Chapter
4
Decision Making in
Organizations
Dr. Hadi Al-Rakah
1
Introduction
• This chapter’s central concepts are around the
rationality & power in decision making and
which is in continuous debate mainly due to the
increasing complexity of modern organizations
• Modern companies need both differentiation
and integration. Decisions ideally need to be
rational (objective, impersonal, unemotional)
in order to facilitate a smooth running and
goal attainment.
2
Models of decision making
• The subject of decision making crosses several
academic disciplines ranging from rational
choice models , various modeling techniques ,
mathematics , statistics to the behavioral aspects
which are handled by psychologists and social
psychologists who in their turn concentrate on
individual cognitive behavior.
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Decision
A decision is a choice made between two or
more available alternatives.
All organizational members make
decisions
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Model of the Decision-Making
Process (Basic model)
Identify
Existing
Problem
List
Alternative
Problem
Select
Most
Beneficial
Solutions
Alternative
Implement
Chosen
Alternative
Gather
ProblemRelated
Feedback
(Evaluation)
5
Managerial Rationality in decision making
• Neo-classical economic assumptions of the
rational choice model of decision making :– At the level of the organization , managers make
rational decisions & without anxiety
– Zey (1992) has shown this kind of logic. To him
the implicit assumption is that if individuals
behave in accordance with rationality then little or
no interference is required by super-ordinate
bodies.
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Limitation of Rational Economic Man or
“Rational Actor”
•
Simon (1945)
–
Decision makers are unable to operate under
conditions of perfect rationality, because they are
constrained by:
(1) complexity of modern organization and
(2) Their own limited cognitive capacities.
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Limitations ( CONT)
• The outcome is “satisfying” rather than
optimizing choice. Due to what said previously:
– The absolutely rational model is beyond reach
– Managers operate within a “bounded rationality” as
result of human & organizational constraints.
– Managers behavior is said to be reasoned (intend to
operate rationally ).
• Human weakness and demands that stem from
within and outside organization limits the
degree of rationality.
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Types of Problems and Decisions
(Simon 1960)
• The below continuum of dimension represents
an early but significant step in distinguishing the
characteristics of decision and associating them
with types of process.
Programmed
Decisions
Nonprogrammed
Decisions
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Limitation (CONT.)
• Programmed Decisions - used to address well and
clear structured and routine problems , occur more
frequently& are more comprehensible .They are
organization and are operational in nature &
usually are left to subordinates.
10
Limitation ( CONT.)
• Nonprogrammed Decisions - used to address
poorly- structured problems that have not been
encountered in quite the same way before
(mostly strategic decisions)
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Decision-making as the Enactment of Power
• Decision making is a game of power between
competing interest groups or players.
• Power is an ever present feature of
organizational life
• Legitimate power (formal in nature) is that
power allocated to positions of authority in the
hierarchy
• Power holder may choose to behave in a way
which further their own or other’s interest or
even block other’s interests
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13
Influential power - holders
(Processes, Prescriptions & explanations)
i.
Empirical studies more criticize the Rational Model as being
idealized depicting unreality.
Incremental ( Lindblom 1959;Braybrook & lindblom 1963)
ii.
–
–
–
–
They refused the concept of linear sequential process of decision making.
To them it is a non linear process.
The full line of alternative solutions is not considered . So instead small
adjustments ( decisions ) are made to ongoing strategies.
Only ones which do not differ markedly from the status quo are
considered.
Decisions proceed by a series of small steps, rather than attaining and
implementing the complete solution in one large step. They are made in a
halting incremental way with periods of recycling , iteration ( repetition)
and reformulation.
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Incrementalism
Advantages
• Because each step in itself is not too dissimilar from
what is already being done it :– Does not upset too many stakeholders
– Stakeholders do not feel threatened by radical change, so it is
possible to gain commitment for what is being done
– The decision have more chance of being undone ( reversible) if
necessary and its repercussions are relatively minor and less
serious.
– If the chosen path seems to lead to undesired destination or if
changing circumstances make destination less appropriate the
step can be retraced with less difficulty than with a larger one.
15
Incrementalism is not enough
• Mintzberg and his colleagues distinguished 7
kinds of decision processes. They found clear
evidence of cycling and recycling of information
& alternatives . Decisions are likely to require
constant adjustments and reappraisal.
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Factors influencing decision making process
Bradford studies on 150 decisions in 30
organizations in England found 3 kind of
decision making processes :• Sporadic ( occurring in a scattered , single
instance occasional scarce)
• Fluid ( Opposite of sporadic )
• Constricted (share some characteristics of the
previous ones but with some distinctive
features)
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Strategies & Garbage-Cans model
(Cohen 1972)
• In Complex organizations whose internal
processes are not really understood , even by
people working for them.
• In these situations Means & Ends of decisions
become uncoupled or disconnected.
– Here actions do not lead to expected outcomes .
– Actions are hijacked along the way by other
decisions and other actions
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Garbage Theory (Summery)
•
•
•
•
•
•
•
•
•
No agreement on neither goals nor the means of achieving them
Uncertainty and ambiguity.
Environment and technology are poorly understood.
Key actors move in and out the decision making process.
Complex organizations, internal processes are not understood
even by those who work in them.
Actions do not lead to the expected outcomes.
Decisions don’t meet the problems.
Solutions exist before the problem.
There are underlying patterns of chaos and complexity theory!
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Coherence =
Intended
rationality
Action dimension
Bacharac
h
Baratz
Lukes
Problem
solving
Mintzber
g
Interest dimension
Cohen
Chaos =
coherence
is a myth
Political
All
activity
are
politically
driven
Overview Of Decision Making in Organization
limitations
• Well-structured
- programmed
• Poorly structured
- nonprogrammed
Decision-Making Conditions
Enactment of power
•Power between interest groups
• Differentiation
•The second face of power
•Influential power- holders
•Incremental
Decision-Making Approach
• Rationality
• Bounded Rationality
Decision-Making
In organization
• Strategies &
Garbage-Cans
model
Factors influencing process
Politics & complexity
3 kind of processes
•Sporadic
•Fluid
•Constricted
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Thank You
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