Organisational Behaviour Ch7

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Describe the six stages in the rational choice decision process

Decision making: the conscious process of making choices among alternatives with the intention of moving toward some desired state of affairs.

Rational choice paradigm of decision making: the view in decision making that people should and typically do, use logic and all available information to choose the alternative with the highest value. Decision making involves identifying, selecting and applying the best possible alternative. The best decision use pure logic and all available information to choose the alternative with the highest value Such as highest expected profit, customer satisfaction, employee wellbeing or some combination of these outcomes.

Subjective expected utility: the probability (expectation) of satisfaction (utility) resulting from choosing a specific alternative in a decision. Decision making process: systematic application of stages of decision making. 1. Identify problem or opportunity

2. Choose the best decision process
3. Develop alternative solutions
4. Choose the best alternative
5. Implement the selected option
6. Evaluate decision outcomes

Problem with Rational choice paradigm:
1. Impossible to apply in reality
2. Difficulty recognising problems
3. Process the huge volume of information
4. Difficulty recognising when choices have failed
5. Focusing on logical thinking, ignores emotion influence making decision

Explain why people have difficulty with it
Problem identification is not just the first step in decision making: it is the most important There are five most widely recognised concerns.

Stakeholder framing: attention-based theory of the firm: states that, organisational decisions and actions are influenced mainly by what attracts management’s attention, rather than by objective reality. Mental mode: if an idea does not fit the existing mental mode of how things should work, the idea is dismissed as unworkable or undesirable.

Decisive leadership: being decisive includes quickly forming an opinion of whether an event signals problem or opportunity. Many decisions happens too quickly before having a chance to logically assess the situation, more often it is a poorer decision than would result if more time had been devoted to identify the problem and evaluating the alternatives. Solution-focused problems: decision makers engage in solution-focused problem identification because it provides comforting closure to the otherwise ambiguous and uncertain nature of problems. Perceptual defence: people sometimes block out bad news as a coping mechanism. Some people inherently avoid negative information. People are more likely to disregard danger signals when they have limited control over the situation.

Identifying problems and opportunities more effectively
* Be aware of the 5 problem identification biases
* Increase awareness of problem identification, need willpower to resist the temptation of looking decisive * Create a norm of “divine discontent”
* Discussing the situation with others to ease difficulty

Explain why people do not follow the rational choice model when evaluating alternative choices

Bounded rationality: the view that people are process limited and imperfect information and rarely select the best choice. Problem with goals: assumes that organisational goals are clear and agreed on. Goals are often ambiguous or in conflict with each other. Problem with information processing: assumes that decision makers can process info about all alternatives and in their consequences, but it is not possible in reality. Implicit favourite: preferred alternative that the decision maker uses repeatedly as a comparison with other choices. biased decision heuristics: key element of rational choice paradigm, as people can...
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