Organizational Decision Making

Posted on May 15 2009

Organizational Decision Making always involves making a choice to alter some existing condition. It is choosing one course of action in preference to others. When the decision is being by management on behalf of the organization, it is expending some amount of organizational or individual resources to implement the organizational decision making.

It is not a single, self-contained event: it is a complex process that extends over some period of time.

Decision Making always includes uncertainty and risk. Humans have bounded rationality – we do not know all of the consequences of our actions. Sometimes a policy organizational decision making can lead to an externality, or unintended side effect. These externalities can be positive or negative.

Decision Making is one skill that can be approached in so many ways. Three methods discussed here are the Rational Model, Incrementalism, and Mixed Scanning.

The Rational Model

If you are to understand this approach to decision making, you must first understand “ Rational choice” theory. This revolves around the idea that individual attempt to maximize their own personal happiness or satisfaction gained from a good or service. Individual rationality and collective rationality sometimes collide.

Decision Makers are consciously rational. They attempt to achieve efficiency in most circumstances. They want to maximize the output for their minimal input. While one may claim that efficiency is the focus, and the decision is made without regard for personal value, it almost always comes down to a preference for a particular value. Efficiency is that value! Efficiency opposes other values such as equity, and individual responsibility.

One major aspects of the Rational Model are the positivist perspective – this is the idea that decision makers must avoid subjectivity and the desired outcome is one that enhances an organization’s capacity to attain its goals.

Another is rationality – individuals are bounded by it, but organizations help to overcome this problem. Individual decisions are based on a rational calculation of both costs and benefits.

The values of an organization may overshadow those of the individual. The individual develops habits of cooperative behaviour – he or she is influenced by other members of the organization.

Problems

Problems with the Rational model are numerous. The individual has relatively stable expectations, but it is not possible to be neutral to values for the company decision. It is difficult to separate the ends from the means (consider ethics). There is high improbability of obtaining agreement amongst all decision makers participating in the organizational decision making process.

The pressures of time oppose the ability to make both a consensus and satisfactory decision – there are almost always sacrifices by someone in the organization with each decision. Bounded rationality is indeed the problem, as it is unlikely that the problem will receive undivided attention.

The problems don’t stop here – there are difficulties with the communication. There can be competition over resources which can damage the efficiency of the project and the decision process itself.

Opponents to these thoughts feel that people forget that consensus is not required in order to make sound decisions in the short run. Typically this is because they can’t decide on the goals in advance of the decision, therefore adding a degree of difficulty that is often nearly impossible to overcome.

Incrementalism

Another approach in organizational decision making to be considered is called Incrementalism, or IterativeDecision Making. It is basically the intention to setting a limited objective to be achieved by the decision, outlining the few options that are readily available, and making a choice based on values. It always considers the status quo as a baseline, not creating abstract one with the process.

Incrementalism is essentially a satisficing model. It emphasizes short term needs and consequences. Troubleshooting is the name of the game! The general premise is that comprehensive analysis of a situation is unrealistic. Within an organization it is most often impossible to know how an action affects other decisions.

A final component to this organizational decision making discussion is a model that combines the two. The mixed model combines the Rational’s comprehensive model’s emphasis on long-term consequences and fundamental choices with the incrementalist’s view on changing only what needs to be changed for the immediate future. The difficulty with this organizational decision making method lies in deciding what is a big and small decision – the extremes are easy, but as the approach the centre point, it becomes far too blurred and must be taken on a case-by-case basis.

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