Making_Decisions.pdf

LDRS
 320
 –
 Making
 Decisions
 

Page
 1
 of
 27
 

Making
 Decisions
 
Acknowledgements
 

This
 text
 is
 a
 reprint
 of
 Chapter
 11
 “Making
 Decisions”
 from
 Bauer
 &
 Erdogen’s
 (2009)
 
Organizational
 Behavior.
 It
 is
 copied
 and
 adapted
 under
 the
 terms
 of
 the
 Creative
 Commons
 
Attribution-­‐NonCommercial-­‐ShareAlike
 3.0
 License.
 

Bauer,
 T.,
 &
 Erdogan,
 B.
 (2009).
 Organizational
 behavior
 (1st
 ed.).
 New
 York:
 Flat
 World
 Knowledge.
 
 

Learning
 Objectives
 

After
 reading
 this
 chapter,
 you
 should
 be
 able
 to
 do
 the
 following:
 

1. Understand
 what
 is
 involved
 in
 decision
 making.
 
2. Compare
 and
 contrast
 different
 decision-­‐making
 models.
 
3. Compare
 and
 contrast
 individual
 and
 group
 decision
 making.
 
4. Understand
 potential
 decision-­‐making
 traps
 and
 how
 to
 avoid
 them.
 
5. Understand
 the
 pros
 and
 cons
 of
 different
 decision-­‐making
 aids.
 
6. Engage
 in
 ethical
 decision
 making.
 
7. Understand
 cross-­‐cultural
 differences
 in
 decision
 making.
 

11.1
 Decision-­‐Making
 Culture:
 The
 Case
 of
 Google
 

Source:
 http://en.wikipedia.org/wiki/File:Googleplex_Welcome_Sign.jpg
 by
 Ardo191.
 

LDRS
 320
 –
 Making
 Decisions
 

Page
 2
 of
 27
 

Google
 (NASDAQ:
 GOOG)
 is
 one
 of
 the
 best-­‐known
 and
 most
 admired
 companies
 around
 the
 world,
 
so
 much
 so
 that
 “googling”
 is
 the
 term
 many
 use
 to
 refer
 to
 searching
 information
 on
 the
 Web.
 What
 
started
 out
 as
 a
 student
 project
 by
 two
 Stanford
 University
 graduates—Larry
 Page
 and
 Sergey
 Brin—
in
 1996,
 Google
 became
 the
 most
 frequently
 used
 Web
 search
 engine
 on
 the
 Internet
 with
 1
 billion
 
searches
 per
 day
 in
 2009,
 as
 well
 as
 other
 innovative
 applications
 such
 as
 Gmail,
 Google
 Earth,
 
Google
 Maps,
 and
 Picasa.
 Google
 grew
 from
 10
 employees
 working
 in
 a
 garage
 in
 Palo
 Alto
 to
 10,000
 
employees
 operating
 around
 the
 world
 by
 2009.
 What
 is
 the
 formula
 behind
 this
 success?
 

Google
 strives
 to
 operate
 based
 on
 solid
 principles
 that
 may
 be
 traced
 back
 to
 its
 founders.
 In
 a
 world
 
crowded
 with
 search
 engines,
 they
 were
 probably
 the
 first
 company
 that
 put
 users
 first.
 Their
 
mission
 statement
 summarizes
 their
 commitment
 to
 end-­‐user
 needs:
 “To
 organize
 the
 world’s
 
information
 and
 to
 make
 it
 universally
 accessible
 and
 useful.”
 While
 other
 companies
 were
 focused
 
on
 marketing
 their
 sites
 and
 increasing
 advertising
 revenues,
 Google
 stripped
 the
 search
 page
 of
 all
 
distractions
 and
 presented
 users
 with
 a
 blank
 page
 consisting
 only
 of
 a
 company
 logo
 and
 a
 search
 
box.
 Google
 resisted
 pop-­‐up
 advertising,
 because
 the
 company
 felt
 that
 it
 was
 annoying
 to
 end-­‐users.
 
They
 insisted
 that
 all
 their
 advertisements
 would
 be
 clearly
 marked
 as
 “sponsored
 links.”
 This
 
emphasis
 on
 improving
 user
 experience
 and
 always
 putting
 it
 before
 making
 more
 money
 in
 the
 
short
 term
 seems
 to
 have
 been
 critical
 to
 their
 success.
 

Keeping
 their
 employees
 happy
 is
 also
 a
 value
 they
 take
 to
 heart.
 Google
 created
 a
 unique
 work
 
environment
 that
 attracts,
 motivates,
 and
 retains
 the
 best
 players
 in
 the
 field.
 Google
 was
 ranked
 as
 
the
 number
 1
 “Best
 Place
 to
 Work
 For”
 by
 Fortune
 magazine
 in
 2007
 and
 number
 4
 in
 2010.
 This
 is
 
not
 surprising
 if
 one
 looks
 closer
 to
 how
 Google
 treats
 employees.
 On
 their
 Mountain
 View,
 
California,
 campus
 called
 the
 “Googleplex,”
 employees
 are
 treated
 to
 free
 gourmet
 food
 options
 
including
 sushi
 bars
 and
 espresso
 stations.
 In
 fact,
 many
 employees
 complain
 that
 once
 they
 started
 
working
 for
 Google,
 they
 tend
 to
 gain
 10
 to
 15
 pounds!
 Employees
 have
 access
 to
 gyms,
 shower
 
facilities,
 video
 games,
 on-­‐site
 child
 care,
 and
 doctors.
 Google
 provides
 4
 months
 of
 paternal
 leave
 
with
 75%
 of
 full
 pay
 and
 offers
 $500
 for
 take-­‐out
 meals
 for
 families
 with
 a
 newborn.
 These
 perks
 
create
 a
 place
 where
 employees
 feel
 that
 they
 are
 treated
 well
 and
 their
 needs
 are
 taken
 care
 of.
 
Moreover,
 they
 contribute
 to
 the
 feeling
 that
 they
 are
 working
 at
 a
 unique
 and
 cool
 place
 that
 is
 
different
 from
 everywhere
 else
 they
 may
 have
 worked.
 

In
 addition,
 Google
 encourages
 employee
 risk
 taking
 and
 innovation.
 How
 is
 this
 done?
 When
 a
 vice
 
president
 in
 charge
 of
 the
 company’s
 advertising
 system
 made
 a
 mistake
 costing
 the
 company
 
millions
 of
 dollars
 and
 apologized
 for
 the
 mistake,
 she
 was
 commended
 by
 Larry
 Page,
 who
 
congratulated
 her
 for
 making
 the
 mistake
 and
 noting
 that
 he
 would
 rather
 run
 a
 company
 where
 they
 
are
 moving
 quickly
 and
 doing
 too
 much,
 as
 opposed
 to
 being
 too
 cautious
 and
 doing
 too
 little.
 This
 
attitude
 toward
 acting
 fast
 and
 accepting
 the
 cost
 of
 resulting
 mistakes
 as
 a
 natural
 consequence
 of
 
working
 on
 the
 cutting
 edge
 may
 explain
 why
 the
 company
 is
 performing
 much
 ahead
 of
 competitors
 
such
 as
 Microsoft
 and
 Yahoo!
 One
 of
 the
 current
 challenges
 for
 Google
 is
 to
 expand
 to
 new
 fields
 
outside
 of
 their
 Web
 search
 engine
 business.
 To
 promote
 new
 ideas,
 Google
 encourages
 all
 engineers
 
to
 spend
 20%
 of
 their
 time
 working
 on
 their
 own
 ideas.
 

Google’s
 culture
 is
 reflected
 in
 their
 decision
 making
 as
 well.
 Decisions
 at
 Google
 are
 made
 in
 teams.
 
Even
 the
 company
 management
 is
 in
 the
 hands
 of
 a
 triad:
 Larry
 Page
 and
 Sergey
 Brin
 hired
 Eric
 
Schmidt
 to
 act
 as
 the
 CEO
 of
 the
 company,
 and
 they
 are
 reportedly
 leading
 the
 company
 by
 
consensus.
 In
 other
 words,
 this
 is
 not
 a
 company
 where
 decisions
 are
 made
 by
 the
 senior
 person
 in
 
charge
 and
 then
 implemented
 top
 down.
 It
 is
 common
 for
 several
 small
 teams
 to
 attack
 each
 problem
 
and
 for
 employees
 to
 try
 to
 influence
 each
 other
 using
 rational
 persuasion
 and
 data.
 Gut
 feeling
 has
 
little
 impact
 on
 how
 decisions
 are
 made.
 In
 some
 meetings,
 people
 reportedly
 are
 not
 allowed
 to
 say
 
“I
 think…”
 but
 instead
 must
 say
 “the
 data
 suggest….”
 To
 facilitate
 teamwork,
 employees
 work
 in
 open
 
office
 environments
 where
 private
 offices
 are
 assigned
 only
 to
 a
 select
 few.
 Even
 Kai-­‐Fu
 Lee,
 the
 
famous
 employee
 whose
 defection
 from
 Microsoft
 was
 the
 target
 of
 a
 lawsuit,
 did
 not
 get
 his
 own
 
office
 and
 shared
 a
 cubicle
 with
 two
 other
 employees.
 

LDRS
 320
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 Making
 Decisions
 

Page
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How
 do
 they
 maintain
 these
 unique
 values?
 In
 a
 company
 emphasizing
 hiring
 the
 smartest
 people,
 it
 
is
 very
 likely
 that
 they
 will
 attract
 big
 egos
 that
 may
 be
 difficult
 to
 work
 with.
 Google
 realizes
 that
 its
 
strength
 comes
 from
 its
 “small
 company”
 values
 that
 emphasize
 risk
 taking,
 agility,
 and
 cooperation.
 
Therefore,
 they
 take
 their
 hiring
 process
 very
 seriously.
 Hiring
 is
 extremely
 competitive
 and
 getting
 
to
 work
 at
 Google
 is
 not
 unlike
 applying
 to
 a
 college.
 Candidates
 may
 be
 asked
 to
 write
 essays
 about
 
how
 they
 will
 perform
 their
 future
 jobs.
 Recently,
 they
 targeted
 potential
 new
 employees
 using
 
billboards
 featuring
 brain
 teasers
 directing
 potential
 candidates
 to
 a
 Web
 site
 where
 they
 were
 
subjected
 to
 more
 brain
 teasers.
 Each
 candidate
 may
 be
 interviewed
 by
 as
 many
 as
 eight
 people
 on
 
several
 occasions.
 Through
 this
 scrutiny,
 they
 are
 trying
 to
 select
 “Googley”
 employees
 who
 will
 
share
 the
 company’s
 values,
 perform
 at
 high
 levels,
 and
 be
 liked
 by
 others
 within
 the
 company.
 

Will
 this
 culture
 survive
 in
 the
 long
 run?
 It
 may
 be
 too
 early
 to
 tell,
 given
 that
 the
 company
 was
 only
 
founded
 in
 1998.
 The
 founders
 emphasized
 that
 their
 initial
 public
 offering
 (IPO)
 would
 not
 change
 
their
 culture
 and
 they
 would
 not
 introduce
 more
 rules
 or
 change
 the
 way
 things
 are
 done
 in
 Google
 to
 
please
 Wall
 Street.
 But
 can
 a
 public
 corporation
 really
 act
 like
 a
 start-­‐up?
 Can
 a
 global
 giant
 facing
 
scrutiny
 on
 issues
 including
 privacy,
 copyright,
 and
 censorship
 maintain
 its
 culture
 rooted
 in
 its
 days
 
in
 a
 Palo
 Alto
 garage?
 Larry
 Page
 is
 quoted
 as
 saying,
 “We
 have
 a
 mantra:
 don’t
 be
 evil,
 which
 is
 to
 do
 
the
 best
 things
 we
 know
 how
 for
 our
 users,
 for
 our
 customers,
 for
 everyone.
 So
 I
 think
 if
 we
 were
 
known
 for
 that,
 it
 would
 be
 a
 wonderful
 thing.”
 

Case
 written
 by
 Berrin
 Erdogan
 and
 Talya
 Bauer
 to
 accompany
 Bauer,
 T.,
 &
 Erdogan,
 B.
 (2009).
 Organizational
 
behavior
 (1st
 ed.).
 New
 York:
 Flat
 World
 Knowledge.
 Based
 on
 information
 from
 Elgin,
 B.,
 Hof,
 R.
 D.,
 &
 Greene,
 J.
 
(2005,
 August
 8).
 Revenge
 of
 the
 nerds—again.
 BusinessWeek.
 Retrieved
 April
 30,
 2010,
 from
 
http://www.businessweek.com/technology/content/jul2005/tc20050728
 _5127_tc024.htm;
 Hardy,
 Q.
 (2005,
 
November
 14).
 Google
 thinks
 small.
 Forbes,
 176(10);
 Lashinky,
 A.
 (2006,
 October
 2).
 Chaos
 by
 design.
 Fortune,
 
154(7);
 Mangalindan,
 M.
 (2004,
 March
 29).
 The
 grownup
 at
 Google:
 How
 Eric
 Schmidt
 imposed
 better
 
management
 tactics
 but
 didn’t
 stifle
 search
 giant.
 Wall
 Street
 Journal,
 p.
 B1;
 Lohr,
 S.
 (2005,
 December
 5).
 At
 
Google,
 cube
 culture
 has
 new
 rules.
 New
 York
 Times.
 Retrieved
 April
 30,
 2010,
 from
 
http://www.nytimes.com/2005/12/05/technology/05google.html;
 Schoeneman,
 D.
 (2006,
 December
 31).
 Can
 
Google
 come
 out
 to
 play?
 New
 York
 Times.
 Retrieved
 April
 30,
 2010,
 from
 
http://www.nytimes.com/2006/12/31/fashion/31google.html;
 Warner,
 M.
 (2004,
 June).
 What
 your
 company
 
can
 learn
 from
 Google.
 Business
 2.0,
 5(5).
 

Discussion
 Questions
 

1. Do
 you
 think
 Google’s
 decision-­‐making
 culture
 will
 help
 or
 hurt
 Google
 in
 the
 long
 run?
 
2. What
 are
 the
 factors
 responsible
 for
 the
 specific
 culture
 that
 exists
 in
 Google?
 
3. What
 type
 of
 decision-­‐making
 approach
 has
 Google
 taken?
 Do
 you
 think
 this
 will
 remain
 the
 

same
 over
 time?
 Why
 or
 why
 not?
 
4. Do
 you
 see
 any
 challenges
 Google
 may
 face
 in
 the
 future
 because
 of
 its
 emphasis
 on
 risk
 

taking?
 

11.2
 Understanding
 Decision
 Making
 

Learning
 Objectives
 

1. Define
 decision
 making.
 
2. Understand
 different
 types
 of
 decisions.
 

Decision
 making
 refers
 to
 making
 choices
 among
 alternative
 courses
 of
 action—which
 may
 also
 
include
 inaction.
 While
 it
 can
 be
 argued
 that
 management
 is
 decision
 making,
 half
 of
 the
 decisions
 
made
 by
 managers
 within
 organizations
 ultimately
 fail.
 [1]
 Therefore,
 increasing
 effectiveness
 in
 
decision
 making
 is
 an
 important
 part
 of
 maximizing
 your
 effectiveness
 at
 work.
 This
 chapter
 will
 help
 

LDRS
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 Making
 Decisions
 

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you
 understand
 how
 to
 make
 decisions
 alone
 or
 in
 a
 group
 while
 avoiding
 common
 decision-­‐making
 
pitfalls.
 

Individuals
 throughout
 organizations
 use
 the
 information
 they
 gather
 to
 make
 a
 wide
 range
 of
 
decisions.
 These
 decisions
 may
 affect
 the
 lives
 of
 others
 and
 change
 the
 course
 of
 an
 organization.
 
For
 example,
 the
 decisions
 made
 by
 executives
 and
 consulting
 firms
 for
 Enron
 ultimately
 resulted
 in
 
a
 $60
 billion
 loss
 for
 investors,
 thousands
 of
 employees
 without
 jobs,
 and
 the
 loss
 of
 all
 employee
 
retirement
 funds.
 But
 Sherron
 Watkins,
 a
 former
 Enron
 employee
 and
 now-­‐famous
 whistleblower,
 
uncovered
 the
 accounting
 problems
 and
 tried
 to
 enact
 change.
 Similarly,
 the
 decision
 made
 by
 firms
 
to
 trade
 in
 mortgage-­‐backed
 securities
 is
 having
 negative
 consequences
 for
 the
 entire
 economy
 in
 the
 
United
 States.
 All
 parties
 involved
 in
 such
 outcomes
 made
 a
 decision,
 and
 
 

Types
 of
 Decisions
 
Most
 discussions
 of
 decision
 making
 assume
 that
 only
 senior
 executives
 make
 decisions
 or
 that
 only
 
senior
 executives’
 decisions
 matter.
 This
 is
 a
 dangerous
 mistake.
 ~
 Peter
 Drucker
 

Despite
 the
 far-­‐reaching
 nature
 of
 the
 decisions
 in
 the
 previous
 example,
 not
 all
 decisions
 have
 major
 
consequences
 or
 even
 require
 a
 lot
 of
 thought.
 For
 example,
 before
 you
 come
 to
 class,
 you
 make
 
simple
 and
 habitual
 decisions
 such
 as
 what
 to
 wear,
 what
 to
 eat,
 and
 which
 route
 to
 take
 as
 you
 go
 to
 
and
 from
 home
 and
 school.
 You
 probably
 do
 not
 spend
 much
 time
 on
 these
 mundane
 decisions.
 
These
 types
 of
 straightforward
 decisions
 are
 termed
 programmed
 decisions,
 or
 decisions
 that
 occur
 
frequently
 enough
 that
 we
 develop
 an
 automated
 response
 to
 them.
 The
 automated
 response
 we
 use
 
to
 make
 these
 decisions
 is
 called
 the
 decision
 rule.
 For
 example,
 many
 restaurants
 face
 customer
 
complaints
 as
 a
 routine
 part
 of
 doing
 business.
 Because
 complaints
 are
 a
 recurring
 problem,
 
responding
 to
 them
 may
 become
 a
 programmed
 decision.
 The
 restaurant
 might
 enact
 a
 policy
 stating
 
that
 every
 time
 they
 receive
 a
 valid
 customer
 complaint,
 the
 customer
 should
 receive
 a
 free
 dessert,
 
which
 represents
 a
 decision
 rule.
 

In
 
 to
 ensure
 consistency
 around
 the
 globe
 such
 as
 at
 this
 St.
 Petersburg,
 Russia,
 location,
 
McDonald’s
 Corporation
 trains
 all
 restaurant
 managers
 at
 Hamburger
 University
 where
 they
 take
 the
 
equivalent
 to
 2
 years
 of
 college
 courses
 and
 learn
 how
 to
 make
 decisions
 on
 the
 job.
 The
 curriculum
 
is
 taught
 in
 28
 languages.
 

Source:
 
http://upload.wikimedia.org/wikipedia/commons/a/a2/McDonalds_in_St_Petersburg_2004.JPG.
 

LDRS
 320
 –
 Making
 Decisions
 

Page
 5
 of
 27
 

On
 the
 other
 hand,
 unique
 and
 important
 decisions
 require
 conscious
 thinking,
 information
 
gathering,
 and
 careful
 consideration
 of
 alternatives.
 These
 are
 called
 nonprogrammed
 decisions.
 For
 
example,
 in
 2005
 McDonald’s
 Corporation
 became
 aware
 of
 the
 need
 to
 respond
 to
 growing
 customer
 
concerns
 regarding
 the
 unhealthy
 aspects
 (high
 in
 fat
 and
 calories)
 of
 the
 food
 they
 sell.
 This
 is
 a
 
nonprogrammed
 decision,
 because
 for
 several
 decades,
 customers
 of
 fast-­‐food
 restaurants
 were
 
more
 concerned
 with
 the
 taste
 and
 price
 of
 the
 food,
 rather
 than
 its
 healthiness.
 In
 response
 to
 this
 
problem,
 McDonald’s
 decided
 to
 offer
 healthier
 alternatives
 such
 as
 the
 choice
 to
 substitute
 French
 
fries
 in
 Happy
 Meals
 with
…