706 Chapter 20 Decision making

ree e t a s r pr e e t

agree disagree

I III
certainty Computational strategy Compromise strategy
Certa t
outcome to be Rational model Political model
a he e II IV
a t s
uncertainty Judgemental strategy Inspirational strategy
Incremental model Garbage can model

Figure 20.5: Conditions favouring different decision-making processes

Source: based on Thompson and Tuden (1959) and Thompson (1967)

I. Computational strategy–rational model

Participants agree on the outcome they desire (no ambiguity) and are certain about the
consequences of their actions (high certainty). For example, as demand for ice cream
increases in the summer, the company introduces an extra shift. The rational model can be
applied in this situation. Since management knows the capabilities of their machines, the
costs of extra manning and the income from extra sales, it can make the calculations using
a computational strategy.

II. Judgemental strategy–incremental model

Participants agree on what outcome they desire (no ambiguity) but are uncertain about the
consequences of their actions (low certainty) because information is inadequate. In the case
of the ice cream makers, new equipment may need to be purchased whose performance
is unknown. There is limited search for and evaluation of alternatives, so those that are
offered differ only slightly (i.e. incrementally) from those which already exist. Thus current
judgements are made on the basis of past decisions. They ‘fix the past’ by continually
adjusting the present as it unfolds with problems being continually attacked. Lindblom (1959)
referred to this process as incrementalism although it is more popularly referred to as the
‘science of muddling through’.

III. Compromise strategy–political model

Participants disagree about what outcomes they desire (high ambiguity) but are sure
that they can be achieved (high certainty). In this case, a compromise strategy is used.
These unprogrammed decisions such as deciding on a company’s future strategy are
ultimately resolved through reasoning, judgement, influence and politics. Since there will
always be disagreement, political behaviour is inevitable. Viewing an organization as a
coalition of interests, a decision is not the result of the rational decision-making process,
but something that is the outcome of horse-trading, and which is acceptable to all those
involved.
Individuals, groups and departments unite their interests, propose alternatives, assess
their power, join with others, negotiate and form coalitions. In conditions of high ambiguity
decision makers look for alternatives that can accommodate the interests of all the parties
involved.

IV. Inspirational strategy–garbage can model

Participants disagree about what outcomes they desire (high ambiguity). They are also uncertain
about the consequences that their actions are likely to have (high uncertainty). When there is
 Organizational decision making 707

neither agreement on goals, nor certainty about cause and effect relationships, ambiguity and
uncertainty prevail, and decision making becomes random. If there is no preference between
high volume/low profits and low volume/high profits, or certainty about what will happen if
they proceed, then the inspirational strategy is an inspired leap into the dark!
In such circumstances, Cyert and March’s decision-making processes become ‘uncoupled’
from the decisions actually made. That is, a link ceases to exist between the problems
identified and the solutions proposed or implemented. The garbage can model was
developed by James March and Johan Olsen and turned the rational model on its head.
Whereas both the rational and the bounded rationality models treated decisions as the
outcomes of a reasoned approach of information-gathering and evaluation, the garbage can
model contended that the elements that constituted decision problems were independent
phenomena that came together in random ways (Cohen et al., 1972; March and Olsen,
1976; Einsiedel, 1983).
In their view, the various logical models of decision making had failed to recognize
the amount of confusion that surrounded decision-making situations. They labelled these
situations organized anarchies within which a decision ‘occurred’ rather than was consciously
made. Thus, decision making involved streams of activities which sought to cope with
uncertainty over time. It occurred when four separate but interdependent streams fortuitously
met. These were:

Choice opportunities: Every organization has a stream of ‘occasions’ at which there is an

expectation of a decision, e.g. weekly staff meetings, product review meetings, govern-
ment cabinet meetings.

Participants: A stream of people who have an opportunity to make a choice.

Problems: A stream of problems which represent matters of concern for individuals both
inside and outside the organization e.g. declining sales; need to recruit staff; increasing
hospital waiting lists.

Solutions: The existence of a stream of solutions or answers, all seeking problems and
questions, and all available from internal staff advisors or external consultants.
708 Chapter 20 Decision making

Decision making and evidence

Evidence-based Peter Tingling and Michael Brydon (2010) defined evidence-based decision making
decision making a as a situation in which a decision was made that followed directly from the evidence
situation in which a (Figure 20.6). They contrasted it with decision-based evidence making which involved
decision is made that marshalling facts and analysis to support a decision that had already been made elsewhere
follows directly from the in the organization. They found that when making a decision, managers used evidence in
evidence. three different ways:

Decision-based • To make a decision: the decision arose directly from the evidence
evidence making • To inform a decision: the evidence was mixed in with intuition or bargaining, to lead to
marshalling facts and a decision
analysis to support a
• To support a decision: the evidence was used simply to justify a decision already made
decision that has already
been made elsewhere in If decisions are allowed to trump the evidence, then it makes decision making ill-informed.
the organization. In the best case, a decision that contradicts the evidence is an inspired hunch based on
experience, while in the worst case, it is the product of ignorant bias. Moreover, once
employees know that managers are more interested in finding evidence to fit their conclusions,
rather than finding out the facts, then they become demoralized and the company is infected
with destructive cynicism. However, historically some companies have collected data and
have successfully ignored it, while in others, the cult of data-driven decision making leaves
so little scope for personal beliefs and hunches that it results in employees just tailoring the
evidence to fit pre-made decisions.

Not all decisions incorporate evidence in the same way, or intend to marshal it toward the same end. This
chart shows three roles that evidence can play, depending on whether the aim is to make, inform, or support a
decision.

ROLE OF EVIDENCE IN DECISION-MAKING DESCRIPTION ARCHETYPAL DECISION RISKS

Make decision Evidence forms Facilities location Poor decisions due
the basis of the to misspeci ed
Decision decision models
Evidence Process Decision

Inform decision Evidence is one of Diagnosis, strategic Mismatch between

Evidence several inputs to the planning evidence and other
decision process inputs requires shift
Decision
Decision to ‘make’ or
Intuition, Process
‘support’ role
Experience,
Bargaining, etc.

Support decision Evidence is created New product Demoralization

to support a decision development, of analysts; poor
Intuition,
Decision Decision made using other technology adoption decisions due to
Experience, inputs decision biases
Process
Bargaining, etc. Evidence and false consensus

Figure 20.6: Role of evidence in decision making

Source: from Tingling and Brydon (2010, p.73) © from MIT Sloan Management Review / Massachusetts Institute of
Technology. All rights reserved. Distributed by Tribute Media Services
 Recap 709

So what is to be done? Should one encourage the use of data, while leaving room for the
occasional inspired decision? Tingling and Brydon offer managers four guidelines:

1. Understand the decision problem and assess the potential contribution of formal
evidence to the quality of the decision-making process. For some problems (e.g. new
product development), historical data is of little use and the decision is best made on
instinct.
2. Use cost–benefit analysis. If the costs of obtaining evidence exceed the benefits, it
may be necessary to make the decision on instinct and admit that this is what is being
done.
3. Differentiate between internal and external decision audiences when engaging in
decision-based evidence making. Some evidence can have ceremonial and signalling
value, but internal stakeholders (employees) are seldom fooled by decision-based
evidence making.
4. Ensure that the majority of decisions incorporate painstakingly gathered, objective
evidence. If managers feel the necessity to feed manufactured evidence to internal
audiences, it should be done rarely and sparingly, otherwise a disregard for evidence
and analysis will become endemic throughout the organization.

RECAP

1. Distinguish prescriptive, descriptive and explana- tive model is the rational model, while a later one
tory models of decision making and provide an was devised by Victor Vroom and Philip Yetton.
example of each. • Descriptive models of decision making reveal how
• Prescriptive models of decision making recom- individuals actually make decisions. The behavioural
mend how individuals should behave in order to theory of decision making is the earliest and most
achieve a desired outcome. The original prescrip- influential descriptive model and was developed by
Herbert Simon, John March and Richard Cyert.
➔
710 Chapter 20 Decision making

• Explanatory models of decision making look at what logrolling; goal displacement; group brainstorm-
decisions were made and aim to provide an explana- ing, groupthink and satisficing.
tion of how they occurred. The heuristics and biases
4. Identify the factors used to decide whether to
model developed by Kahneman, Tversky and Thaler,
adopt individual or group decision making.
as well as Janis’ groupthink, illustrate these.
• Individual or group decision making has been
2. Distinguish different decision conditions on the made on the basis of the following factors: type
basis of risk and programmability. of problem task; acceptance of decision; quality of
• Decision conditions can be classified as those the solution; characteristics of the individuals; and
involving: certainty, risk and uncertainty. decision-making climate.
• Decisions can be classified as routine, adaptive and 5. Match organizational conditions with the deci-
innovative. sion-making-model that favour them.
3. Consider the advantages and disadvantages of • Combining a belief about the relationship
group decision making. between the causes and effects of a problem
• Groups offer the advantages of a greater pool of with the degree of consensus about the goals
knowledge; different perspectives; greater prob- of actions can direct one to choose one of four
lem comprehension; and increased acceptance of strategies with its associated decision-making
decisions. model – computational/rational; judgemental/
incremental; compromise/political; or inspira-
• Disadvantages of groups can be considered under
tional/garbage can.
the headings of personality factors; social conform-
ity; diffusion of responsibility; minority domination;

RECAP: What did they decide?

Than Luang, Thailand:

• Taking advantage of the best cave conditions in days, the operation’s chief decided on the diving option. At
03:00 GMT on the 8 July, 13 foreign divers and five from the Thai Navy entered the caves. Lowered water levels
had made some of the previously flooded chambers walkable. The rescue process included a mixture of walking,
wading, climbing and diving – all in complete darkness along guide ropes already installed.

• In the end, the boys were ‘packaged’. They were heavily sedated to prevent them from panicking in the narrow,
dark tunnels, and endangering themselves and their rescuers. Each semi-conscious boy was then strapped to a
diver who manoeuvred him through the underwater passages and carried him through the tunnels. Each was
accompanied by a second diver.

• The first four, boys were extracted on the Sunday. As the rains started, the next four were rescued on the Monday,
and the remaining boys and their coach came out on Tuesday.

• After 17 days, what had been described by experienced cave rescue experts as ‘mission impossible’ had become,
‘mission accomplished’. By going for the dive option the Thai director of the rescue had made the correct decision.
In addition, the dive team, including the two British divers, were influential in that decision, and this illustrates the
need for locally-informed decision making by someone with intimate knowledge of the prevailing conditions.

Source: ased on nline e s (2 1 2 1 c 2 1 d)

Thai football team rescue underway

This video shows divers entering the flooded caves to rescue the young boys and their
coach (1:28).