes place around each idea,
and members ask for and giveclarification and make evaluative
statements. Finally, group members vote for theirfavorite ideas by
using ranking or rating techniques. Following the four-step
NGThelps to ensure that all members participate fully, and it
avoids group decision-making problems such as groupthink.
Delphi Technique29 is unique because it is a groupprocess using
written responses to a series ofquestionnaires instead of
physically bringingindividuals together to make a decision. The
firstquestionnaire asks individuals to respond to a broadquestion
such as stating the problem, outliningobjectives, or proposing
solutions. Each subsequentquestionnaire is built from the
information gathered inthe previous one. The process ends when the
groupreaches a consensus. Facilitators can decide whether tokeep
responses anonymous. This process is often usedto generate best
practices from experts. For example,Purdue University Professor
Michael Campion used thisprocess when he was editor of the research
journalPersonnel Psychology and wanted to determine thequalities
that distinguished a good research article.Using the Delphi
technique, he was able to gatherresponses from hundreds of top
researchers fromaround the world and distill them into a checklist
ofcriteria that he could use to evaluate articles submittedto his
journal, all without ever having to leave hisoffice.Campion, M. A.
(1993). Article review checklist: A criterion checklist
forreviewing research articles in applied psychology. Personnel
Psychology, 46, 705718.
Majority rule30 refers to a decision-making rule in which each
member of thegroup is given a single vote and the option receiving
the greatest number of votes is
28. A technique designed to helpwith group decision making
byensuring that all membersparticipate fully.
29. A group process that utilizeswritten responses to a series
ofquestionnaires instead ofphysically bringing individualstogether
to make a decision.
30. A decision-making rule inwhich each member of thegroup is
given a single vote,and the option receiving thegreatest number of
votes isselected.
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selected. This technique has remained popular, perhaps due to
its simplicity, speed,ease of use, and representational fairness.
Research also supports majority rule asan effective decision-making
technique.Hastie, R., & Kameda, T. (2005). The robustbeauty of
majority rules in group decisions. Psychological Review, 112,
494508.However, those who did not vote in favor of the decision
will be less likely tosupport it.
Consensus31 is another decision-making rule that groups may use
when the goal isto gain support for an idea or plan of action.
While consensus tends to require moretime, it may make sense when
support is needed to enact the plan. The processworks by discussing
the issues at hand, generating a proposal, calling for
consensus,and discussing any concerns. If concerns still exist, the
proposal is modified toaccommodate them. These steps are repeated
until consensus is reached. Thus, thisdecision-making rule is
inclusive, participatory, cooperative, and democratic.Research
shows that consensus can lead to better accuracy,Roch, S. G.
(2007). Whyconvene rater teams: An investigation of the benefits of
anticipated discussion,consensus, and rater motivation.
Organizational Behavior and Human DecisionProcesses, 104, 1429. and
it helps members feel greater satisfaction withdecisions.Mohammed,
S., & Ringseis, E. (2001). Cognitive diversity and consensus
ingroup decision making: The role of inputs, processes, and
outcomes. OrganizationalBehavior and Human Decision Processes, 85,
310335. However, groups take longer withthis approach, and if
consensus cannot be reached, members tend to
becomefrustrated.Peterson, R. (1999). Can you have too much of a
good thing? The limits ofvoice for improving satisfaction with
leaders. Personality and Social Psychology, 25,313324.
31. A decision-making rule thatgroups may use when the goalis to
gain support for an idea orplan of action. This decision-making
rule is inclusive,participatory, cooperative, anddemocratic.
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OB Toolbox: Perform a Project Premortem
Doctors routinely perform postmortems to understand what went
wrong with apatient who has died. The idea is for everyone to learn
from the unfortunateoutcome so that future patients will not meet a
similar fate. But what if youcould avoid a horrible outcome before
it happened by proactively identifyingproject risks? Research has
shown that the simple exercise of imagining whatcould go wrong with
a given decision can increase peoples ability to correctlyidentify
reasons for future successes or failures by 30%.Mitchell, D. J.,
Russo, J.,& Pennington, N. (1989). Back to the future: Temporal
perspective in theexplanation of events. Journal of Behaviorial
Decision Making, 2, 2538. Apremortem32 is a way to imagine what
might go wrong and avoid it beforespending a cent or having to
change course along the way. Gary Klein, anexpert on decision
making in fast-paced, uncertain, complex, and criticalenvironments,
recommends that decision makers follow a five-step process
toincrease their chances of success.
1. A planning team comes up with an outline of a plan, such as
thelaunching of a new product.
2. Either the existing group or a unique group is then told to
imaginelooking into a crystal ball and seeing that the new product
failedmiserably. They then write down all the reasons they can
imaginethat might have led to this failure. Each team member shares
itemsfrom their list until all the potential problems have
beenidentified.
3. The list is reviewed for additional ideas.4. The issues are
sorted into categories in the search for themes.5. The plan should
then be revised to correct the flaws and avoid
these potential problems.
This technique allows groups to truly delve into what if
scenarios. Forexample, in a premortem session at a Fortune 500
company, an executiveimagined that a potential billion-dollar
environmental sustainability projectmight fail because the CEO had
retired.
Sources: Breen, B. (2000, August). Whats your intuition? Fast
Company, 290;Klein, G. (2007, September). Performing a project
premortem. Harvard BusinessReview, 85, 1819; Klein, G. (2003). The
power of intuition: How to use your gutfeelings to make better
decisions at work. New York: Random House; Pliske, R.,32. A way to
imagine what mightgo wrong and avoid it before
spending a cent or having tochange course along the way.
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McCloskey, M., & Klein, G. (2001). Decision skills training:
Facilitating learningfrom experience. In E. Salas & G. Klein
(Eds.), Linking expertise and naturalisticdecision making (pp.
3753). Mahwah, NJ: Lawrence Erlbaum Associates.
Group Decision Support Systems (GDSS)33 are interactive
computer-basedsystems that are able to combine communication and
decision technologies to helpgroups make better decisions. Research
shows that a GDSS can actually improve theoutput of groups
collaborative work through higher information sharing.Lam, S. S.K.,
& Schaubroeck, J. (2000). Improving group decisions by better
poolinginformation: A comparative advantage of group decision
support systems. Journal ofApplied Psychology, 85, 565573.
Organizations know that having effective knowledgemanagement
systems34 to share information is important, and their
spendingreflects this reality. Businesses invested $2.7 billion
into new systems in 2002, andprojections were for this number to
double every 5 years. As the popularity of thesesystems grows, they
risk becoming counterproductive. Humans can only process somany
ideas and information at one time. As virtual meetings grow larger,
it isreasonable to assume that information overload can occur and
good ideas will fallthrough the cracks, essentially recreating a
problem that the GDSS was intended tosolve, which is to make sure
every idea is heard. Another problem is the systempossibly becoming
too complicated. If the systems evolve to a point ofuncomfortable
complexity, it has recreated the problem. Those who understand
theinterface will control the narrative of the discussion, while
those who are less savvywill only be along for the ride.Nunamaker,
J. F., Jr., Dennis, A. R., Valacich, J. S.,Vogel, D. R., &
George, J. F. (1991, July). Electronic meetings to support group
work.Communications of the ACM, 34(7), 4061. Lastly, many of these
programs fail to takeinto account the factor of human psychology.
These systems could make employeesmore reluctant to share
information because of lack of control, lack of immediatefeedback,
or the fear of online flames.
Decision trees35 are diagrams in which answers to yes or no
questions lead decisionmakers to address additional questions until
they reach the end of the tree.Decision trees are helpful in
avoiding errors such as framing bias.Wright, G., &Goodwin, P.
(2002). Eliminating a framing bias by using simple instructions
tothink harder and respondents with managerial experience: Comment
onbreaking the frame. Strategic Management Journal, 23, 10591067.
Decision treestend to be helpful in guiding the decision maker to a
predetermined alternative andensuring consistency of decision
makingthat is, every time certain conditions arepresent, the
decision maker will follow one course of action as opposed to
others ifthe decision is made using a decision tree.
33. Interactive computer-basedsystems that are able tocombine
communication anddecision technologies to helpgroups make better
decisions.
34. Systems for managingknowledge in organizations,supporting
creation, capture,storage, and dissemination ofinformation.
35. Diagrams where answers to yesor no questions lead
decisionmakers to address additionalquestions until they reach
theend of the tree.
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11.4 Decision Making in Groups 547
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Figure 11.14
Utilizing decision trees can improve investment decisions by
optimizing them for maximum payoff. A decision treeconsists of
three types of nodes. Decision nodes are commonly represented by
squares. Chance nodes are representedby circles. End nodes are
represented by triangles.
Source:
http://upload.wikimedia.org/wikipedia/en/9/93/Investment_decision_Insight.png.
KEY TAKEAWAY
There are trade-offs between making decisions alone and within a
group.Groups have a greater diversity of experiences and ideas than
individuals,but they also have potential process losses such as
groupthink. Groupthinkcan be avoided by recognizing the eight
symptoms discussed. Finally, thereare a variety of tools and
techniques available for helping to make moreeffective decisions in
groups, including the nominal group technique, Delphitechnique,
majority rule, consensus, GDSS, and decision trees.
EXERCISES
1. Do you prefer to make decisions in a group or alone? What are
the mainreasons for your preference?
2. Have you been in a group that used the brainstorming
technique? Was itan effective tool for coming up with creative
ideas? Please shareexamples.
3. Have you been in a group that experienced groupthink? If so,
how didyou deal with it?
4. Which of the decision-making tools discussed in this chapter
(NGT,Delphi, and so on) have you used? How effective were they?
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11.5 The Role of Ethics and National Culture
LEARNING OBJECTIVES
1. Consider the role of ethical behavior on decision making.2.
Consider the role of national culture on decision making.
Ethics and Decision Making
Because many decisions involve an ethical component, one of the
most importantconsiderations in management is whether the decisions
you are making as anemployee or manager are ethical. Here are some
basic questions you can askyourself to assess the ethics of a
decision.Adapted from ideas contained in KennethBlanchard and
Norman Vincent Peale (1988). The power of ethical management.
NewYork: William Morrow.
Is this decision fair? Will I feel better or worse about myself
after I make this decision? Does this decision break any
organizational rules? Does this decision break any laws? How would
I feel if this decision were broadcast on the news?
The current economic crisis in the United States and many other
parts of the worldis a perfect example of legal yet unethical
decisions resulting in disaster. Manyexperts agree that one of the
driving forces behind the sliding economy was thelending practices
of many banks (of which several no longer exist). In March of2008,
a memo from JPMorgan Chase & Co. was leaked to an Oregon
newspapercalled Zippy Cheats & Tricks (Zippy is Chases
automated, computer-based loanapproval system). Although Chase
executives firmly stated that the contents of thememo were not
company policy, the contents clearly indicate some of
thequestionable ethics involved with the risky loans now clogging
the financial system.
In the memo, several steps were outlined to help a broker push a
clients approvalthrough the system, including, In the income
section of your 1003, make sure youinput all income in base income.
DO NOT break it down by overtime, commissionsor bonus. NO GIFT
FUNDS! If your borrower is getting a gift, add it to a bank
accountalong with the rest of the assets. Be sure to remove any
mention of gift funds on therest of your 1003. If you do not get
Stated/Stated, try resubmitting with slightlyhigher income. Inch it
up $500 to see if you can get the findings you want. Do the
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same for assets.Manning, J. (2008, March 27). Chase mortgage
memo pushesCheats & Tricks. The Oregonian. Retrieved November
1, 2008,
fromhttp://www.oregonlive.com/business/index.sff/2008/03/chase_memo_pushes_che.html.
While it is not possible to determine how widely circulated the
memo was, thementality it captures was clearly present during the
lending boom that precipitatedthe current meltdown. While some
actions during this period were distinctly illegal,many people
worked well within the law and simply made unethical
decisions.Imagine a real estate agent that knows a potential buyers
income. The buyer wantsto purchase a home priced at $400,000, and
the agent knows the individual cannotafford to make payments on a
mortgage of that size. Instead of advising the buyeraccordingly and
losing a large commission, the agent finds a bank willing to
lendmoney to an unqualified borrower, collects the commission for
the sale, and moveson to the next client. It is clear how these
types of unethical yet legal decisions canhave dramatic
consequences.
Suppose you are the CEO of a small company that needs to cut
operational costs orface bankruptcy. You have decided that you will
not be issuing the yearly bonusthat employees have come to expect.
The first thing you think about after comingto this decision is
whether or not it is fair. It seems logical to you that since
thealternative would be the failure of the company and everyones
losing their jobs,not receiving a bonus is preferable to being out
of work. Additionally, you will notbe collecting a bonus yourself,
so that the decision will affect everyone equally.After deciding
that the decision seems fair, you try to assess how you will feel
aboutyourself after informing employees that there will not be a
bonus this year.Although you do not like the idea of not being able
to issue the yearly bonus, youare the CEO, and CEOs often have to
make tough decisions. Since your ultimatepriority is to save the
company from bankruptcy, you decide it is better to withholdbonuses
rather than issuing them, knowing the company cannot afford it.
Despitethe fact that bonuses have been issued every year since the
company was founded,there are no organizational policies or laws
requiring that employees receive abonus; it has simply been a
company tradition. The last thing you think about ishow you would
feel if your decision were broadcast on the news. Because of the
direnature of the situation, and because the fate of the business
is at stake, you feelconfident that this course of action is
preferable to laying off loyal employees. Aslong as the facts of
the situation were reported correctly, you feel the public
wouldunderstand why the decision was made.
Decision Making Around the Globe
Decision-making styles and approaches tend to differ depending
on the context,and one important contextual factor to keep in mind
is the culture in which
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11.5 The Role of Ethics and National Culture 550
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decisions are being made. Research on Japanese and Dutch
decision makers showthat while both cultures are
consensus-oriented, Japanese managers tend to seekconsensus much
more than Dutch managers.Noorderhaven, N. G.
(2007).Comprehensiveness versus pragmatism: Consensus at the
Japanese-Dutch interface.Journal of Management Studies, 44,
13491370. Additionally, American managers tendto value quick
decision making, while Chinese managers are more reflective andtake
their time to make important decisionsespecially when they involve
somesort of potential conflict.
Another example of how decision-making styles may differ across
cultures is thestyle used in Japan called nemawashi. Nemawashi
refers to building consensuswithin a group before a decision is
made. Japanese decision makers talk to partieswhose support is
needed beforehand, explain the subject, address their concerns,and
build their support. Using this method clearly takes time and may
lead toslower decision making. However, because all parties
important to the decision willgive their stamp of approval before
the decision is made, this technique leads to aquicker
implementation of the final decision once it is decided.
KEY TAKEAWAY
Asking yourself some key questions can help you determine if a
decision youare considering is ethical. A decision being legal does
not automaticallymake it ethical. Unethical decisions can lead to
business failures for a varietyof reasons. Different cultures have
different styles of decision making. Incountries with a
collectivist orientation, a high value is placed on
buildingconsensus. Some national cultures value quick decision
making, whereasothers believe in taking time to arrive at a
decision. Taking national cultureinto account is important in
effective cross-cultural business interactions.
EXERCISES
1. How can you assess if you are making ethical decisions or
not?2. Have you seen examples of ethical or unethical decisions
being made?
Describe what you observed.3. Have you seen examples of national
culture affecting decision making?4. What advice surrounding
decision making would you give to someone
who will be managing a new division of a company in another
culture?5. What can go wrong when cultural factors are ignored?
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11.6 Empowered Decision Making: The Case of Ingar Skaug
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If you always do what you always did, you always get what you
always got, says Ingar Skaugand he shouldknow. Skaug is president
and CEO of Wilh. Wilhelmsen ASA (OSE: ABM), a leading global
maritime industrycompany based in Norway with 23,000 employees and
516 offices worldwide. He faced major challenges when hebegan his
job at Wilhelmsen Lines in 1989. The entire top management team of
the company had been killed inan airplane crash when returning from
a ship dedication ceremony. As you can imagine, employees
weremourning the loss of their friends and leadership team. While
Skaug knew that changes needed to be madewithin the organization,
he also knew that he had to proceed slowly and carefully in
implementing any changes.The biggest challenge he saw was the
decision-making style within the company.
Skaug recalls this dilemma as follows:
I found myself in a situation in Wilhelmsen Lines where everyone
was coming to my office in the morning andthey expected me to take
all the decisions. I said to people, Those are not my decisions. I
dont want to takethose decisions. You take those decisions. So for
half a year they were screaming about that I was very afraid
ofmaking decisions. So I had a little bit of a struggle with the
organization, with the people there at the time. Theythought I was
a very poor manager because I didnt dare to make decisions. I had
to teach them. I had to forcethe people to make their own
decisions.
Figure 11.15
Source:http://www.wilhelmsen.com/about/invest/corporate/Management/Pages/IngarSkaug.aspx.
Chapter 11 Making Decisions
11.6 Empowered Decision Making: The Case of Ingar Skaug 553
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His lessons paid off over the years. The company has now
invented a cargo ship capable of transporting 10,000vehicles while
running exclusively on renewable energy via the power of the sun,
wind, and water. He andothers within the company cite the freedom
that employees feel to make decisions and mistakes on their way
tomaking discoveries in improved methods as a major factor in their
success in revolutionizing the shippingindustry one innovation at a
time.
Case written by [citation redacted per publisher request]. Based
on information from McCarthy, J. F., OConnell,D. J., & Hall, D.
T. (2005). Leading beyond tragedy: The balance of personal identity
and adaptability. Leadership &Organizational Development
Journal, 26, 458475; Skaug, I. (2007, July). Breaking free in
turbulent times: Theintersection of turbulence, innovation and
leadership. Business Leadership Review, 4, 17; Furness, V.
(2005).Interview with Ingar Skaug. European Business Forum.
Retrieved April 4, 2008, from
http://www.ebfonline.com/article.aspx?extraid=30; Norwegian
executive Ingar Skaug named chairman of Center for Creative
LeadershipsBoard of Governors. (2006, September). Center for
Creative Leadership news release. Retrieved April 4, 2008,from
http://www.ccl.org/leadership/news/2006/skaug.aspx.
DISCUSSION QUESTIONS
1. What are some additional challenges Ingar Skaug probably
faced whiletaking over control of Wilh. Wilhelmsen?
2. Skaug says that for the first several months as CEO, he
deferred manydecisions to other employees. In what types of
situations might this havebeen inappropriate? Would Skaugs method
have worked if he weretaking over a hospital or an investment
firm?
3. How would you approach a situation like Skaugs?4. For Skaug,
the decision to defer decisions worked for the company.
What are some potential pitfalls this management style could
havefallen into? Does the pace of the industry make a difference in
whatmanagement style is appropriate (e.g., the fast pace of a
high-techcompany versus the slower pace of an industrial
manufacturingcompany)?
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11.7 Conclusion
Decision making is a critical component of business. Some
decisions are obvious andcan be made quickly, without investing
much time and effort in the decision-making process. Others,
however, require substantial consideration of thecircumstances
surrounding the decision, available alternatives, and
potentialoutcomes. Fortunately, there are several methods that can
be used when making adifficult decision, depending on various
environmental factors. Some decisions arebest made by groups. Group
decision-making processes also have multiple modelsto follow,
depending on the situation. Even when specific models are
followed,groups and individuals can often fall into potential
decision-making pitfalls. If toolittle information is available,
decisions might be made based on a feeling. On theother hand, if
too much information is presented, people can suffer from
analysisparalysis, in which no decision is reached because of the
overwhelming number ofalternatives.
Ethics and culture both play a part in decision making. From
time to time, adecision can be legal but not ethical. These gray
areas that surround decisionmaking can further complicate the
process, but following basic guidelines can helppeople ensure that
the decisions they make are ethical and fair.
Additionally,different cultures can have different styles of
decision making. In some countriessuch as the United States, it may
be customary to come to a simple majority whenmaking a decision.
Conversely, a country such as Japan will often take the time
toreach consensus when making decisions. Being aware of the various
methods formaking decisions as well as potential problems that may
arise can help peoplebecome effective decision makers in any
situation.
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11.8 Exercises
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ETHICAL DILEMMA
Herbs Concoction (and Marthas Dilemma): The Case of