Johns 10e Irm ch11

CHAPTER 11
DECISION MAKING
CHAPTER LEARNING OBJECTIVES
After reading Chapter 11, students should be able to:

LO11.1 Define decision making and differentiate well-structured and ill-structured
problems.
LO11.2 Compare and contrast perfectly rational decision making with decision making
under bounded rationality.
LO11.3 Discuss the impact of framing and cognitive biases on the decision process.
LO11.4 Explain the process of escalation of commitment to an apparently failing course
of action.
LO11.5 Consider how emotions and mood affect decision making.
LO11.6 Summarize the pros and cons of using groups to make decisions, with attention
to the groupthink phenomenon and risk assessment.
LO11.7 Discuss contemporary approaches to improving organizational decision making.
CHAPTER OUTLINE AND TEACHING NOTES
What Is Decision Making?
Decision making is the process of developing a commitment to some course of action. It

involves making a choice among several action alternatives requiring a commitment of
resources. Decision making is also a process of problem solving. A problem exists when
a gap is perceived between some existing state and some desired state.
Well-Structured Problems
For a well-structured problem, the existing state is clear, the desired state is clear, and
how to get from one state to the other is fairly obvious. Such problems are simple, and
their solutions arouse little controversy. They are repetitive and familiar. Because
decision making takes time and is prone to error, organizations (and individuals) attempt
to program the decision making for well-structured problems. A program is a
standardized way of solving a problem.
Ill-Structured Problems
Ill-structured problems are those for which the existing and desired states are unclear and
the method of getting to the desired state is unknown. They are unusual, complex
problems that involve a high degree of uncertainty. As a result, they frequently arouse
controversy and conflict among those who are interested in the decision. They cannot be
solved with programmed decisions. Decision makers resort to non-programmed decision
making to solve ill-structured problems. They are likely to gather more information and
Copyright © 2017 Pearson Canada Inc.

11-2 Johns/Saks, Organizational Behaviour, Tenth Edition
be more self-consciously analytical in their approach. Ill-structured problems can entail

high risk and stimulate political considerations.
As shown in Exhibt 11.1, a rational decision maker would use a decision making model
once a problem is identified. When a rational decision maker identifies a problem, he or
she is likely to search for information to clarify the problem and suggest alternatives;
evaluate the alternatives and choose the best for implementation. The implemented
solution is then monitored over time to ensure its immediate and continued effectiveness.
If difficulties occur at any point in the process, repetition or recycling may be affected.
The Compleat Decision Maker — A Rational Decision-Making Model
Perfect versus Bounded Rationality

The prototype for perfect rationality is Economic Person. This means that he or she is
completely informed, perfectly logical, and oriented toward economic gain. Economic
Person can gather information without cost and is completely informed; is perfectly
logical; and economic gain is the only criterion for decision making. In reality, managers
tend to exhibit bounded rationality rather than perfect rationality. That is, while they try
to act rationally, they are limited in their capacity to acquire and process information.
Also, time constraints and political considerations act as bounds to rationality. Bounded
rationality can be illustrated by framing and cognitive biases as well as the impact of
emotions and mood on decisions. Framing refers to the aspects of the presentation of
information about a problem that are assumed by decision makers. Cognitive biases are
tendencies to acquire and process information in an error- prone manner. They constitute
assumptions and shortcuts that can improve decision-making efficiency but frequently
lead to serious errors in judgment.
Problem Identification and Framing

Although a perfectly rational decision maker is completely informed, the following
difficulties may develop in problem identification for a manager exhibiting bounded
rationality:
• Perceptual defence. This can keep a decision maker from perceiving problems as the
perceptual system defends the perceiver against unpleasant perceptions.
• Problem defined in terms of functional specialty. A problem may be defined in terms
of one’s functional specialty.
• Problem defined in terms of solution. This involves jumping to conclusions and short-
circuiting the rational decision-making process.
• Problem diagnosed in terms of symptoms. A problem may be diagnosed in terms of
symptoms, ignoring the underlying cause of the problem.
When problems are identified they are framed in some way and different decision frames
might lead to very different decisions. Rational decision makers should try to be very
self-conscious about how they have framed problems, they should try out alternative
frames, and they should avoid overarching, universal frames.

Chapter 11 Decision Making 11-3
Information Search
Information clarifies the nature or extent of a problem and suggests alternative solutions.
The perfectly rational Economic Person has free and instantaneous access to all
information needed to clarify the problem and develop alternative solutions. In bounded
rationality, the information search may be slow and costly.
Too Little Information. Sometimes, decision makers do not acquire enough information
to make a good decision. Several cognitive biases contribute to this. Managers often rely
on their own flawed memory. Unfortunately, our memory is more selective then
representative—we remember vivid, recent events and rely on familiar information.
Overconfidence in decision making is also a problem and it is reinforced by confirmation
bias - the tendency to seek out information that conforms to one’s own definition of or
solution to a problem. These biases lead people to shirk the acquisition of additional
information.
Too Much Information. Managers may also obtain too much information which can also
damage decisions. Information overload is the reception of more information than is
necessary to make effective decisions. Information overload can lead to errors, omissions,
delays, and cutting corners. Even though this usually results in lower quality decisions,
decision makers tend to be more confident with more information and think that more is
better. People also tend to have a cognitive bias to value advice for which they have paid
over free advice of equal quality.
Alternative Development, Evaluation, and Choice

A decision maker lists alternative solutions to a problem, examines the solutions, and
chooses the best one. This is easy for the perfectly rational decision maker since he or she
conceives of all alternatives, knows the ultimate value of each, and knows the probability
that each will work. A rational decision maker exhibits maximization — the choice of the
decision alternative with the greatest expected value.
However, the decision maker working under bounded rationality may not know all
alternative solutions, and may be ignorant of the ultimate values and probabilities of
success of those solutions that he knows. Cognitive biases also come into play. People are
weak intuitive statisticians and frequently violate statistical principals. They have trouble
incorporating known existing data about the likelihood of events (base rates) into their
decisions. They also have trouble with sample size (large samples warrant more
confidence), probability estimates of multiple event scenarios (overestimate the odds of
complex chains occurring), and are poor at revising estimates of probabilities and values
as they acquire additional information. An example of this last problem is the anchoring
effect, which refers to the inadequate adjustment of subsequent estimates from an initial
estimate that serves as an anchor. It is possible to reduce some of these basic cognitive
biases by making people more accountable for their decisions. However, this
accountability must be in place before a decision is reached.
The perfectly rational decision maker evaluates alternative solutions against a single
criterion- economic gain. A decision maker working under bounded rationality has to

factor in other criteria such as political acceptability of the solution to other

organizational members which increases the complexity of the decision-making process.
As a result, the decision maker working under bounded rationality frequently “satisfices”
rather than maximizes. Satisficing involves establishing an adequate level of acceptability
for a solution and then screening solutions until one that exceeds this level is found.
When this occurs, evaluation of alternatives ceases and the solution is chosen for
implementation.
Entrepreneurs are especially prone to overconfidence, too much optimism, and other
cognitive biases that cloud decision making
Risky Business
Choosing between decision alternatives involves an element of risk. The role of risk in
decision making also demonstrates the power of framing. Research by Kahneman and
Tversky shows that when people view a problem as a choice between losses, they tend to
make risky decisions, rolling the dice in the face of a sure loss. When people frame the
alternatives as a choice between gains they tend to make conservative decisions,
protecting the sure win. Learning history can modify these general preferences for or
against risk.
Solution Implementation
The perfectly rational decision maker factors any possible implementation problems into
his or her choice of solutions. However, solution implementation for a bounded decision
maker is more difficult since he or she is usually dependent on others to implement the
decision and it is difficult to anticipate their ability or motivation to do so. A good
example of this is when products such as cars are designed, engineered, and produced in
a lengthy series of stages.
Solution Evaluation
Solution evaluation is the last step in the decision making process. The perfectly rational
decision maker evaluates the effectiveness of a decision with calm, objective detachment.
However, a bounded decision maker might encounter problems.
Justification. People tend to be overconfident about the adequacy of their decisions. To

avoid dissonance because of a faulty decision, individuals may avoid testing the
adequacy of the decision. If circumstances force them to recognize an error, they may try
to justify the faulty decision. The justification of faulty decisions is best seen in the
irrational treatment of sunk costs. Sunk costs are permanent losses of resources incurred
as a result of a decision. Even though the resources have been lost, people try to justify a
past bad decision by escalating the decision (throw good resources after bad), attempting
to prove that they were right all along and to recoup the sunk costs. This process is
known as escalation of commitment. Escalation of commitment is the tendency to invest
additional resources in an apparently failing course of action. The escalation involves
devoting more and more resources to actions implied by the decision. In addition to
dissonance reduction, it is motivated by a desire not to appear wasteful, a desire to appear
consistent, or an attempt to avoid the sure loss represented by sunk costs. Escalation of

commitment sometimes happens even when the current decision maker is not responsible
for previous sunk costs. In addition to situational causes, personality, moods, and
emotions can affect escalation. People high on neuroticism and negative affectivity are
less likely to escalate. Escalation can occur in both competitive and non-competitive
situations.
Attempts to prevent the escalation of commitment might include the following:

• Encourage continuous experimentation with reframing the problem. Reframe the
problem from one of spending to one of saving.
• Set specific goals that must be met before additional resources are invested.
• Place more emphasis on evaluating managers on how decisions are made and less on
decision outcomes.
• Separate initial and subsequent decision making.
Using groups does not reduce the tendency toward escalation. Groups are more prone
than individuals to escalate commitment.
Hindsight. The careful evaluation of decisions is also inhibited by faulty hindsight.

Hindsight is the tendency to review the decision-making process to find what was done
right or wrong. It often reflects a cognitive bias. Individuals engaging in hindsight may
exhibit the knew-it-all-along effect. This is a tendency to assume, after the fact that we
knew all along what the outcome of a decision would be. Another form of faulty
hindsight is taking personal responsibility for successful decision outcomes while
denying responsibility for unsuccessful outcomes.
How Emotions and Mood Affect Decision Making

Contrary to the rational model of decision making, there is ample evidence that emotions
also play a role in decision making. In fact, strong emotions frequently figure in the
decision-making process that corrects ethical errors (Chapter 12), and so-called
whistleblowers often report that they were motivated by emotion to protest decision
errors. Strong (positive) emotion has also been implicated in creative decision making
and the proper use of intuition to solve problems. Such intuition (Chapter 1) can lead to
the successful short-circuiting of the steps in the rational model when speed is of the
essence.
There are also many cases in which strong emotions are a hindrance such as when people
experiencing strong emotions are often self-focused and distracted from the actual
demands of the problem at hand. A common theme over the years has been how
excessive emotional conflict between business partners or family business members
provokes questionable business decisions.
There is plenty of evidence that mood affects what and how people think when making
decisions and that it has greatest impact on uncertain, ambiguous decisions of the type
that are especially crucial for organizations. Research on mood and decision making has
found that:

 People in a positive mood tend to remember positive information. Those in a negative

mood remember negative information.
 People in a positive mood tend to evaluate objects, people, and events more
positively. Those in a negative mood provide more negative evaluations.
 People in a good mood tend to overestimate the likelihood that good events will occur
and underestimate the occurrence of bad events. People in a bad mood do the
opposite.
 People in a good mood adopt simplified, short-cut decision-making strategies, more
likely violating the rational model. People in a negative mood are prone to approach
decisions in a more deliberate, systematic, detailed way.
 Positive mood promotes more creative, intuitive decision making.
The impact of mood on decision making is not necessarily dysfunctional. If the

excesses of optimism can be controlled, those in a good mood can make creative
decisions. If the excesses of pessimism can be controlled, those in a negative mood can
actually process information more carefully and effectively. A good example of how
mood and emotion can lead to faulty decision making can be seen in the “dot.com
meltdown” that began in the 1990s.
Rational Decision Making—A Summary

The rational decision-making model provides a good guide for how many decisions
should be made but offers only a partially accurate view of how they are made. For
complex, unfamiliar decisions the rational model provides a pretty good picture of how
people actually make decisions. However, there is plenty of case evidence that in
organizations the rational decision-making process is often short-circuited in part because
of the biases discussed above. This might explain why about half of the decisions made in
organizations have been found to be failures.
Group Decision Making
Many organizational decisions are made by groups rather than individuals, especially
when problems are ill structured. There are both advantages and problems of group
decision making.
Why Use Groups?

Groups may be used to make organizational decisions for three reasons.
Decision Quality. Groups should make higher quality decisions than individuals because
groups are more vigilant, can generate more ideas, and can evaluate ideas better than
individuals. These characteristics suggest that groups should make higher-quality
decisions than individuals.
Decision Acceptance and Commitment. Often, a decision made by a group is more likely
to be accepted because people wish to be involved in decisions that affect them, they will
better understand a decision in which they participated, and will be more committed to a
decision in which they invested personal time and energy. The acceptability of group

decisions is especially useful in decision implementation, since committed individuals

should be willing to follow through with implementation.
Diffusion of Responsibility. This refers to the ability of group members to share the
burden of the negative consequences of a poor decision. Each member of a group shares
part of the burden of the negative consequences of a poor decision, and no one person
will be singled out for punishment.
Do Groups Actually Make Higher-Quality Decisions Than Individuals?

Research has shown that groups usually produce more and better solutions to problems
than individuals working alone. Certain conditions should enable groups to perform
better than individuals.
• Group members differ in relevant skills and abilities, as long as they don’t differ so
much that conflict occurs.
• Some division of labour can occur.
• Memory for facts is an important issue.
• Individual judgments can be combined by weighting them to reflect member
expertise.
Disadvantages of Group Decision Making

Group decision making has four potential disadvantages.
Time. Groups seldom work quickly or efficiently, compared to individuals due to process
losses. This problem increases with size. When the speed of arriving at a solution to a
problem is a prime factor, organizations should avoid using groups.
Conflict. Participants in group decisions often have their own personal axes to grind or
their own resources to protect and as a result, decision quality may take a back seat to
political wrangling and infighting. In general, groups will make better decisions when
their members feel psychologically safe.
Domination. The advantages of group decision making will seldom be realized if

meetings are dominated by a single individual or a small coalition. If the dominant person
is particularly misinformed, the group decision is very likely to be ineffective.
Groupthink. Groupthink happens when group pressures lead to reduced mental

efficiency, poor testing of reality, and lax moral judgment. Psychologist Irving Janis, who
developed the groupthink concept, felt that high group cohesiveness was at its root. It
now appears that other factors are more important such as strong identification with the
group, concern for approval from the group, and the isolation of the group from other
sources of information. The promotion of a particular decision by the group leader
appears to be the strongest cause. Groupthink symptoms include:
 Illusion of invulnerability. Members are overconfident and willing to assume great
risks. They ignore obvious danger signals.
 Rationalization. Problems and counterarguments that members cannot ignore are
“rationalized away.”

 Illusion of morality. The decisions the group adopts are not only perceived as
sensible, they are also perceived as morally correct.
 Stereotypes of outsiders. The group constructs unfavourable stereotypes of those
outside the group who are the targets of their decisions.
 Pressure for conformity. Members pressure each other to fall in line and conform
with the group’s views.
 Self-censorship. Members convince themselves to avoid voicing opinions contrary to
the group.
 Illusion of unanimity. Members perceive that unanimous support exists for their
chosen course of action.
 Mindguards. Some group members may adopt the role of “protecting” the group from
information that goes against its decisions.
Victims of groupthink are operating in an atmosphere of unreality that should lead to

low-quality decisions. To prevent groupthink, leaders must be careful to avoid exerting
undue pressure for a particular decision outcome and concentrate on good decision
processes. They should establish norms that encourage and even reward responsible
dissent, and outside experts should be brought in from time to time to challenge the
group’s views.
Stimulating and Managing Controversy

As long as it does not become full-blown conflict, controversy provokes new ideas and
improves decisions. An interesting method of controversy stimulation is the appointment
of a devil’s advocate. A devil’s advocate may be appointed to identify and challenge the
weaknesses of a proposed plan or strategy. The controversy promoted by the devil’s
advocate improves decision quality. To be effective, the advocate must present his or her
views in an objective, unemotional manner.
How Do Groups Handle Risk?

Problems that are suitable for group decision making involve some degree of risk and
uncertainty. This raises the question of whether groups make more or less risky decisions
than those of individuals. A key factor is the initial positions of the group members
before they discuss a particular problem. When group members are initially more willing
to take risks, they experience a risky shift after discussion. A risky shift is the tendency
for groups to make riskier decisions than the average risk initially advocated by their
individual members. When group members are somewhat conservative before
interaction, they tend to exhibit a conservative shift when they discuss the problem. A
conservative shift is the tendency for groups to make less risky decisions than the average
risk initially advocated by their individual members.
Risky and conservative shifts occur in a wide variety of real settings, including
investment and purchasing decisions. A key factor appears to be the initial positions of
the group members before they discuss the problem. Group discussion seems to polarize
or exaggerate the initial position of the group. Two main factors explain risky and
conservative shifts when groups make decisions:

 Group discussion generates ideas and arguments that individual members have not
considered before. This information naturally favours the members’ initial tendency
toward risk or toward conservatism.
 Group members try to present themselves as basically similar to other members but
“even better.” They try to one-up others in discussion by adopting a slightly more
extreme version of the group’s initial stance.
Managers should be aware of the tendency for group interaction to polarize initial risk
levels.
Contemporary Approaches to Improving Decision Making
Good decisions are vital for organizational success, and decisions can be improved if
decision makers are encouraged to adhere to the rational model shown in Exhibit 11.1.
This should help preclude the various biases and errors that we have alluded to earlier.
Following are some contemporary approaches that indicate that managers have to be
more mindful of the quality of the evidence they are using to make decisions; they have
to be open to new and improved sources of evidence; and they may have involve an array
of new people in the decision-making process.
Evidence-Based Management
Evidence-based management is “making decisions through the conscientious, explicit,
and judicious use of the best available evidence from multiple sources.” Much of what
passes for decision making in organizations consists of guessing what the boss favours,
indiscriminately copying competitors (defended as “benchmarking”), or buying canned
consulting packages, none of which passes the test for the best available evidence. Harder
sources of evidence (scientific research and company data) are most useful at the
information search and solution evaluation stages of the decision cycle shown in Exhibit
11.1. Expert and professional judgment tend to be most valuable in identifying the
problem and mid-process, when developing, choosing, and implementing solutions.
Crowdsourcing
Crowdsourcing involves “outsourcing” aspects of a decision process to a large collection
of people. It is meant to capitalize on the merits of group decision making that were
discussed earlier, but on a large scale. In terms of the rational decision model,
crowdsourcing can be used to develop alternative solutions to a problem, to choose the
best solution, or both. Two basic ideas underpin the effective use of crowdsourcing for
decision making. One is that the information required to make a particular decision is not
available to those charged with making that decision. The other is that a large collection
of diverse individuals is likely to contain either a single superior solution to a problem, or
on average, the collection will be correct. Low-cost information technology and the rise
of social media have contributed to the growth of crowdsourcing as a decision aid. It is
best employed when in-house expertise is lacking, the nature of the problem can be
clearly stated, and a large, diverse crowd is both knowledgeable and motivated to
participate.

Analytics and Big Data

Like crowdsourcing, analytics and big data are other facets of evidence-based
management. Analytics concerns finding meaningful patterns in large datasets using
conventional statistics, mathematical modeling, and various techniques to represent data
visually. In some cases, the revealed patterns show that problems are more well
structured than was thought. The term big data refers loosely to copious amounts of
information that are often collected in real time and can come from a wide variety of
sources, particularly digital. These sources include messages and images from social
media, blog postings, cellphone data (including GPS), online shopping records, news
articles, and data captured by sensors in cars and machinery. Such data tend to be
unstructured and not easily incorporated into standard databases.
ADDITIONAL CHAPTER MATERIAL: TRADITONAL APPROACHES FOR

IMPROVING DECISION MAKING IN ORGANIZATONS
Improving Decision Making in Organizations
Managers can improve the success of their decisions by using various tactics, such as
making the need for action clear at the outset, setting objectives, carrying out an
unrestricted search for solutions, and getting key people to participate. It stands to reason
that organizational decision making can improve if decision makers receive
encouragement to follow more closely the rational decision-making model shown in
Exhibit 11.1. This should help to preclude the various biases and errors that we have
alluded to throughout the chapter. Each of the following techniques has this goal.
Training Discussion Leaders
When organizations use group decision making, an appointed leader often convenes the
group and guides the discussion. The actions of this leader can “make or break” the
decision. On the one hand, if the leader behaves autocratically, trying to “sell” a
preconceived decision, the advantages of using a group are obliterated, and decision
acceptance can suffer. If the leader fails to exert any influence, however, the group might
develop a low-quality solution that does not meet the needs of the organization. The use
of role-playing training to develop these leadership skills has increased the quality and
acceptance of group decisions. The following are examples of the skills that people learn
in discussion-leader training:
● State the problem in a non-defensive, objective manner. Do not suggest solutions or

preferences.
● Supply essential facts and clarify any constraints on solutions (e.g., “We can’t spend
more than $25 000.”).
● Draw out all group members. Prevent domination by one person, and protect
members from being attacked or severely criticized.
● Wait out pauses. Do not make suggestions or ask leading questions.
● Ask stimulating questions that move the discussion forward.

● Summarize and clarify at several points to mark progress.
Traditional and Electronic Brainstorming
Brainstorming is the brainchild of a Madison Avenue advertising executive. Its major

purpose is to increase the number of creative solution alternatives to problems. Thus,
brainstorming focuses on the generation of ideas rather than the evaluation of ideas. If a
group generates a large number of ideas, the chance of obtaining a truly creative solution
is increased.
Brainstorming was originally conceived as a group technique. It was assumed that, in

generating ideas, group members could feed off each other’s suggestions and be
stimulated to offer more creative solutions. To ensure this, the group is encouraged to
operate in a freewheeling, off-the-wall manner. No ideas should be considered too
extreme or unusual to be voiced. In addition, no criticism of ideas should be offered,
since this can inhibit useful lines of thinking. For instance, an advertising agency might
convene a group to generate names for a new toothpaste or soft drink. Similarly, a
government agency might convene a group to generate possible solutions for welfare
fraud.
Traditional brainstorming has not fulfilled its full creative promise. Research has shown
conclusively that individuals working alone tend to generate more ideas than those in
groups. In other words, four people working independently (and encouraged to be
creative and non-evaluative) will usually generate more ideas than the same people
working as a team. Why is this? Likely explanations include inhibition, domination of the
group by an ineffective member, or the sheer physical limitations of people trying to talk
simultaneously.
However, brainstorming can provide advantages that extend beyond the mere number of
ideas generated. Researchers Robert Sutton and Andrew Hargadon studied IDEO, the
incredibly successful product and services design firm based in Palo Alto, California.
One of the most innovative companies in the world, IDEO makes extensive use of
brainstorming. They found that the procedure results in a number of important creative
and business advantages. In terms of the organizational culture, they found that it helps
organizational memory and supports a culture of wisdom—that is, ideas from one session
can be used on subsequent, unrelated projects, and participants learn to appreciate the
good ideas of others. At the individual level, the sessions motivate and stimulate the
engineers and allow them to show off their good ideas to their colleagues. Finally, IDEO
uses the brainstorming sessions to impress their clients, who really get to see how the
design process unfolds. Thus, brainstorming shapes the organizational culture, helps
retain good talent, and contributes to client confidence.
An alternative to traditional brainstorming is electronic brainstorming. Electronic

brainstorming uses computer-mediated communication to accomplish the same goal as
traditional brainstorming: the generation of novel ideas without evaluation. As we noted,

face-to-face interaction actually reduces individual brainstorming performance. But what

happens if people brainstorm as an electronic group?
Once over the size of two members, electronic brainstorming groups perform better than
face-to-face groups in terms of both quantity and quality of ideas. Also, as electronic
groups get larger, they tend to produce more ideas, but the ideas-per-person measure
remains stable. In contrast, as face-to-face groups get bigger, fewer and fewer ideas per
person are generated (recall social loafing from Chapter 7). What accounts for the success
of electronic brainstorming? Reduced inhibition about participating and the ability for
people to enter ideas simultaneously without waiting for others seem to be the main
reasons. Notice that these factors become especially critical as the group gets bigger.
Some organizations have done electronic brainstorming with groups of up to 30
members.
Nominal Group Technique
The fact that nominal (in name only) brainstorming groups generate more ideas than
interacting brainstorming groups gave rise to the nominal group technique (NGT) of
decision making. Unlike brainstorming, NGT is concerned with both the generation of
ideas and the evaluation of these ideas.
Imagine a meeting room in which 7 to 10 individuals are sitting around a table in full
view of each other; however, at the beginning of the meeting they do not speak to
each other. Instead, each individual is writing ideas on a pad of paper in front of him
or her. At the end of 5 to 10 minutes, a structured sharing of ideas takes place. Each
individual, in round-robin fashion, presents one idea from his or her private list. A
recorder writes that idea on a flip chart in full view of other members. There is still
no discussion at this point of the meeting—only the recording of privately narrated
ideas. Round-robin listing continues until all members indicate they have no further
ideas to share. Discussion follows during the next phase of the meeting; however, it is
structured so that each idea receives attention before independent voting. This is
accomplished by asking for clarification, or stating support or nonsupport of each
idea listed on the flip chart. Independent voting then takes place. Each member
privately, in writing, selects priorities by rank-ordering (or rating). The group
decision is the mathematically pooled outcome of the individual votes.
As you can see, NGT carefully separates the generation of ideas from their evaluation.
Ideas are generated nominally (without interaction) to prevent inhibition and conformity.
Evaluation permits interaction and discussion, but it occurs in a fairly structured manner
to be sure that each idea gets adequate attention. NGT’s chief disadvantage would seem
to be the time and resources required to assemble the group for face-to-face interaction.
The Delphi technique was developed, in part, to overcome this problem.

The Delphi Technique
The Delphi technique of decision making was developed at the Rand Corporation to
forecast changes in technology. Its name derives from the future-telling ability of the
famous Greek Delphic Oracle. Unlike NGT, the Delphi process relies solely on a nominal
group—participants do not engage in face-to-face interaction. Thus, it is possible to poll a
large number of experts without assembling them in the same place at the same time. We
should emphasize that these experts do not actually make a final decision; rather, they
provide information for organizational decision makers.
The heart of Delphi is a series of questionnaires sent to respondents. Minimally, there are
two waves of questionnaires, but more is not unusual. The first questionnaire is usually
general in nature and permits free responses to the problem. For example, suppose the
CEO of a large corporation wishes to evaluate and improve the firm’s customer service.
A random sample of employees who have worked closely with customers would receive
an initial questionnaire asking them to list the strengths and weaknesses of the existing
approach to customers. The staff would collate the responses and develop a second
questionnaire that might share these responses and ask for suggested improvements. A
final questionnaire might then be sent asking respondents to rate or rank each
improvement. The staff would then merge the ratings or rankings mathematically and
present them to the president for consideration.
A chief disadvantage of Delphi is the rather lengthy time frame involved in the
questionnaire phases, although email and other web-based solutions can speed up sending
and receiving. In addition, its effectiveness depends on the writing skills of the
respondents and their interest in the problem, since they must work on their own rather
than as part of an actual group. Despite these problems, Delphi is an efficient method of
pooling a large number of expert judgments while avoiding the problems of conformity
and domination that can occur in interacting groups.
CLASSROOM DEMONSTRATION AND MINI-LECTURE: THE DOLLAR

AUCTION AND ESCALATION OF COMMITMENT
Semester dragging? Student interest flagging? This exercise is guaranteed to get their
attention and provide a good introduction to a mini-lecture on the process of escalation of
commitment to a failing course of action.
The demonstration is called the dollar auction. It is described in Max Bazerman’s

excellent book Judgment in Managerial Decision Making. Max credits the economist and
game theorist M. Shubik with the basic idea (The dollar auction game: A paradox in non-
cooperative behavior and escalation. Journal of Conflict Resolution, Volume 15, 1971,
109-111).
Here’s how to do the auction. Hold up a dollar and announce that you are going to
auction it off to the highest bidder. Then give these instructions to the class:

• You can participate or watch.

• Only bidders can talk (no extraneous conversation). Bidding will be in 5¢ or 10¢
increments.
• There is only one deviation from a conventional auction. Both the winner and the
second highest bidder must pay the amount that each has bid. If you win at 30¢ and
beat out a bid of 25¢, I get that 25¢ and I owe you 70¢.
• Will someone give me 10¢ for this dollar?
Experience shows that someone will pay a lot more than 10¢. Generally, the bidding
begins fast and furious and then comes down to two people who slug it out to the end. It
is not unusual for the winner to pay more than a dollar for the dollar. Remember that the
runner-up must pay too! If your conscience bothers you, give the money back, give it to
charity, or buy the class a treat.
The dollar auction is great for demonstrating irrationality, a common theme in the
chapter, right in class. The moment a second bid is received for the dollar, somebody is
going to lose something here. Seasoned executives and students with extensive
coursework in finance, accounting, and economics fall prey to the auction as frequently
as inexperienced students.
In debriefing, ask the winner what was going through his or her mind during the auction.
Do the same for the loser, early dropouts, and non-participants. Call the class’s attention
to the fact that this is an escalation of commitment situation, although unlike some of the
bad investments discussed in the book this is competitive escalation. A real life example
is a corporate takeover battle in which both sides spend millions on lawyers and
investment bankers regardless of who “wins.” Also, a gasoline price war illustrates
competitive escalation. Review the possible reasons for escalation of commitment in such
situations, tying them back to the students’ comments:
• Competition and the desire to win (an extra-economic criterion).
• To justify the earlier decision to bid, thereby reducing dissonance.
• Inability to ignore sunk costs.
• Desire to appear consistent to others.
• Desire not to appear wasteful.
• The framing of the problem as a sure loss (as when your competition has upped the
bid and you are now the second highest bidder). People are risk seeking when
problems are framed this way.
• How can escalation situations be avoided? This, of course, depends on just which of
the above factors is operating in a given situation. Here are some possible strategies:
• Try to reframe the problem. For example, in the dollar auction, think of the savings of
dropping out rather than the sure loss incurred.
• Set advance limits on the amount to be invested.
• Bring in experts or consultants who do not have a personal stake in the past stream of
decisions. These people can serve as devil’s advocates.
• Try not to stifle controversy about the failing stream of decisions. Dissenters might
show the value of stopping escalation.

CLASSROOM DEMONSTRATION: INDIVIDUAL VERSUS GROUP

DECISION MAKING
If you would like to show your students how group decisions are often higher in quality
than individual decisions, try the following exercise: Spring a “pop quiz” on your class
concerning the material in Chapter 11 or another chapter that they’ve read recently. Use
about 10 of the multiple choice questions from the Test Bank.
First, have the students complete the quiz individually. Then have them break into groups
of 4 or 5 students each, discuss the questions, and come to a group consensus about the
answer to each question. Provide the groups with the correct answers to the questions so
that the group can mark its “consensus exam” and each individual can mark his or her
individual pre-discussion exam responses. Have each group calculate the average of the
individual responses. On the board, make a chart that shows for each group the group
score, the average of the groups’ individual scores, and the range of individual scores
(high score and low score) in the group. On a task of this nature, we would generally
expect the group score to be higher than the average of the individual scores. Memory of
facts and concepts is critical for a good score, and groups should have more “memory
capacity” than individuals. If the group score is lower than the average of the individual
scores it may indicate that the interaction was dominated by one of the poorer individual
scorers.
Research in this general domain often shows that the group performs better than its
average member but not as well as its best member. However, in a research study that did
this specific task using organizational behaviour questions, intact learning groups, and
marks as rewards, Larry K. Michaelsen, Warren E. Watson, and Robert Black found that
groups outperformed their best member 97 percent of the time! (A realistic test of
individual versus group consensus decision making. Journal of Applied Psychology,
Volume 74, 1989, 834-839.)
Other issues that might be considered during debriefing include:

• How structured was this problem?
• Did your group attack the problem “rationally” and systematically?
• How did your group manage controversy?
• Could groupthink occur in this task?
• What are some similar tasks that one might encounter in an actual organization?
Variations on the above exercise: The quiz in question could be an actual scheduled quiz,
and you could count either the individual mark or the group mark as part of the students’
grades. In the former case, have the students turn in one copy of their responses before
they meet in groups (keeping another copy). In the latter case, obtain a copy of the group
results before giving the correct answers. Also, if you are concerned that students will be
embarrassed about revealing their individual scores to their groups, take a small pad of
paper into class and have the students report their scores to the group on anonymous
“ballots.” This will allow the group to calculate its average score and determine the range
of scores.

SAMPLE ANSWERS TO DISCUSSION QUESTIONS
1. The director of an urban hospital feels that there is a turnover problem among the
hospital’s nurses. About 25 percent of the staff resigns each year, leading to high
replacement costs and disruption of services. Use the decision model in Exhibit 11.1
to explore how the director might proceed to solve this problem. Discuss probable
bounds to the rationality of the director’s decision.
The director has already identified a problem, which is the first step in the model. A gap
exists between the actual turnover rate and the desired turnover rate. The search for
relevant information involves a search both for the causes of the turnover and the
potential range of solutions. At this phase, the director might contact an expert on
turnover at a local university, interview nursing supervisors, try to obtain comparable
data from other hospitals, and so on. He or she might conduct an attitude survey of nurses
in order to determine if particular areas of dissatisfaction are a probable cause of
turnover. Alternative solutions must be relevant to these causes and might involve job
redesign, supervisor training, or a pay increase. The evaluation and choice of a solution to
implement will factor in both costs and probability of success. After the solution is
implemented, turnover would be monitored in order to see if the intervention solved the
problem. Bounds to the rationality of the director’s decision may include time pressures,
political pressures, the tendency to adopt a “solution” with inadequate analysis, the
tendency to blame others if the solution does not work, and so forth.
2. Describe a decision-making episode (in school, work, or personal life) in which you
experienced information overload. How did you respond to this overload? Did it
affect the quality of your decision?
Jack Carson was assigned by his boss, the corporate human resource director, to develop
a supervisor training manual for the firm’s incoming supervisors. Although Carson was
an experienced trainer, he had never before prepared such a manual. He took to the job
with relish. First, he collected every existing training manual he could get his hands on.
Although many of them were for purposes other than supervisor training, he felt he might
get some valuable ideas from them. Then he visited a local university library where he
collected as many books and journal articles about training as he could find. “No sense in
not making this a state-of-the-art job,” he thought. Then Carson interviewed all of the
firm’s trainers and a number of supervisors who had recently undergone the current
training program. Finally, Carson interviewed two professors at the university who were
experts in training. When it was time to decide what to include in the manual, Carson
experienced overload. He responded by trying to incorporate everything he had learned
into the manual. The result was a bulky, confusing document that supervisors found very
difficult to master. Information overload had damaged his decision-making capability.
3. A very cohesive planning group for a major oil company is about to develop a long-
range strategic plan. The head of the unit is aware of the groupthink problem and
wishes to prevent it. What steps should she take?
Because of her high status in the group, the head should avoid making her own ideas and
positions clear early in the series of planning meetings. This will prevent the group from

rallying around them to the exclusion of other ideas. Also, during discussion, the head of
the group should occasionally leave the meeting room so that members feel free to bring
up contrary views. Care should be taken to ensure that all group members get their say,
and devil’s advocates should be appointed to critique the group’s current position.
Outside sources of information with contrary views should be given an impartial hearing,
since the group will have an automatic tendency to discount these views.
4. Discuss the implications of diffusion of responsibility, risky shift, and conservative

shift for the members of a parole board. Also, consider the role of emotion and mood.
Diffusion of responsibility means that group members feel less personally responsible for
the consequences of a decision than they would if they had made the decision
individually. This may be good or bad for a parole board. Diffusion is beneficial if it
gives the board the courage to stick to its guns and act the way it truly believes is right.
However, it may also cause the board to work less conscientiously, since the blame for
incorrect decisions can be shared by others. A risky shift means that the board would
make riskier decisions than its individual members, perhaps granting parole to dangerous
prisoners. A conservative shift means that the board would make more conservative
decisions than its individual members, perhaps failing to grant parole to a very eligible
inmate. Research indicates that risky individual positions lead to risky shifts after
discussion. Conservative individual positions lead to conservative shifts. Both kinds of
shifts may or may not result in poor quality decisions. If they represent a sensible sharing
of information, such shifts may improve decision quality.
Emotions and mood would also surely play into a parole board’s ruling. If a potential
parolee’s crime was particularly gruesome, emotional reactions would certainly colour
the board’s decisions. Pleas from the potential parolee or from victims would also
represent factors in a board’s decision that are more emotional than rational. Keep in
mind that these emotional aspects may lead to sounder decisions and should not
necessarily be viewed as dysfunctional. On the other hand, the mood of board members
could lead to poor decisions. To the extent that mood on the parole board could become
contagious among members, positive mood could lead to unwarranted leniency while
negative mood could lead to unfair harshness.
5. Discuss how the concepts of groupthink and escalation of commitment might be

related to some cases of unethical decision making (and its cover-up) in business.
By definition, one component of the groupthink syndrome can be lax moral judgment.
This laxity occurs when the groupthink process inhibits the group from systematically
discussing (if not thinking about) the moral consequences of its decisions --who are the
stakeholders here, and how will they be affected? Paradoxically, the group can come to
believe that it is acting morally (“illusion of morality”). Self-censorship and mindguards
will contribute to the illusion that these views are unanimously held. Escalation of
commitment involves the over-expenditure of resources in a failing course of action.
Some examples of unethical behaviour involve foolish attempts to recoup sunk costs
(e.g., to “earn back” money “borrowed” from an account). Others might involve foolish
attempts to protect one’s own ego by trying to show at any cost that past decisions were
correct. “Any cost” implies that others might be hurt by this decision strategy.

ADDITIONAL DISCUSSION QUESTIONS AND ANSWERS
1. Many universities must register thousands of students for courses each semester. Is
this a well-structured problem or an ill-structured problem? Does it require
programmed decisions or non-programmed decisions? Elaborate.
This is a well-structured problem because the existing state, the desired state, and how to
get from one state to the other are fairly clear. The desired state is to get X students into
Y courses with minimum hassle and confusion. This can be accomplished with
programmed decision making. For example, experience and trends over the years provide
departments with rules of thumb (programs) about how many courses of what sort will be
required in a given semester. In turn, registration personnel adopt routine programs to tell
them how big a given class should be and what to do when the class is filled to capacity.
Programs are used quite literally, as many course registration systems are highly
computerized nowadays. Of course, unanticipated enrollment levels for some courses
may require creative, non-programmed decision making.
2. An auditing team fails to detect a case of embezzlement that has gone on for several
months at a bank. How might team members use hindsight to justify their faulty
decisions?
Team members might tell themselves that they “knew all along” (the knew-it-all-along
effect) that something was wrong, but they just weren’t able to isolate the problem. Also,
they might reject responsibility for the oversight, claiming that the bank manager was at
fault or that the embezzler was especially clever and devious. These hindsight responses
do not totally justify faulty decisions, but they do make the team feel less culpable.
EXTRA DISCUSSION QUESTIONS
1. Explain how the rational decision-making process works.

2. Compare and contrast perfect rationality and bounded rationality.
3. What are sunk costs? How do they affect solution evaluation?
4. What is hindsight? Cite two specific cases of hindsight.
5. Compare and contrast programmed and non-programmed decision making.
6. What are the advantages and disadvantages of group decision making?
7. What can organizations do to improve the decision making of their members?
8. How can emotion and mood affect decision making?
9. What is groupthink and what can organizations do to prevent it?
10. How do groups handle risk? What is a risky shift? What is a conservative shift?

SAMPLE ANSWERS TO INTEGRATIVE DISCUSSION QUESTIONS
1. Consider the role of communication in decision making. Explain how various

communication problems can affect decision making in organizations. How can
personal and organizational approaches for improving communication improve
decision making?
Communication is important for decision making. Effective communication requires that
the right people receive the right information in a timely manner. Decision making
requires information at every stage: problem identification, information search,
development of alternatives, evaluation of alternatives, solution choice, solution
implementation, and solution evaluation. If decision makers do not receive the
information required at each stage, decision making will suffer. Thus, communication
problems can lead to low quality decision making. Some of the communication problems
that can limit or restrict information needed for decision making are filtering, silence, and
the mum effect. With filtering, a message is watered down or stopped during
transmission. Filtering can preclude the right people getting the right information, and so
the decision making process will suffer. Silence means that relevant information is being
withheld and if this is information is important for a decision then the decision making
process will suffer. Information required to make a decision might be withheld as a result
of the mum effect. Because of status differences or time constraints, decision makers
might not obtain important information from employees or other members of the
organization. These communication problems could result in problems at each stage of
decision making. For example, some alternatives might not be considered; the evaluation
of some alternatives might be flawed; and solution choice and evaluation might be based
on limited or inaccurate information. Therefore, effective decision making depends on
effective communication. Personal approaches to improve communication (take the time;
be accepting of others; do not confuse the person with the problem; say what you feel;
listen actively; and give timely and specific feedback) and organizational approaches
(360-degree feedback, employee surveys and feedback, suggestion systems, telephone
hotlines, intranets, and webcasts, and management training) can be used to ensure that
decision makers receive the information they need to make better and more informed
decisions.
2. Does group structure influence group decision making? Explain how each of the
following structural characteristics might influence group decision quality,
acceptance and commitment, and diffusion of responsibility: group size, diversity,
norms, roles, status, and cohesiveness.
Although group decision making is discussed in this chapter, the effect of group
characteristics on decision outcomes was not discussed. Thus, it is interesting to consider
how the group structural characteristics discussed in Chapter 7 might be related to
decision outcomes. Following is a consideration of these relationships:
Group size. As group size increases, groups tend to be less cohesive and less effective.
There are also likely to be problems of communication and coordination along with
process losses. As a result, smaller groups might make better decisions in terms of
decision quality. An exception to this would be when larger groups produce better

alternatives. However, decision acceptance and commitment will probably be greater in

smaller groups while diffusion of responsibility would be more likely in large groups.
Group diversity. To the extent that diverse groups get along and contain a variety of
expertise and views, more diverse groups should make higher quality decisions.
However, to the extent that diverse groups have trouble developing and becoming
cohesive, there might be problems in terms of acceptance and commitment to a decision.
As well, members of diverse groups might be more likely to distance themselves from
others which can result in more diffusion of responsibility.
Group norms. Group norms might also influence decision outcomes. For example, groups
with strong performance norms might be more likely to make high quality decisions.
Strong norms in general are likely to result in acceptance and commitment of group
decisions. Groups with weak norms that are not strongly enforced might be more
susceptible to diffusion of responsibility.
Roles. Roles can improve decision outcomes to the extent that group members perform a
variety of roles that aid the decision making process. For example, if one group member
has the role of devil’s advocate, the quality of decisions is likely to be high. If another
group member has the role of meeting the social-emotional needs of group members,
decision acceptance and commitment might be more likely. The lack of clearly defined
roles might result in more diffusion of responsibility.
Status. Large status differences could have a negative effect on decision outcomes. This
is because high status people prefer to communicate with others of similar status. As a
result, some group members might be inhibited from communicating upward.
Furthermore, higher-status members do more talking and have more influence but are not
necessarily the most knowledgeable about the problem at hand. As a result, the quality of
decisions might suffer. In addition, group members with lower status might not accept or
be committed to decisions. Large status differences might also lead to more diffusion of
responsibility.
Cohesiveness. Cohesiveness is likely to lead to better decision outcomes. This is because

group members are more likely to participate in group activities, and cohesive groups
tend to be successful at accomplishing their goals. Thus, the quality of decisions should
be high. Member acceptance and commitment is also likely to be high because of strong
conformity in cohesive groups. This should also curtail diffusion of responsibility.
However, it is also possible that excessive conformity could result in groupthink and the
acceptance of low quality decisions.

SAMPLE ANSWER TO ON-THE-JOB CHALLENGE QUESTION: TORONTO

RITZ-CARLTON NIXES POPPIES
Imagine the decision process that underpins the Ritz-Carlton policy against wearing
ribbons, pins, or badges on one’s uniform. What are some pros and some cons of such a
policy? What does this story say about the role of rationality versus emotion in decision
making? How do you account for the regularity with which managers reverse themselves
on decisions like this?
Virtually all organizations in the service industry have rules and policies about employee
appearance. Thus, the Ritz’s policy is not unusual. Advantages of such a policy
concerning ribbons, pins, badges, and the like include: presenting a consistent brand
image; putting the focus on the customer, not the service provider; avoiding offending
customers with what could be controversial statements or causes; not having to adjudicate
what are acceptable versus unacceptable statements or causes, etc. Disadvantages include
stifling self-expression; appearing petty; being misunderstood by the general public; etc.
Managers apply a rational model when forming such policies. The recipients and external
observers of such policies often apply emotional criteria when evaluating them. Managers
seem to have a difficult time imagining how policy decisions that they view as being
strictly internal to their organizations (and thus under their control) will be viewed by
outsiders. These outsiders see a negative consequence but not the context (e.g., having to
adjudicate among statements and causes) in which a rule was developed.
TEACHING NOTES FOR THE NEW TRUCK DILEMMA EXPERIENTIAL

EXERCISE
This exercise is a revision of one of the late N R. F. Maier’s excellent research based role
play exercises. The key revision is the conversion of an all male repair crew to a mixed-
sex crew. These teaching notes also rely heavily upon Professor Maier’s work with the
role play, originally published as The Case of The New Truck. The basic mechanics of
the role play and the debriefing are provided in the text. You may wish to take some
index cards to class that can be folded into triangular cross sectional name plates for
student role names. Allow 25 to 30 minutes for interaction and 15 minutes for debriefing.
Professor Maier noted that the essential problem in this exercise is one of fairness, since
the worst truck (Charlie’s) is usually discarded. While the students are interacting, Maier
recommends putting the following matrix on the board to summarize the results for each
group. Use arrows to show whose truck went where. At the bottom of the matrix, note
how many people get a different truck, who was dissatisfied, and whether or not the
supervisor Chris Marshall was satisfied. Also note coin flips, promised repairs, and
promises of future new trucks:
Group Number
12345 2 3 4 5 6
Terry T T T T T
Sal S S S S S

Jan J J J J J
Sam S S S S S
Charlie C C C C C
Number of different trucks?

Who was dissatisfied?
Who was satisfied?
Professor Maier found that an average of about three people got a different truck as a
result of the interaction and that most of the crew and the supervisor were usually
satisfied.
As long as Charlie’s truck is junked, the resulting decision has high quality. Then the
criterion for a good decision revolves around the satisfaction of the crew with the
decision. Point out to students that this may be a difficult decision to program if new
trucks don’t come up very often. A typical program might be to give the highest seniority
person the new truck. If this is applied, Terry will get the new truck every time, a result
that will probably provoke inequity. Proof of the difficulty of programming this decision
is seen in the variety of different solutions that the groups provide. Also, note that Chris,
in his or her “wisdom”, will never be able to satisfy the group with an autocratic decision.
Chris literally lacks the information the group as a unit has. For example, he or she
doesn’t know which truck is the worst.
The satisfaction of the group is highly dependent on the process the group goes through
in making its decision. If Chris draws out everyone and protects reticent members so that
everyone gets his or her say, things usually go well. High levels of group dissatisfaction
or failure to junk Charlie’s truck can usually be traced back to faulty group processes. It
is highly instructive to take this problem through the Vroom and Jago leadership decision
tree (Chapter 9) if you have covered this chapter earlier. It clearly prescribes a group or at
least a highly consultative decision.
Professor Maier notes that the following problems may be similar to the New truck
Dilemma in terms of the fairness dimension: Parking allocation, overtime allocation,
space assignments, vacation schedules, holiday coverage, location in new premises.
These teaching notes draw in part on Maier, N. R. F., & McKay, E. P. (1973).
Instructor’s Manual for Psychology in Industrial Organizations. Boston: Houghton
Mifflin, pp. 16-17.

TEACHING NOTES FOR THE RESTAURANT REVIEW CASE INCIDENT
1. What are some of the factors that might lead Christophe to make a poor decision
about the review?
Some of the cognitive biases associated with bounded rationality are factors that might
lead Christophe to make a poor decision about the review. First, consider some of the
difficulties in problem identification:
Perceptual defence: The perceptual system often defends against unpleasant perceptions.
Thus, Christopher might choose to downplay or ignore the negative things mentioned in
the review and simply focus on the positive comments. This might result in posting only
the positive things mentioned in the review.
Problem defined in terms of functional specialty: Selective perception causes decision

makers to view a problem as being in the domain of their own specialty, even when some
other perspective might be warranted. Applying this to the case suggests that the focus of
the problem might be the staff, the food, management, or perhaps something else not
even mentioned in the review. How the problem is defined might impact the decision.
Problem defined in terms of solution: This involves jumping to conclusions and short-
circuiting the rational model. This might result in the writing of an angry letter to the
paper’s editor without considering the other alternatives more carefully.
Problem diagnosed in terms of symptoms: This might involve blaming the food critic and
the newspaper rather than focusing on some of the problems mentioned in the review. For
example, Christophe might conclude that the food critic is inexperienced, not familiar
with Canjun food, or just wrong and unfair. In other words, the problem is the food critic
not the restaurant. This might also result in the decision to write an angry letter to the
editor.
Finally, one of the most important factors to consider is the role of emotions. In this case,
the review has invoked strong negative emotions which can be a hindrance to decision
making as people experiencing strong emotions are often self-focused and distracted
from the actual demands of the problem at hand. Excessive negatively can cause an
immediate response and in this case, probably an angry letter to the editor. However, a
negative mood can actually help people process information more carefully and
effectively if the excesses of pessimism can be controlled. Thus, a negative mood can
result in a more carefully thought out decision.
2. What would you do in this situation, and why?

Students are likely to disagree on this. Some are likely to recommend not posting the
review at all; others will say to post it and focus on the favourable things in the review;
and some might say to write an angry letter to the editor. Have students consider the
consequences of each alternative and to then evaluate them as per the rational decision
making model. Writing an angry letter is not likely to result in a positive consequence
and will not help the restaurant. Not posing the review might cause some people to

wonder why it has not been posted given that the local custom is to post restaurant
reviews prominently at the restaurant. And only posting the favourable excerpts from the
review might be seen by some people as dishonest and misleading. Posting the entire
review is probably the best thing to do and there is nothing wrong with highlighting the
favourable excerpts so they stand out. Given that the negative things in the review are not
horrible and there are positive things mentioned, posting the review might still lead to
more customers. At the same time, Christopher might address the concerns in the review
which are easy to correct. The staff who are described as “charming” are likely to become
more professional as they acquire more experience. The menu can be revised and some
less expensive wines from the “well chosen” wine list can be added. Finally, Christophe
might also write a letter to the critic thanking him/her for the review, informing him/her
of the changes being made, and then invite him/her for a free meal to witness the changes
first-hand.
TEACHING NOTES FOR THE ADMISSIONS DILEMMA CASE STUDY
Note to instructor: This case is also relevant to Chapter 12, Power, Politics, and
Ethics.
1. Is selecting applicants for business school a well-structured or an ill-structured

problem? Explain your reasoning.
This task is a fairly well-structured problem. It is routine and repetitive in the
sense that hundreds of applicants are screened each year. Furthermore, the
existing state, the desired end state, and how to get from one state to the other are
all fairly clear. One factor that diminishes the structure a bit is the invocation of a
somewhat rare decision criterion—the wealth and donation history of this
particular applicant’s father. Evidence for this is the existence of the dean’s
“Watch List.”
2. Is it possible to program the decision to select applicants for admission for

business school? Is it advisable? Explain your answers.
In practice, most schools use a semi-programmed system to select graduate
students. It is not unusual to see firm minimums set for GPA and GMAT scores
(hence the programming) but allow for judgment to be employed in regard to
work experience and other more qualitative criteria. It is ironic that advocates for
both programming and not programming graduate school admissions cite fairness
arguments: Programming relies on objective data and is not directly biased by
considerations of gender, race, or being the offspring of a big donor to the
university or business school. On the other hand, advocates of a less programmed
approach cite the need to make decisions that respect diversity and inclusiveness,
and this requires more subjective, less programmable, decision criteria.
3. Does Janel Lehman have enough information to make an appropriate decision?

Does she have too much?

Janel Lehman probably has enough information to make an appropriate decision.

She has a full file on the candidate that includes GPA, GMAT, extracurricular
history, work experiences, and letters of recommendation, albeit from her father’s
firm. In other words, on the standard admissions criteria, she is fully informed.
Perhaps what she does not know is how the Dean of the Birdwood Business
School or the applicant’s father Joseph might react to her rejection, but is
questionable if these are relevant to making the appropriate decision. There is no
indication of information overload here.
4. Explain how mood and emotion might affect decision making in this case.
Fear of displeasing the dean and/or losing her job might cloud Janel’s decision
prowess. As the text notes, being “blinded by emotion” does not contribute to
effective decision making, and the existence of the Watch List is a reminder of the
dean’s interest in such “special” applicants. Some evidence of distorted thinking
appears at the end of the case, where Janel seriously considers the idea that being
wealthy and academically underqualified might constitute a new applicant
diversity category!
5. Give an example of how hindsight might apply to the forthcoming decision.

If Caroline Lipscomb is admitted and turns out to be a superb student, some will
say that they knew all along that she was a star, in spite of the fact that she has
rather mediocre credentials by the standards of the business school. If she is
admitted and turns out to be a poor student, some will say that they could have
predicted it given her spotty application credentials.
6. Is this a decision that is appropriate for a group to make?

Certainly, if the decision task is not fully programmed, the use of a group might
be helpful. Different perspectives and knowledge can be brought to bear (e.g., on
the relevance of an applicant’s work experience), and individual biases can be
averaged out. Although a group decision process here is susceptible to all the
foibles of group decision making noted in the chapter (e.g., groupthink), the ready
availability of objective data (grades, GPA) should temper some of the worst
excesses of group decisions.
7. What are the ethical issues raised by this case?

At least two ethical issues can be noted. One of these is the matter of fairness.
Applicants to graduate school are effectively competing with each other for
admission spots, and they have the right to be judged on a level playing field
according to similar criteria. Many would feel that downplaying objective
scholarly credentials and emphasizing family connections is unfair and unethical.
The other issue has to do with the extent to which generous donors can be seen as
having undue influence in the affairs of the business school. Although there is no
evidence in the case that Joseph Lipscomb has asked for preferential treatment for
his daughter, there is substantial evidence that the business school might be
willing to provide such treatment. Is this ethical decision making? For an example

of corporate donor influence on university decision making, see the 2015 news
coverage of the Enbridge corporation’s donation to the University of Calgary:
http://www.cbc.ca/news/canada/calgary/university-calgary-enbridge-sponsorship-
1.3286369

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Johns 10e Irm ch11

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CHAPTER 11

CHAPTER LEARNING OBJECTIVES

After reading Chapter 11, students should be able to:

CHAPTER OUTLINE AND TEACHING NOTES

What Is Decision Making?

Decision making is the process of developing a commitment to some course of action. It

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be more self-consciously analytical in their approach. Ill-structured problems can entail

The Compleat Decision Maker — A Rational Decision-Making Model

Perfect versus Bounded Rationality

Problem Identification and Framing

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Alternative Development, Evaluation, and Choice

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factor in other criteria such as political acceptability of the solution to other

Justification. People tend to be overconfident about the adequacy of their decisions. To

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Attempts to prevent the escalation of commitment might include the following:

Hindsight. The careful evaluation of decisions is also inhibited by faulty hindsight.

How Emotions and Mood Affect Decision Making

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 People in a positive mood tend to remember positive information. Those in a negative

The impact of mood on decision making is not necessarily dysfunctional. If the

Rational Decision Making—A Summary

Group Decision Making

Why Use Groups?

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decisions is especially useful in decision implementation, since committed individuals

Do Groups Actually Make Higher-Quality Decisions Than Individuals?

Disadvantages of Group Decision Making

Domination. The advantages of group decision making will seldom be realized if

Groupthink. Groupthink happens when group pressures lead to reduced mental

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Victims of groupthink are operating in an atmosphere of unreality that should lead to

Stimulating and Managing Controversy

How Do Groups Handle Risk?

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Contemporary Approaches to Improving Decision Making

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Analytics and Big Data

ADDITIONAL CHAPTER MATERIAL: TRADITONAL APPROACHES FOR

Improving Decision Making in Organizations

Training Discussion Leaders

● State the problem in a non-defensive, objective manner. Do not suggest solutions or

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● Summarize and clarify at several points to mark progress.

Traditional and Electronic Brainstorming

Brainstorming is the brainchild of a Madison Avenue advertising executive. Its major

Brainstorming was originally conceived as a group technique. It was assumed that, in

An alternative to traditional brainstorming is electronic brainstorming. Electronic

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face-to-face interaction actually reduces individual brainstorming performance. But what

Nominal Group Technique

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The Delphi Technique

CLASSROOM DEMONSTRATION AND MINI-LECTURE: THE DOLLAR

The demonstration is called the dollar auction. It is described in Max Bazerman’s

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• You can participate or watch.