Effective Decision-Making Models in Organizational Management
Decision-Making in Organizations
Managers design structures and cultures that fit the environment; they choose technologies to convert inputs into outputs and a strategy to guide the use of competencies and resources to create value. In doing so, they face two types of decisions:
- Programmed Decisions (Routine): These are repetitive and routine decisions handled through standard rules and procedures.
- Non-Programmed Decisions: These are new, unstructured decisions made without predefined rules.
The Rational Model
Decision-making is a goal-oriented process divided into three phases:
- Problem Identification
- Development of Alternative Solutions
- Comparison of Consequences for Each Alternative
Limitations
- Assumes full access to information and clear cause-and-effect relationships, which can be costly.
- Ignores ambiguity and uncertainty.
- Assumes managers can process all alternatives rationally.
- Assumes shared values among all decision-makers.
The Carnegie Mellon Model
Managers perform limited and satisfactory searches for problems and solutions. Information is only partially available, so rationality is bounded.
The Incremental Model
Managers choose solutions that are slightly different from past ones, progressing cautiously due to limited information. This conservative approach works well in stable environments but may prevent adequate responses to change.
Random and Anarchic Models
Decisions are made intuitively or by chance, with no logical sequence. In these models, decision-making can appear chaotic.
The Garbage Can Model
Problems arise based on available solutions. Intuition, luck, and timing play key roles. Decisions are often unstructured and opportunistic.
Organizational Learning
Organizational learning is the process through which managers seek to influence the willingness and ability of members to understand and manage the organization and its environment to make decisions that improve effectiveness.
Individual Level
Managers should enable individuals to improve their personal skills by building distinctive competencies. Organizations must foster a dedication to work, encouraging experimentation and risk-taking.
Group Level
Managers should promote learning through various types of groups, allowing individuals to share competencies to solve problems. Team learning is more important than individual learning since most key decisions are made in groups.
Organizational Level
Managers can promote learning through the organization’s structure and culture:
- A mechanistic structure supports learning through exploitation (using existing knowledge).
- An organic structure encourages exploration (seeking new solutions).
Interorganizational Level
Organizations can improve effectiveness by imitating or adapting the distinctive competencies of other organizations.
Factors Influencing Organizational Learning
- Anchoring to Past Success: This involves a reliance on rules and procedures that have worked in the past, which can hinder new learning.
- Cognitive Structure: Research has shown that certain cognitive biases lead managers to misperceive and misinterpret information, affecting their decision-making.