Managerial Cognition
Junior-Prof. Dr. Brooke A. Shaughnessy
No copying, photographing, video recording allowed.
© Junior-Prof. Dr. Brooke Shaughnessy. Institute for
Leadership and Organization (ILO). LMU Munich. All rights
reserved. No part of this material (including verbal
presentations of it) may be recorded, reproduced, stored in a
retrieval system, or transmitted in any form or by any means-electronic, mechanical, photographing, scanning,
photocopying, video recording, or otherwise--without prior
written permission. To order copies or request permission to
reproduce materials, e-mail [email protected].
© Junior-Prof. Dr. Brooke Shaughnessy
1
Agenda
• Decision characteristics
• Decision-making models
• Steps executives take making important decisions
• Participative decision making
• Techniques for improving decision making in
today’s organizations
• The mindful supervisor
© Junior-Prof. Dr. Brooke Shaughnessy
2
Managerial Decision Making
• Decision making is not easy
• It must be done amid
• Ever-changing factors
• Unclear information
• Conflicting points of view
© Junior-Prof. Dr. Brooke Shaughnessy
3
Decision characteristics
© Junior-Prof. Dr. Brooke Shaughnessy
4
Decisions and Decision Making
• Decision
• Choice made from available alternatives
• Decision Making
• Process of identifying problems and opportunities and
resolving them
© Junior-Prof. Dr. Brooke Shaughnessy
5
Categories of Decisions
• Programmed Decisions
• Situations occurred often enough to enable decision
rules to be developed and applied in the future
• Made in response to recurring organizational problems
• Nonprogrammed Decisions
• In response to unique, poorly defined and largely
unstructured, and have important consequences to the
organization
© Junior-Prof. Dr. Brooke Shaughnessy
6
Decisions and Decision Making
• Many decisions that managers deal with
every day involve at least some degree of
uncertainty and require nonprogrammed
decision making
 May be difficult to make
 Made amid changing factors
 Information may be unclear
 May have to deal with conflicting points of view
© Junior-Prof. Dr. Brooke Shaughnessy
7
Certainty, Risk, Uncertainty,
Ambiguity
● Certainty
● All the information the decision maker needs is fully available
● Risk
● Decision has clear-cut goals
● Good information is available
● Future outcomes associated with each alternative are subject to chance
● Uncertainty
● Managers know which goals they wish to achieve
● Information about alternatives and future events is incomplete
● Managers may have to come up with creative approaches to alternatives
● Ambiguity
●
●
●
●
By far the most difficult decision situation
Goals to be achieved or the problem to be solved is unclear
Alternatives are difficult to define
Information about outcomes is unavailable
© Junior-Prof. Dr. Brooke Shaughnessy
8
Conditions that Affect the
Possibility of Decision Failure
Organizational
Problem
Low
Possibility of Failure
Certainty
Risk
High
Uncertainty
Programmed
Decisions
Ambiguity
Nonprogrammed
Decisions
Problem
Solution
© Junior-Prof. Dr. Brooke Shaughnessy
9
Selecting a Decision Making
Model
• Depends on personal preference
• Whether the decision is programmed or nonprogrammed
• Extent to which the decision is characterized by
risk, uncertainty, or ambiguity
© Junior-Prof. Dr. Brooke Shaughnessy
10
Decision-Making Models
Classical Model
Administrative Model
Political Model
© Junior-Prof. Dr. Brooke Shaughnessy
11
Classical Model
• Logical decision in the organization’s best economic
interests
• Assumptions
• Decision maker operates to accomplish goals that are known
and agreed upon
• Decision maker strives for condition of certainty – gathers
complete information
• Criteria for evaluating alternatives are known
• Decision maker is rational and uses logic
• Normative
• Describes how a manager should and provides guidelines for
reaching an ideal decision
© Junior-Prof. Dr. Brooke Shaughnessy
12
Administrative Model (1)
• How nonprogrammed decisions are made –
uncertainty/ambiguity
• Two concepts are instrumental in shaping the
administrative model
• Bounded rationality
• People have limits or boundaries on how rational they can be
• Satisficing
• Means that decision makers choose the first solution
alternative that satisfies minimal decision criteria
Source: Herbert A. Simon
© Junior-Prof. Dr. Brooke Shaughnessy
13
Administrative Model (2)
• Managers actually make decisions in difficult situations
characterized by non-programmed decisions, uncertainty,
and ambiguity
• Decision goals often are vague, conflicting and lack
consensus among managers
• Rational procedures are not always used
• Managers’ searches for alternatives are limited
• Managers settle for a satisficing rather than a maximizing
solution
• Intuition, looks to past experience
• Descriptive
• How managers actually make decisions--not how they should
© Junior-Prof. Dr. Brooke Shaughnessy
14
Political Model
• Closely resembles the real environment in which most
managers and decision makers operate
• Useful in making non-programmed decisions
• Decisions are complex
• Disagreement and conflict over problems and solutions are
normal
• Coalition
• Informal alliance among manages who support a specific goal
© Junior-Prof. Dr. Brooke Shaughnessy
15
Characteristics Decision Making
Models
Classical Model
Administrative Model
• Clear-cut problem
and goals
• Condition of
certainty
• Full information
about alternatives
and their outcomes
• Rational choice by
individual for
maximizing
outcomes
• Vague problem and
goals
• Condition of
uncertainty
• Limited information
about alternatives
and their outcomes
• Satisficing choice
for resolving
problem using
intuition
© Junior-Prof. Dr. Brooke Shaughnessy
Political Model
• Pluralistic,
conflicting goal
• Condition of
uncertainty,
ambiguity
• Inconsistent
viewpoints,
ambiguity
information
• Bargaining and
discussion among
coalition members
16
Steps to take making
important decisions
© Junior-Prof. Dr. Brooke Shaughnessy
17
Managerial decision-making
process
6. Evaluation
and feedback
5.
Implementation
of chosen
alternative
4. Selection of
desired
alternative
© Junior-Prof. Dr. Brooke Shaughnessy
1. Recognition
of decision
requirement
2. Diagnosis and
analysis of
causes
3. Development
of alternatives
18
Diagnosis and Analysis of Causes
• Diagnosis
• Analyze underlying causal factors associated with the
decision situation
• Managers make a mistake if they jump into
generating alternatives without first exploring the
cause of the problem more deeply
© Junior-Prof. Dr. Brooke Shaughnessy
19
Underlying Causes
• What is the state of disequilibrium affecting us?
• When did it occur?
•
•
•
•
•
•
Where did it occur?
How did it occur?
To whom did it occur?
What is the urgency of the problem?
What is the interconnectedness of events?
What result came from which activity?
© Junior-Prof. Dr. Brooke Shaughnessy
20
Selection of Desired Alternatives
• Risk Propensity
• Willingness to undertake risk with the opportunity of
gaining an increased payoff
• Implementation
• Using managerial, administrative, and persuasive
abilities to translate the chosen alternative into action
© Junior-Prof. Dr. Brooke Shaughnessy
21
Decision Styles
• Differences among people with respect to how they
perceive problems and make decisions
• Not all managers make decisions the same
•
•
•
•
Directive style
Analytical style
Conceptual style
Behavioral style
© Junior-Prof. Dr. Brooke Shaughnessy
22
Personal decision framework
Personal
decision style
Situation
• Programmed/ Nonprogrammed
• Classical, administrative,
political
• Decision steps
© Junior-Prof. Dr. Brooke Shaughnessy
•
•
•
•
Directive
Analytical
Conceptual
Behavioral
Decision
Choice
• Best solution to problem
23
Decision styles
© Junior-Prof. Dr. Brooke Shaughnessy
24
Directive Style
• People who prefer simple, clear-cut solutions to
problems
• Make decisions quickly
• May consider only one or two alternatives
• Efficient and rational
• Prefer rules or procedures
© Junior-Prof. Dr. Brooke Shaughnessy
25
Analytical Style
• Complex solutions based on as much data as they
can gather
• Carefully consider alternatives
• Base decision on objective, rational data from
management control systems and other sources
• Search for best possible decision based on
information available
© Junior-Prof. Dr. Brooke Shaughnessy
26
Conceptual Style
• Consider a broad amount of information
• More socially oriented than analytical style
• Like to talk to others about the problem and possible
solutions
• Consider many broad alternatives
• Relay on information from people and systems
• Solve problems creatively
© Junior-Prof. Dr. Brooke Shaughnessy
27
Behavioral Style
• Have a deep concern for others as individuals
• Like to talk to people one-on-one
• Understand their feelings about the problem and the effect
of a given decision upon them
• Concerned with the personal development of others
• May make decisions to help others achieve their goals
© Junior-Prof. Dr. Brooke Shaughnessy
28
Participation in Decision
Making
© Junior-Prof. Dr. Brooke Shaughnessy
29
Participation in Decision Making
• Helps gauge the appropriate amount of
participation for subordinates in process
• Leader Participation Styles
• Five levels of subordinate participation in decision
making ranging from highly autocratic to highly
democratic
• Diagnostic Questions
• Decision participation depends on
• The problem
• Required level of decision quality
• Importance of having subordinates commit to decision
Source: Vroom-Jago Model
© Junior-Prof. Dr. Brooke Shaughnessy
30
Techniques for improving
decision making in
today’s organizations
© Junior-Prof. Dr. Brooke Shaughnessy
31
Seven Leader Diagnostic
Questions




How significant is the decision?
How important is subordinate commitment?
What is the level of the leader’s expertise?
If the leader were to make the decision alone at what level
would subordinates be committed to the decision?
 What level is the subordinate’s support for the team or
organization’s objectives?
 What is the member’s level of knowledge or expertise
relative to the problem?
 How skilled or committed are group members to working
together?
© Junior-Prof. Dr. Brooke Shaughnessy
32
Decision making in ambiguity
• Brainstorming
• Rigorous debate
• Learn, don’t punish
• Decision making checklist
• Know when to bail
• Practice the five why’s
© Junior-Prof. Dr. Brooke Shaughnessy
33
Checklist (Kahneman et al., 2011)
Check for…
1. Self interest
2. The affect heuristic
3. Group think
4. Saliency bias
5. Availability bias
6. Anchoring bias
7. Halo effect
8. Overconfidence, planning fallacy, optimism biases, competitor
neglect
9. Disaster neglect
10. Loss aversion
© Junior-Prof. Dr. Brooke Shaughnessy
34
Know when to bail
• Escalation of commitment
• The tendency to continue to commit resources to a
failing course of action
Why it occurs
• Humans dislike inconsistency
• Optimism
• Control
• Sunk costs
How to deal with it
• Split responsibility for decisions
• Provide individuals with a graceful exit
• Have groups make the initial decision
© Junior-Prof. Dr. Brooke Shaughnessy
35
Practice the five why’s
• Sakichi Toyoda developed the technique in the
1930s
• „Go and see” philosophy
• Decision making is based on in-depth understanding
• Simple: Ask why no fewer than 5 times
• Example: Client refuses to pay
•
•
•
•
•
Why? Delivery was too late.
Why? Job took longer than anticipated.
Why? Ran out of ink.
Why? There was a last minute order, used up the ink.
Why? Didn’t have ink, couldn’t fill order
© Junior-Prof. Dr. Brooke Shaughnessy
36
The Mindful Supervisor
© Junior-Prof. Dr. Brooke Shaughnessy
37
Leadership and self-awareness
• “21st century leadership calls for a new type of
leader who understands him/herself well and can
call others into a higher state of being, rather than
the old style leader who simply knows how to
manage [business] processes.”
• Connelly and Diaz; Executive Awareness, 2007
© Junior-Prof. Dr. Brooke Shaughnessy
38
Mindfulness
• A technique in which a person becomes
purposefully aware of his/her thoughts, feelings
and decisions in the present moment, nonjudgmentally.
• It serves as a pre-requisite to developing insight
and wisdom.
© Junior-Prof. Dr. Brooke Shaughnessy
39
Mindfulness (2)
• Overlapping concepts:
•
•
•
•
Emotional Intelligence
Self Awareness
Authentic Leadership
Metacognition
© Junior-Prof. Dr. Brooke Shaughnessy
40