Advantages of programmed decision making

Perception and Managerial Decision Making

Organizational Behavior

Organizational Behavior by OpenStax, 2019

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Welcome to Chapter 6 – Perception and Managerial Decision Making from our Organizational Behavior textbook

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Learning Objectives

What are the basic characteristics of managerial decision-making?

What are the two systems of decision-making in the brain?

What is the difference between programmed and non-programmed decisions?

What barriers exist that make effective decision-making difficult?

How can a manager improve the quality of her/his individual decision-making?

What are the advantages and disadvantages of group decision-making, and how can a manager improve the quality of group decision-making?

Organizational Behavior by OpenStax, 2019

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The six leaning objectives for this chapter are…

What are the basic characteristics of managerial decision-making?

What are the two systems of decision-making in the brain?

What is the difference between programmed and non-programmed decisions?

What barriers exist that make effective decision-making difficult?

How can a manager improve the quality of her/his individual decision-making?

What are the advantages and disadvantages of group decision-making, and how can a manager improve the quality of group decision-making?

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Contents

Overview of Managerial Decision-Making

How the Brain Processes Information to Make Decisions

Programmed and Non-programmed Decisions

Barriers to Effective Decision-Making

Improving the Quality of Decision-Making

Group Decision-Making

Organizational Behavior by OpenStax, 2019

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The chapter is organized into six sections that align with the learning objectives…

An Overview of Managerial Decision-Making (defining decision-making and identifying stakeholders)

How the Brain Processes Information to Make Decisions (considering reflective and reactive decision-making systems, as well as my field, emotional intelligence)

In Programmed and Non-programmed Decisions (we will compare & contrast these two types of decisions)

Consider the Barriers to Effective Decision-Making

Discuss Improving the Quality of Decision-Making; and in

Group Decision-Making (consider the advantages and disadvantages of making decisions in groups)

…finally, we will also touch on the TedTalk, ‘How to use experts -- and when not to’, by Noreena Hertz

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Overview of Managerial Decision-Making

Organizational Behavior

Organizational Behavior by OpenStax, 2019

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In the Overview of Managerial Decision-Making, we will define decision-making and identify stakeholders

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Decision-making

Decision-making is the action or process of thinking through possible options and selecting one

Stakeholders are all the individuals or groups that are affected by an organization

What’s the Right (Correct) Answer?

What’s the Right (Legal) Answer?

What’s the Right (Ethical) Answer?

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Organizational Behavior by OpenStax, 2019

Decision-making is the action or process of thinking through possible options and selecting one…basically, whenever you have a choice between two or more options (such as what college to attend, what to major in, or even taking this specific class section), then you have a decision to make.

Stakeholders are all the individuals or groups that are affected by the decision, for example if we decided to raise or lower your tuition and fees, who are the key stakeholders? You have the students, of course, and potential family who may be impacted by raising or lowering your costs, plus the impact on our budget for faculty, staff and general operations. But you also have the public, whose taxes help to subsidize the CSU system, as well as the impact on our local economy when we make college education either more affordable or less affordable.

When considering a decision, in alignment with our college learning goal of ethical reasoning, it is helpful to consider what is right (who should bare the price for education, the students or the taxpayer), what is legal (what mechanisms do we have for raising or lowering student fees, and what services are we mandated to maintain), and what is ethical (given the positive outcomes to the region for college attainment, does society have an obligation to further subsidize the CSU system)?

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How the Brain Processes Information to Make Decisions

Organizational Behavior

Organizational Behavior by OpenStax, 2019

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In How the Brain Processes Information to Make Decisions, we will consider types of decision-making systems (reflective and reactive), as well as my field, emotional intelligence

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Reflective & Reactive Systems

Reflective Decision-Making is logical, analytical, deliberate, and methodical

When faced with novel and complex situations, it is better to process available information logically, analytically, and methodically

Reactive Decision-Making is quick, impulsive, and intuitive, relying on emotions or habits to provide cues for what to do next

The quick, intuitive route can be lifesaving; when we suddenly feel intense fear, a fight-or-flight response kicks in that leads to immediate action without methodically weighing all possible options and their consequences

Emotional intelligence is the ability to recognize, understand, pay attention to, and manage one’s own emotions and the emotions of others

Perceiving Emotions – identify emotion in himself or herself and others

Facilitating Thought – use his or her emotions to improve thinking

Understanding Emotions – understands the complexity of emotional meanings

Emotional Management – able to manage emotions in his or her own life and in others

Organizational Behavior by OpenStax, 2019

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Salovey, P. & Mayer, J. D. (1990). Emotional intelligence. Imagination, Cognition & Personality, 9, 185-211.

There are two basic categories of decision-making systems…

Reflective Decision-Making is logical, analytical, deliberate, and methodical; and best used when we face new and complicated decisions.

In contrast, Reactive Decision-Making is quick, impulsive, and intuitive, and best used in familiar, simple situations or in an emergency, when time is of the essence.

For example, when buying a car, dealers often try to encourage customers into an emotional, reactive decision, in terms of the car, the finances, the coverage, and the extras. But car buying is best served by a more reflective, rather than impulsive, decision-making process. At least, if you don’t’ want to regret your decision!

I also want to touch on the concept of emotional intelligence, which is one of my research areas…

In general, emotional intelligence (sometimes referred to as EI or EQ), is the ability to identify emotions in yourself (do you know how you are feeling), use emptions to improve thinking (such as playing the right song when you work out to gain energy and focus), understand the complexity of emotions (when someone cuts in line are you frustrated, angry, apprehensive, fearful or a combination of potentially competing emotions), and emotional management (such as how to calm yourself or someone else when upset). Taken together, the ability to understand and manage emotions in self and others can be major advantage in work and life.

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Programmed and Nonprogrammed Decisions

Organizational Behavior

Organizational Behavior by OpenStax, 2019

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In Programmed and Non-programmed Decisions we will compare & contrast these two types of decisions

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Programmed and Non-programmed Decisions

Programmed decisions are those that are repeated over time and for which an existing set of rules can be developed to guide the process

Heuristics, a mental shortcuts that allow a decision maker to reach a good decision quickly. They are strategies that develop based on prior experience

Satisficing, a decision maker selects the first acceptable solution without engaging in additional effort to identify the best solution

Non-programmed decisions are novel, unstructured decisions that are generally based on criteria that are not well-defined

Decision-Making Process

Recognize that a decision needs to be made

Generate multiple alternatives

Analyze the alternatives

Select an alternative

Implement the selected alternative

Evaluate its effectiveness

Organizational Behavior by OpenStax, 2019

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Programmed decisions are those that are repeated over time and for which an existing set of rules can be developed to guide the process…such as deciding what to wear, ordering take out, or deciding what class section to enroll in.

For these types of decisions we generally have mental shortcuts that make it easier to decide, called heuristics. For example, if there is traffic in a familiar area, we tend to follow patterns when taking alternative routes. My wife, for example, always finds local roads with minimal traffic lights, while I tend to follow local roads that are the most direct, with the fewest decision points.

In addition to heuristics, we often satisfice (or making an acceptable, if not an optimal decision). Do you pick the first burger place that comes up on Yelp, the one you visited last week, or the one closest to your home (all types of heuristics). Or do you go through the process of analyzing each place that sells burgers to find the ‘perfect choice’?

Non-programmed decisions, in contrast, are novel, unstructured decisions that are generally based on criteria that are not well-defined…such as what school to go to, whom to live with, or when to retire.

For these types of decisions, which are new and complicated, it is often better to follow a more defined process to make sense of an ill-defined problem. For example, think about the choice to come to CSUSB…

Recognize that a decision needs to be made (that is, that you want to go to college at all, transfer colleges, or go back to college)

Generate multiple alternatives (such as which CSU’s are an option, what about UCs or private institutions, being in the Inland Empire, in California, or in the US, and what about not going to college at all or waiting to go until later)

Analyze the alternatives (what are the pros & cons, for example, between attending CSUSB vs. UCR, USC or Arizona State, or not going to college and investing the money instead)

Select an alternative (that is, make the decision, in this case to attend CSUSB)

Implement the selected alternative (that is, enroll and register for classes); and finally

Evaluate its effectiveness (which, sadly, we often fail to do), which means assess after the fact if the choice you made was the right one…how would you know…how would you evaluate the decision….cost, time to degree, your first job after college?)

The six steps, taken together are part of the decision-making process that can best be used for non-programmed decisions.

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Barriers to Effective Decision-Making

Organizational Behavior

Organizational Behavior by OpenStax, 2019

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In this section, we will consider the various Barriers to Effective Decision-Making

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Barriers to Effective Decision-Making

Bounded rationality is the idea that for complex issues we cannot be completely rational because we cannot fully grasp all the possible alternatives, nor can we understand all the implications of every possible alternative

Escalation of commitment is the tendency of decision makers to remain committed to poor decision, even when doing so leads to increasingly negative outcomes

Time Constraints

Uncertainty

Confirmation bias is when we tend to pay more attention to information that confirms our existing beliefs and less attention to information that is contrary to our beliefs

Process conflict, conflict about the best way to do something, can lead to improved performance, as individuals explore various options together in order to identify superior solutions. Relationship conflict is conflict between individuals that is more personal and involves attacks on a person rather than an idea

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There are several barriers to effective decision-making…

Bounded rationality is the realization that we are not omniscient in our decision-making, and that we can never truly list, assess, and differentiate all possible alternatives. At some point, there is a leap of faith that we are making the right choice. Hence, no matter they type of decision or system used, we rely on heuristics and satisficing in our decision-making to some extent.

Escalation of commitment is the tendency to remain committed to poor decision, even when doing so leads to increasingly negative outcomes. For example, let’s say you go the casino with $100 and quickly lose your money. Then you head to the ATM to go over your budget, with the hope of making back your losses, which almost never happens! That is escalation of commitment.

Time Constraints…When there is little time available to collect information and to rationally process it, we are much less likely to make a good nonprogrammed decision.

Uncertainty…managers frequently make decisions under conditions of uncertainty—they cannot know the outcome of each alternative until they’ve chosen that alternative…we often use the phrase; it is better to ask for forgiveness than permission!

Confirmation bias is when pay more attention to information that confirms our existing beliefs and less attention to information that is contrary to our beliefs. For example, if you believe a co-worker is inept, then you will focus each time the person makes a mistake and ignore (or fail to notice) when they do something right.

Finally, there is conflict that can impact effective decision-making. Not all conflict is bad, as we will see in a later chapter, but there is process conflict (how to do something, which can lead to a better decision) and relationship conflict (which is personal, and generally leads to poor decisions). For example, as your team approaches the various team assignments, legitimate discussions about how to work together, the assignment parameters, and how best to develop and analyze a case can be helpful (rather than just pushing forward without any discussion), but if those discussions become personal and toxic, then it is hard (if not impossible) to make effective decisions.

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Improving the Quality of Decision-Making

Organizational Behavior

Organizational Behavior by OpenStax, 2019

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In this section we will consider who to Improve the Quality of Decision-Making.

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Improving Decision-Making

Critical thinking is a disciplined process of evaluating the quality of information, especially data collected from other sources and arguments made by other people, to determine whether the source should be trusted or whether the argument is valid

Programmed Decisions

Satisficing

Heuristics

Nonprogrammed Decisions

Decision-Making Process

Creativity is the generation of new or original ideas; it requires the use of imagination and the ability to step back from traditional ways of doing things and seeing the world

Ethical decision-making

Moral sensitivity—recognizing that the issue has a moral component;

Moral judgment—determining which actions are right vs. wrong;

Moral motivation/intention—deciding to do the right thing; and

Moral character/action—doing what is right.

Organizational Behavior by OpenStax, 2019

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As discussed previously…there are different types of decisions (programmed and non-programmed) and decision-making systems (reactive and reflective). Regardless, having some level of critical thinking (or a process to evaluate the information you have in front of you) as well as having an option to be creative (or taking a step back) can help, regardless of the decision type or system used.

For example, in our current political environment, particularly with the use of social media, there is often misinformation (or alternative facts), with people just forwarding the information as true, without ever verifying the source of the information or the validity of the information. Whatever the information, whatever the source, being a discerning (or critical) consumer of information is key.

In addition, one other aspect of decision-making is the ethics involved. That is, how we evaluate decisions often have an ethical component.

Do we recognize when a decision may have a moral or ethical implication (moral sensitivity), such as selling a product to someone who clearly cannot afford it;

How do we determine right or wrong (morel judgment), between protecting consumers and protecting profitability;

What are the intentions (moral motivation) and are they personal gain or public good; and

What is the right moral action, do you sell what people need, can afford, and that foster sustainability; or do you aim to maximize short term gains, regardless of the costs.

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Group Decision-Making

Organizational Behavior

Organizational Behavior by OpenStax, 2019

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In Group Decision-Making we will consider the advantages of group decision and a potential pitfall of group decision making (called Groupthink)

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Group Decisions

An advantage to involving groups in decision-making is that you can incorporate different perspectives and ideas

Brainstorming is a process of generating as many solutions or options as possible and is a popular technique associated with group decision-making

Devil’s advocate in order to reduce groupthink. The devil’s advocate intentionally takes on the role of critic. Their job is to point out flawed logic, to challenge the group’s evaluations of various alternatives, and to identify weaknesses in proposed solutions

Groupthink is a mode of thinking, in which group members premature striving for agreement overrides their ability to realistically appraise alternative courses of action

Illusion of invulnerability

Inherent morality of group

Rationalization

Stereotyping of outsiders

Self-censorship

Direct pressure

Mind-guarding

Illusion of unanimity

Organizational Behavior by OpenStax, 2019

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Janis, I. L. (November, 1971). Groupthink. Psychology Today, 5(6), 43–46.

An advantage to involving groups in decision-making is that you can incorporate different perspectives and ideas. The process of brainstorming (or generating a list of options without critique) and playing devil’s advocate (asking someone to specifically take the role of critic on each idea) can help make sure the group decision-making process is effective.

Without some level of creativity and critical thinking, groups can fall into what Janis Irving called, Groupthink, which is a mode of thinking, in which group members premature striving for agreement overrides their ability to realistically appraise alternative courses of action.

Groupthink has eight distinct symptoms…

Illusion of invulnerability (that is, whatever we decide will work out, for example, when I was little, we didn’t wear helmets when we rode our bikes or skateboarded…assuming we were invulnerable from harm)

Inherent morality of group (all groups, no matter their affiliation, believe they are on the side of right…except in movies, groups don’t come together to do evil for evil’s sake…we all think we are the heroes in the story)

Rationalization (we justify our decisions, often after the fact, to explain why we did what we did, for example, can I drive after a having a couple of pints? Should I skip my workout today, to rest up for tomorrow?)

Stereotyping of outsiders (when confronted with opposition from others, we often stereotype or minimize their input, for example in higher education, faculty often characterize administrators as going to the ‘dark side’, while administrators assume coordinating faculty is like ‘herding cats’)

Self-censorship (to protect our membership in our group or team, we often don’t speak up when we disagree with the group, afraid of being ostracized for our comments)

Direct pressure (when we do speak up, sometimes the group will then pressure us to back off and get with the program)

Mind-guards are individuals who intentionally distort information to justify a decision. For example, do you always say everything to your boss, your partners, your parent, or your friend? Or do you embellish the good parts and downplay (or remove) the bad parts?

Finally, is the Illusion of unanimity, that is, if there is no direct dissent, then everyone agrees. For example, in class, instructors often ask, does everyone understand or does anyone have a question. If no one answers, the instructor assumes everyone understands, but we know they don’t!

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Noreena Hertz How to use experts -- and when not to

Organizational Behavior

https://www.ted.com/read/ted-studies/management

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Noreena Hertz, ‘How to use experts -- and when not to’, Feb 2011

https://www.ted.com/talks/noreena_hertz_how_to_use_experts_and_when_not_to

Finally, let’s consider the TedTalk by Noreena Hertz on How to use experts -- and when not to..

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How to use experts -- and when not to

Overview

Addicted to experts

Surrendered our power

Illusion of certainty

Independent decision-making parts of our brain ‘switched on’

Confirmation bias

Three Strategies

Embracing dissent, ready and willing to take experts on

Managed dissent, encouraging disagreement, discord, and difference

Democratizing expertise

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https://www.ted.com/read/ted-studies/management

In How to use experts -- and when not to, Noreena Hertz provides an overview and strategies to consider in relation to using experts…

For an overview, the reality is we are often addicted to using (and relying) on experts, effectively surrendering our power of choice and believing experts provide certainty, which unfortunately is often not correct. For example, we had one dentist (that we no longer use) who, during a routine exam, would pressure the client to undergo a “needed” invasive procedure (like a crown or root canal) without really letting them have time to decide or adequately outlining the pros and cons of the decision. In effect, our independent decisions-making shuts down and we then use confirmation bias (as discussed earlier) to focus on information that confirms what the expert recommends.

To combat this, and take back our power, Noreena recommends three strategies…

Embracing dissent, being ready and willing to take experts on…to ask questions, to play devil’s advocate, and to validate data

Managed dissent, by encouraging disagreement, discord, and difference in ourselves and others, and

Democratizing expertise, that is, recognizing that there are likely multiple perspectives, even within an established field about what is and what is not effective or ethical decision-making

And that concludes the presentation for Chapter 6 – Perception and Managerial Decision Making.