1. Organizational
Behavior, 9/E
Schermerhorn, Hunt, and
Osborn
Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc.

2. Chapter 14 Study Questions
 What is the decision-making process in
organizations?
 What are the useful decision-making
models?
 How do intuition, judgment, and creativity
affect decision making?
Organizational Behavior: Chapter 14
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3. Chapter 14 Study Questions (cont.)
 How do you manage the decision-making
process?
 What are some of the current issues in
decision making?
 How do you infuse ethics into the
decision-making process?
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4. Study Question 1: What is the decision-
making process in organizations?
 Decision making is the process of choosing a
course of action for dealing with a problem or
opportunity.
 Steps in systematic decision making.
– Recognize and define the problem or opportunity.
– Identify and analyze alternative courses of action, and
estimate their effects on the problem or opportunity.
– Choose a preferred course of action.
– Implement the preferred course of action.
– Evaluate the results and follow up as necessary.
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5. Study Question 1: What is the decision-
making process in organizations?
 Certain decision environments.
– Exist when information is sufficient to predict the
results of each alternative in advance of
implementation.
 Risk decision environments.
– Exist when decision makers lack complete certainty
regarding the outcomes of various courses of action,
but they are aware of the probabilities associated with
their occurrence.
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6. Study Question 1: What is the decision-
making process in organizations?
 Uncertain decision environments.
– Exist when managers have so little information on
hand that they cannot even assign probabilities to
various alternatives and their possible outcomes.
– Described as a rapidly changing setting in terms of:
• External conditions.
• The information technology requirements needed for
analyzing and making decisions.
• The people who influence problem and choice definitions.
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7. Study Question 1: What is the decision-
making process in organizations?
 Uncertain decision environments (cont.).
– Can be described in terms of types of risks
encountered by the organization.
• Strategic risks are threats to overall business
success.
• Operational risks are threats inherent in the
technologies used to reach business success.
• Reputation risks are threats to a brand or to the
firm’s reputation
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8. Study Question 1: What is the decision-
making process in organizations?
 Types of decisions.
– Programmed decisions.
• Involve routine problems that arise regularly and
can be addressed through standard responses.
– Nonprogrammed decisions.
• Involve nonroutine problems that require solutions
specifically tailored to the situation at hand.
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9. Study Question 2:What are the useful
decision-making models?
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10. Study Question 2:What are the useful
decision-making models?
 Classical decision theory assumes the
manager faces a clearly defined problem,
knows all possible action alternatives and
their consequences, and then chooses the
optimum solution.
 Widespread application of classical
decision theory is restricted by bounded
rationality.
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11. Study Question 2:What are the useful
decision-making models?
 Classical decision theory does not appear
to fit well in the modern business world,
though it can be used toward the bottom of
many firms.
 Behavioral decision theory accepts the
notion of bounded rationality. It assumes
the manager acts only in terms of what is
perceived about a given situation, and then
chooses a satisficing solution.
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12. Study Question 2:What are the useful
decision-making models?
 The garbage can model.
– A model of decision making that views
problems, solutions, participants, and choice
situations as mixed together in the “garbage
can” of the organization.
– The garbage can model highlights two
important organizational facts of life.
• Different individuals may do choice making and
implementation.
• Many problems go unsolved.
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13. Study Question 2:What are the useful
decision-making models?
 Decision making realities.
– Decision making information may not be
available.
– Bounded rationality and cognitive limitations
affect the way people define problems,
identify alternatives, and choose preferred
solutions.
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14. Study Question 2:What are the useful
decision-making models?
 Decision making realities (cont.).
– Most decision making in organizations goes
beyond step-by-step rational choice.
– Decisions must be made under risk and
uncertainty.
– Decisions should be ethical.
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15. Study Question 3: How do intuition, judgment,
and creativity affect decision making?
 Intuition.
– The ability to know or recognize quickly and
readily the possibilities of a given situation.
– A key element of decision making under risk
and uncertainty.
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16. Study Question 3: How do intuition, judgment,
and creativity affect decision making?
 Judgmental heuristics.
– Simplifying strategies or “rules of thumb”
used to make decisions.
– Make it easier to to deal with uncertainty and
limited information.
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17. Study Question 3: How do intuition, judgment,
and creativity affect decision making?
 Types of heuristics.
– Availability heuristic.
• Bases a decision on similarity to past occurrences
that are easily remembered.
– Representativeness heuristic.
• Bases a decision on similarities between an event
and stereotypes of similar occurrences.
– Anchoring and adjustment heuristic.
• Bases a decision on incremental adjustments to an
initial value determined by historical precedent or
some reference point.
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18. Study Question 3: How do intuition, judgment,
and creativity affect decision making?
 General judgmental biases in decision
making.
– Confirmation trap.
• The tendency to seek confirmation for what is
already thought to be true and to not search for
disconfirming information.
– Hindsight trap.
• The tendency to overestimate the degree to which
an event that has already taken place could have
been predicted.
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19. Study Question 3: How do intuition, judgment,
and creativity affect decision making?
 Stages in the creative thinking process.
– Preparation.
– Concentration.
– Incubation.
– Illumination
– Verification.
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20. Study Question 3: How do intuition, judgment,
and creativity affect decision making?
 Ways of fostering creativity.
– Diversifying teams to include members with different
backgrounds, training, and perspectives.
– Encouraging analogical reasoning.
– Stressing periods of silent reflection.
– Recording all ideas so that the same ones are not
rediscovered.
– Establishing high expectations for creativity.
– Developing a physical space that encourages fun,
divergent ideas.
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21. Study Question 3: How do intuition, judgment,
and creativity affect decision making?
 Creativity is higher when:
– Linguistic ability, willingness to engage in
divergent thinking, and intelligence are
present.
– Individuals are motivated by and derive
satisfaction from task accomplishment.
– There are opportunities for creativity, as many
constraints as possible are eliminated, and
rewards are provided for creative efforts.
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22. Study Question 3: How do intuition, judgment,
and creativity affect decision making?
 Creativity is higher when (cont.):
– The decision maker emphasizes engagement in
the creative process and counsels individuals
to share their ideas with others.
– The decision maker encourages subordinates
to recognize ambiguity, contact others with
different views, and be prepared to make
considerable changes.
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23. Study Question 4: How do you
manage the decision-making process?
 In choosing problems to address, ask and
answer the following questions:
– Is the problem easy to deal with?
– Might the problem resolve itself?
– Is this my decision to make?
– Is this a solvable problem within the context
of the organization?
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24. Study Question 4: How do you
manage the decision-making process?
 Reasons for decision making failure.
– Managers too often copy others’ choices and try to
sell them to subordinates.
– Subordinates may believe the manager is imposing his
or her will rather than working for everyone’s
interests.
– Managers may focus on the problems they see rather
than the outcomes they want.
– Managers use participation too infrequently.
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25. Study Question 4: How do you
manage the decision-making process?
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26. Study Question 4: How do you
manage the decision-making process?
 Key problem attributes in the Vroom, Yetton,
and Jago decision making framework.
– The required quality of the decision.
– The commitment needed from subordinates.
– The amount of information the leader has.
– Commitment probability.
– Goal congruence.
– Subordinate conflict.
– Subordinate information.
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27. Study Question 4: How do you
manage the decision-making process?
 Authority decisions in the Vroom, Yetton, and
Jago decision making framework.
– Manager or team leader uses information that he or
she possesses and decides what to do without
involving others.
– Variant 1  manager solves the problem or makes the
decision alone.
– Variant 2  manager obtains the necessary
information from others and then decides.
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28. Study Question 4: How do you
manage the decision-making process?
 Consultative decisions in the Vroom, Yetton, and
Jago decision making framework.
– Manager or team leader solicits input from other
people and then, based on this information and its
interpretation, makes a final choice.
– Variant 1  manager seeks input from others
individually and then makes a decision.
– Variant 2  manager seeks input from others
collectively and then makes a decision.
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29. Study Question 4: How do you
manage the decision-making process?
 Group decisions in the Vroom, Yetton, and
Jago decision making framework.
– Manager or team leader consults with others
and allows them to help make the final choice.
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30. Study Question 4: How do you
manage the decision-making process?
 Knowing when to quit.
– The natural desire to continue on a selected course of
action reinforces escalating commitment.
– Escalating commitment is the tendency to continue
and renew effort on a previously chosen course of
action, even though it is not working.
– Tendency to escalate commitments often outweighs
the willingness to disengage from them.
– Good decision makers are willing to reverse previous
decisions.
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31. Study Question 5: What are some of the
current issues in decision making?
 Workplace trends affecting organizational
decision makers.
– Business units are becoming smaller in size.
– New, more flexible, and adaptable
organizational forms.
– Multifunctional understanding is increasingly
important.
– Workers with both technical knowledge and
team skills are increasingly desirable.
– The nature of “work” is in a state of flux.
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32. Study Question 5: What are some of the
current issues in decision making?
 Information technology and decision
making.
– Artificial intelligence is the study of how
computers can be programmed to think like
human beings.
– Expert systems support decision making by
following “either-or” rules to make
deductions.
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33. Study Question 5: What are some of the
current issues in decision making?
 Information technology and decision
making (cont.).
– Fuzzy logic and neural networks reason
inductively.
– Computer support for decision making.
– Information technology does not deal with
issues raised by the garbage can model.
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34. Study Question 5: What are some of the
current issues in decision making?
 Cultural factors and decision making.
– Culture is “the way in which a group of people solves
problems.”
– North American culture stresses decisiveness, speed,
and the individual selection of alternatives.
– Other cultures place less emphasis on individual
choice than on developing implementations that work.
– The most important impact of culture on decision
making concerns which issues are elevated to the
status of problems solvable within the firm.
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35. Study Question 6: How do you infuse
ethics into the decision-making process?
 Ways to infuse ethics into decision
making.
– Develop a code of ethics and follow it.
– Establish procedures for reporting violations.
– Involve employees in identifying ethical
issues.
– Monitor ethical performance.
– Reward ethical behavior.
– Publicize ethical efforts.
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36. Study Question 6: How do you infuse
ethics into the decision-making process?
 Morality is involved in:
– Choosing problems.
– Deciding who should be involved in making
decisions.
– Estimating the impacts of decision
alternatives.
– Selecting an alternative for implementation.
 An effective decision needs to solve a problem as
well as match moral values and help others.
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37. COPYRIGHT
Copyright 2005 © John Wiley & Sons, Inc. All rights reserved.
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