DeVry University Ch 8 Make Good Decisions Discussion Which of the decision-making tools discussed in this chapter (NGT, Delphi, etc.) have you used? Please

DeVry University Ch 8 Make Good Decisions Discussion Which of the decision-making tools discussed in this chapter (NGT, Delphi, etc.) have you used? Please explain the situation and context. How effective were the tools used? What were the results of the decision? Chapter 8: Make Good Decisions
A peacefulness follows any decision, even the wrong one.
By Rita Mae Brown
The hardest thing to learn in life is which bridge to cross and which to burn.
By David Russell
Too Many Choices
Andi graduated from Spokane Community College two weeks ago with her degree in
Business Management. She is anxious to put her knowledge to good use at a job she
enjoys.
Andi has an idea of her perfect job and begins work to apply to those organizations that
meet her criteria. Using social media and traditional approaches to job searching, Andi
gets three interviews at well-known companies in the Spokane area.
After what seems like a week interviewing, Andi receives two job offers! She is thrilled but
isn’t sure which one to choose. One of the offers is for a higher salary than she expected
but requires one week of travel per month. The other job is a lower salary and position, but
the possibilities to grow with the company seem better. Andi isn’t sure which job to choose.
Big decisions, such as career choices, take a lot of planning and thought to make sure we
make the right decision for our needs. This chapter will discuss the ways we can learn to
make good personal decisions but also good decisions for the organizations we work for.
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Understanding Decision Making
LEARNING OBJECTIVES
1. Define decision making and describe how you can make better decisions.
2. Understand the different types of decisions you may make in your career and
personal life.
Decision making refers to making choices among alternative courses of action—which
may also include inaction. This chapter will help you understand how to make decisions
alone or in a group while avoiding common decision-making pitfalls. As you know, the key
to positive human relations in these situations is communication and application of
emotional intelligence skills such as self- awareness when making decisions alone.
Emotional intelligence is required in the form of relationship management when making
decisions in groups.
Individuals throughout organizations use the information they gather to make a wide range
of decisions. These decisions may affect the lives of others and change the course of an
organization. For example, the decisions made by executives and consulting 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, the decision made by firms to trade in mortgage-backed
securities is having negative consequences for the entire economy in the United States.
All parties involved in such outcomes made a decision, and everyone is now living with the
consequences of those decisions.
Types of Decisions
Despite the far-reaching nature of the decisions in the previous example, not all decisions
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 to wear, 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 of straightforward decisions are termed programmed decisions, or decisions
that occur frequently enough that we develop an automated response to them. The
automated response we use to make these decisions is called the decision rule. For
example, many restaurants face customer complaints as a routine part of doing business.
Because complaints are a recurring problem, responding to them may become a
programmed decision. The restaurant might enact a policy stating that every time they
receive a valid customer complaint, the customer should receive a free dessert, which
represents a decision rule.
On the other hand, unique and important decisions require conscious thinking, information
gathering, and careful consideration of alternatives. These are called non-programmed
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decisions. For example, in 2005 McDonald’s Corporation became aware of the need to
respond to growing customer concerns regarding the unhealthy aspects (high in fat and
calories) of the food they sell.
This is a non-programmed decision, because for several decades, customers of fast-food
restaurants were more concerned with the taste and price of the food rather than its
healthiness. In response to this problem, McDonald’s decided to offer healthier
alternatives such as the choice to substitute French fries in Happy Meals with apple slices,
and in 2007 they banned the use of trans-fat at their restaurants.
In order to ensure consistency around the globe such as at this St. Petersburg, Russia,
location, McDonald’s Corporation trains all restaurant managers at Hamburger University,
where they take the equivalent of two years of college courses and learn how to make
decisions on the job. The curriculum is taught in twenty-eight languages.
A crisis situation also constitutes a non-programmed decision for companies. For example,
the leadership of Nutrorim was facing a tough decision. They had recently introduced a
new product, ChargeUp with Lipitrene, an improved version of their popular sports drink
powder, ChargeUp. At some point, a phone call came from a state health department to
inform them of eleven cases of gastrointestinal distress that might be related to their
product, which led to a decision to recall ChargeUp. The decision was made without an
investigation of the information. While this decision was conservative, it was made without
a process that weighed the information. Two weeks later it became clear that the reported
health problems were unrelated to Nutrorim’s product. In fact, all the cases were traced
back to a contaminated health club juice bar. However, the damage to the brand and to the
balance sheets was already done. This unfortunate decision caused Nutrorim to rethink the
way decisions were made when under pressure. The company now gathers information to
make informed choices even when time is of the essence.[1]
Decisions can be classified into three categories based on the level at which they occur.
1. Strategic decisions set the course of an organization.
2. Tactical decisions are decisions about how things will get done.
3. Finally, operational decisions refer to decisions that employees make each day to
make the organization run.
For example, think about the restaurant that routinely offers a free dessert when a
customer complaint is received. The owner of the restaurant made a strategic decision to
have great customer service. The manager of the restaurant implemented the free dessert
policy as a way to handle customer complaints, which is a tactical decision. Finally, the
servers at the restaurant are making individual decisions each day by evaluating whether
each customer complaint received is legitimate and warrants a free dessert.
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In this chapter we are going to discuss different decision-making models designed to
understand and evaluate the effectiveness of non-programmed decisions. We will cover
four decision-making approaches, starting with the rational decision-making model, moving
to the bounded rationality decision-making model, the intuitive decision-making model, and
ending with the creative decision-making model. The importance of making good decisions
relates to our ability to manage our emotional intelligence to make sure we make the right
decisions. These models will help us make better decisions, which results in better human
relations.
Making Rational Decisions
The rational decision-making model describes a series of steps that decision makers
should consider if their goal is to maximize the quality of their outcomes. In other words, if
you want to make sure that you make the best choice, going through the formal steps of
the rational decision-making model may make sense.
Let’s imagine that your old, clunky car has broken down, and you have enough money
saved for a substantial down payment on a new car. It will be the first major purchase of
your life, and you want to make the right choice. The first step, therefore, has already been
completed—we know that you want to buy a new car. Next, in step 2, you’ll need to decide
which factors are important to you. How many passengers do you want to accommodate?
How important is fuel economy to you? Is safety a major concern? You only have a certain
amount of money saved, and you don’t want to take on too much debt, so price range is an
important factor as well. If you know you want to have room for at least five adults, get at
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least twenty miles per gallon, drive a car with a strong safety rating, not spend more than
$22,000 on the purchase, and like how it looks, you have identified the decision criteria.
All the potential options for purchasing your car will be evaluated against these criteria.
Before we can move too much further, you need to decide how important each factor is to
your decision in step 3. If each is equally important, then there is no need to weigh them,
but if you know that price and mpg are key factors, you might weigh them heavily and keep
the other criteria with medium importance. Step 4 requires you to generate all alternatives
about your options. Then, in step 5, you need to use this information to evaluate each
alternative against the criteria you have established. You choose the best alternative (step
6), and then you would go out and buy your new car (step 7).
Of course, the outcome of this decision will influence the next decision made. That is where
step 8 comes in. For example, if you purchase a car and have nothing but problems with
it, you will be less likely to consider the same make and model when purchasing a car the
next time.
While decision makers can get off track during any of these steps, research shows that
searching for alternatives in the fourth step can be the most challenging and often leads to
failure. In fact, one researcher found that no alternative generation occurred in 85 percent
of the decisions he studied.[2] 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
unrestricted search for solutions, get key people to participate, and avoid using their power
to push their perspective.[3]
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 your decision criteria
before you search for alternatives. This would prevent you from liking one option too much
and setting your criteria accordingly. For example, let’s say you started browsing cars
online before you generated your decision criteria. You may come across a car that you
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feel reflects your sense of style and you develop an 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 system are the most important criteria. After purchasing
it, you may realize that the car is too small for your friends to ride in the back seat, which
was something you should have thought about. Setting criteria before you search for
alternatives may prevent you from making such mistakes. Another advantage of the
rational model is that it urges decision makers to generate all alternatives instead of only a
few. By generating a large number of alternatives that cover a wide range of possibilities,
you are unlikely to make a more effective decision that does not require sacrificing one
criterion for the sake of another.
Despite all its benefits, you may have noticed that this decision-making model involves a
number of unrealistic assumptions as well. It assumes that people completely understand
the decision to be made, that they know all their available choices, that they have no
perceptual biases, and that they want to make optimal decisions. Nobel Prize–winning
economist Herbert Simon observed that while the rational decision-making model may be a
helpful device in aiding decision makers when working through problems, it doesn’t
represent how decisions are frequently made within organizations. In fact, Simon argued
that it didn’t even come close.
Think about how you make important decisions in your life. It is likely that you rarely sit
down and complete all eight of the steps in the rational decision-making model. For
example, this model proposed that we should search for all possible alternatives before
making a decision, but that process is time consuming, and individuals are often under
time pressure to make decisions. Moreover, even if we had access to all the information
that was available, it could be challenging to compare the pros and cons of each alternative
and rank them according to our preferences. Anyone who has recently purchased a new
laptop computer or cell phone can attest to the challenge of sorting through the different
strengths and limitations of each brand and model and arriving at the solution that best
meets particular needs. In fact, the availability of too much information can lead to analysis
paralysis, in which more and more time is spent on gathering information and thinking
about it, but no decisions actually get made.
A senior executive at Hewlett-Packard Development Company LP admits that his company
suffered from this spiral of analyzing things for too long to the point where data gathering
led to “not making decisions, instead of us making decisions.”[4] Moreover, you may not
always be interested in reaching 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 your dream house, but if you are only looking for an apartment to rent for the academic
year, you may be willing to take the first one that meets your criteria of being clean, close to
campus, and within your price range.
Making “Good Enough” Decisions
The bounded rationality model of decision making recognizes the limitations of our
decision-making processes. According to this model, individuals knowingly limit their
options to a manageable set and choose the first acceptable alternative without
conducting an exhaustive search for alternatives. An important part of the bounded
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rationality approach is the tendency to satisfice (a term coined by Herbert Simon from
satisfy and suffice), which refers to accepting the first alternative that meets your minimum
criteria. For example, many college graduates do not conduct a national or international
search for potential job openings. Instead, they focus their search on a limited geographic
area, and they tend to accept the first offer in their chosen area, even if it may not be the
ideal job situation. Satisficing is similar to rational decision making. The main difference is
that rather than choosing the best option and maximizing the potential outcome, the
decision maker saves cognitive time and effort by accepting the first alternative that meets
the minimum threshold.
Making Intuitive Decisions
The intuitive decision-making model has emerged as an alternative to other decision
making processes. This model refers to arriving at decisions without conscious reasoning.
A total of 89 percent of managers surveyed admitted to using intuition to make decisions at
least sometimes and 59 percent said they used intuition often.[5] Managers make decisions
under challenging circumstances, including time pressures, constraints, a great deal of
uncertainty, changing conditions, and highly visible and high-stakes outcomes. Thus, it
makes sense that they would not have the time to use the rational decision-making model.
Yet when CEOs, financial analysts, and health care workers are asked about the critical
decisions they make, seldom do they attribute success to luck.
To an outside observer, it may seem like they are making guesses as to the course of
action to take, but it turns out that experts systematically make decisions 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 not choose among a list of well thought out
alternatives. They don’t decide between two or three options and choose the best one.
Instead, they consider only one option at a time. The intuitive decision-making model
argues that in a given situation, experts making decisions scan the environment for cues to
recognize patterns.[6] Once a pattern is recognized, they can play a potential course of
action through to its outcome based on their prior experience.
Thanks to training, experience, and knowledge, these decision makers have an idea of how
well a given solution may work. If they run through the mental model and find that the
solution will not work, they alter the solution before setting it into action. If it still is not
deemed a workable solution, it is discarded as an option, and a new idea is tested until a
workable solution is found. Once a viable course of action is identified, the decision maker
puts the solution into motion. The key point is that only one choice is considered 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 intuitive decisionmaking models, creative decision making is a vital part of being an effective decision
maker. Creativity 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 from cutting costs to generating new ways of
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doing business. Please note that, while creativity is the first step in the innovation process,
creativity and innovation are not the same thing. Innovation begins with creative ideas, but
it also involves realistic planning and follow-through. Innovations such as 3M’s Clearview
Window Tinting grow out of a creative decision-making process about what may or may not
work 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 you do not recognize that you
have a problem, it is impossible to solve it.
Immersion is the step in which the decision maker consciously thinks about the problem
and gathers information. A key to success in creative decision making is having or
acquiring expertise in the area being studied. Then, incubation occurs. During incubation,
the individual sets the problem aside and does not think about it for a while. At this time,
the brain is actually working on the problem unconsciously.
Then comes illumination, or the insight moment when the solution to the problem becomes
apparent to the person, sometimes when it is least expected. This sudden insight is the
“eureka” moment, similar to what happened to the ancient Greek inventor Archimedes,
who found a solution to the problem he was working on while taking a bath. Finally, the
verification and a…
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