Organizational Constraints in Decision Making

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The organization itself constrains decision makers and thus can create deviations from the rational model. Managers, for instance, shape their decisions to reflect the organization’s performance evaluation and reward system, to comply with the organization’s formal regulations, and to meet organizationally imposed time constraints. Previous organizational decisions also act as precedents to constrain current decision.

Performance Evaluation

Managers are strongly influenced in their decision making by the criteria on which they are evaluated. If a division manager believes that the manufacturing plants under his responsibility are operating best when he hears nothing negative, we shouldn’t be surprised to find his plant managers spending a good part of their time ensuring that negative information doesn’t reach the division boss. Similarly, if a college dean believes that an instructor should never fail more than 10% of her students—to fail more reflects on the instructor’s ability to teach—we should expect that instructor who want to receive favorable evaluations will decide not to fail too many students.

Reward systems

The organization’s reward system influences decision makers by suggesting to them what choices are preferable in terms of personal payoff. For example, if the organization rewards risk aversion, manager are likely to make conservative decisions. From the 1930s through the mid-1980s, General Motors consistently gave out promotions and bonuses to managers who kept a low profile, avoided controversy, and were good team players. The result was that GM managers became very adept at dodging tough issues and passing controversial decisions on to committees.

Formal Regulations

All but the smallest of organizations create rules, policies, procedures, and other formalized regulations in order to standardize the behavior of their members. By programming decisions,...
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