Decision-Making Process

The Decision-Making Process

Begins with the identification of a problem & ends with evaluation & the implementation of a solution.

Two Case Studies

Tylenol & Toyota illustrate good & bad decision-making when recalling products. One approach improved trust in the company while another harmed the organization's reputation?

How did a decision-making process help Tylenol while a lack of structure hindered Toyota?

Tylenol Case Study

In October 1982, Tylenol dealt with a crisis because someone was tampering with the product & poising the customer.

What steps did they take to make a decision?

Toyota Case Study

A late recall over sticky pedals & accelator issues damaged Toyota's brand.

How could the recall have been better handled?

Steps in the Decision-Making Process

• Identify the Problem
• Generate & Evaluate Solutions
• Make a Decision
• Implement the Decision
• Evaluate the Decision
• Repeat as Required

Identify the Problem

• Gathers information.
• Focuses on information gathering, information processing & deliberation.
• Decision objectives should be established.
• Explains what a successful resolution would be.

Generate & Evaluate Solutions

• Indentify criteria to evaluate options.
• Potential solutions are formulated.
• Information is gathered & analyzed.
• The advantages and disadvantages of alternative solutions are identified:
• Stakeholder analysis.
• Cost-benefit analysis.

Make a Decision

• Decide on a preferred course of action.
• Classical Decision-Making Model
• Managers act rationally
• Managers possess all information
• Results in an optimal decision
• Behavioural Decision-Making Model
• Managers react to the situation
• Recognizes limits in gathering information
• Results in a satisficing (choosing the first/most acceptable alternative) decision.

Differences in Models

Implement the Decision

• Involves taking action to make sure the solution decided upon becomes a reality.
• Managers need to have willingness & ability to implement action plans.
• Lack-of-participation error should be avoided.

Evaluate the Decision

• Compare actual & desired results.
• Positive & negative consequences of chosen course of action should be examined.

Repeat as Required

• If actual results fall short of desired results, the manager returns to earlier steps in the decision-making process.

Personal Decision-Making

• Use the process to consider a personal decision:

Issues in Decision-Making

• Errors & Traps
• Ethical Decision-Making
• Individual & Group Decisions
• Organizational Learning

Errors & Traps

• Heuristics: Strategies to simplify decisions that may not be accurate.
• Lack of Participation: Failing to adequately involve all persons whose support is necessary.
• Framing Error: Solving a problem based on the context.
• Escalating Commitment: Continuing on a course of action although it is not working.

Reframing a decision may lead to different results.

Ethical Decision-Making

• Considering the ethics of a proposed decision may result in better decisions & prevent costly litigation.
• Ethical Decision-Making is an element of Corporate Social Responsibility.
• Ethical decisions satisfy the following criteria:
• Utility
• Rights
• Justice
• Caring

An app to assist with ethical decision-making is available online: https://itunes.apple.com/us/app/ethical-decision-making/id799710217

Individual & Group Decisions

• Potential advantages of groups:
• Greater amounts of information & expertise.
• More action alternatives are considered.
• Increased understanding & acceptance of outcomes.
• Increased commitment to implement final plans.

• Potential disadvantages of groups:
• Groupthink or pressure to conform
• Increased time commitment
• Potential for conflict.

Organizational Learning

• A learning organization continously changes & improves using the lessons of experience.

• Organizations must learn from past decisions & seek to increase their knowledge in order to succeed.

Telus encourages social learning to promote development.

Your Cognitive Style

Your decision-making style will be influence by how you think about issues.

Understanding how you think helps identify biases & work with complementary team members.

• Link: http://www.kellogg.northwestern.edu/faculty/uzzi/ftp/page47.html