Organizational Decision Making

• Process of responding to a problem by searching

for and selecting a course of action that will
create the most value for organizational
stakeholders
– Finding the best vendor
– How to best service customers
– How to deal with competition
– Where to test launch a product/service

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 Organizational Decision Making
• Formally defined as the process of identifying and
solving problems

• Two stage process mostly:

– Problem identification stage

– Problem solution stage

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 Organizational Decision Making:
Problem Identification
• Who (all) identifies (identify)?

• What gets identified?

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 Decision Making
• Social cognition: the way an individual encodes,
processes, remembers and uses information

• Naïve scientists or cognitive misers

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 Naïve Scientists
• Individuals are rational and logical in decision making
• Rational model
– Diagnose the problem
– Develop alternative solutions
– Evaluate alternatives
– Choose the best alternative
– Implement the chosen alternative

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 Rational Model: Assumptions
• Decision makers have
– have all the information they need
– have the ability to process all information and make the
best decisions
– agree about what needs to be done

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 Carnegie Model
• Decision makers usually do not have
– all the information they need
– the ability to process all information and resort to
satisficing
• Limited information search to identify solutions
• This limited search restricted to few pre defined criteria
– Bounded rationality: limited capacity to process
information about alternatives

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 Cognitive Misers
• Fiske and Taylor (1991) argued we are cognitive
misers
– Our mental processing resources are highly valued, so we
find ways of saving time and effort when involved in
decision making

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 Cognitive Misers
• Fiske and Taylor (1991) argued we are cognitive
misers
– Our mental processing resources are highly valued, so we
find ways of saving time and effort when involved in
decision making ..more so if pressed for time

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 Heuristics
• Time-saving mental shortcuts that reduce
complex judgements to simple rules of thumb
– Heuristics are quick and easy
– Heuristics can result in biased information processing

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 Availability Heuristic
• Tendency to judge the frequency or probability of
an event in terms of how easy it is to think of
examples of that event (Tversky & Kahneman,
1973)
– We might feel more trepidation about taking a flight if
we have just heard about a horrific plane crash

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 Representativeness Heuristic
• Tendency to allocate a set of attributes to
someone if they match the prototype of a given
category (Kahneman & Tversky, 1973)
– We might look for someone with a white coat and
stethoscope when we arrive at a hospital for
treatment

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Rational Dialectical
Approach Inquiry
Problem identified
Problem identified

Solutions Solutions
suggested suggested
Solutions suggested

Solutions challenged

Solution chosen Solution chosen

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 Types of Decisions
• Programmed decisions: repetitive, well defined,
and for which procedures exist for resolving a
problem
Example: time slots in which classes are scheduled at IIM C;
IIM C summer placement week: No. of rental cars IIM C
hires

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 Types of Decisions
• NonProgrammed decisions: novel and poorly
defined, and no procedure exists

Examples: smoke onboard Air Canada 797

(DFW-YYZ; June 1983)

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 Types of Decisions
• NonProgrammed decisions lead to Programmed
Solutions
– Smoke detectors in washrooms

– Neon strips in the aisles after AC 797

– 90 seconds evacuation rule

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 Organizational Decision Making
• Organizational level decisions are not usually made
by a single manager
• Problem identification and problem solution involve
many departments, multiple viewpoints, and even
other organizations which are beyond the scope of
the individual manager

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Columbia

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Why did NASA downplay the threat?

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 Psychological Safety
• The belief that the workplace is conducive to
interpersonal risk, is typically taken-for-granted as
the “way things are around here”, that is, whether
it is easy to speak up, admit error

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 Psychological Safety
• Psy safety = f (interpersonal trust, mutual respect)

• Learning = f (psy safety, …)

• In teams with high psychological safety, members

believe that the group will not rebuke, marginalize,
or penalize them for speaking up or challenging
prevailing opinion

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