Decision-Making Models & Styles Lecture PDF

Decision-making models and styles Scope: Importance of decision in Leadership Role of intelligence and experience in decision-making Cognitive resources model in decision-making Vroom and Yetton's normative model Rational vs. incremental model Decision-making strategies...

Decision-making models and styles Scope: Importance of decision in Leadership Role of intelligence and experience in decision-making Cognitive resources model in decision-making Vroom and Yetton's normative model Rational vs. incremental model Decision-making strategies Factors affecting decision-making  Leadership and decision The hallmark of leadership process is how decision is translated into productive outcome. Leaders decisions are measured by intelligence and experience. To what extent do leaders intelligence and experience predict successful performance?  Cognitive resource model Developed by Fiedler and Garcia (1987) from the industrial and organizational psychology perspective. Focusses on the implications of leader’s intelligence and experience on stress. That factors such as: intelligence and experience can affect leaders ability. Leaders who perform best are those that use their cognitive abilities to determine the most efficient way to lead their groups. Whether a leader relies on intelligence or experience depends on the level of stress in any given situation.  Effect of stress on decision-making When leaders are under high level of stress, leader intelligence has no relationship to success of firms. When leaders are under low levels of stress, leaders intelligence contribute to firms success. Under high level of stress, leaders experience is positively related to unit success. Leaders under low level of stress, experience has no relationship to unit success.  Assumptions Leaders cognitive ability contributes to team performance only when the leader’s approach is directive. Stressful situations affect the relationship between intelligence and decision quality. In low-stressful situations, leaders’ use their intelligence to get the best result. Experience is positively related to decision quality under high stress situations.  Assumptions In high-stressful situations, leaders who are more experienced obtain quality results. In high stress situations, rational solutions are not always available. Without rational solutions, intelligence does little good and can actually make the situation worse. For simple tasks, leaders’ intelligence and experience are irrelevant.  Common types of decision quality Framing Efficiency Due diligence Information quality Dealing with ambiguity Imagination & creativity Alternatives Trade-offs Diverse perspectives Objectives Rational  Strengths of model Intelligence is emphasize as a leadership quality The model predicts the type of person that can lead in a stressful situation The model holds that people aspiring for leadership positions be checked for intelligence and ability to management stress  Weakness of the model The model does not define intelligence. The types of stress that affect decision quality of leaders is not explain in the model. The model does not talk about leaders who have both high Intelligence Quotient (IQ) and good work experience. It is not totally correct that simple jobs do not require an intelligence or experience leader.  Normative decision model Developed by Vroom and Yetton (1973) holds that leaders can improve group performance through participation of followers in decision-making process. This is because the amount of input subordinates have in decision-making vary substantially depending on the issue. Predicated in determining how much input subordinates should have in the decision-making process.  Normative decision model The model profiles the leader, follower, and situational factors that affect the degree of subordinates’ participation in the decision-making process. Determine which situational or factors affect the level of participation and group performance. Vroom and Yetton first investigate leaders’ decision-making processes used in group settings.  Assumptions of the model Factors determining leaders’ decision adequacy include: decision quality decision acceptance Participation increases decision acceptance Decision acceptance increases commitment and effectiveness of action.  Decision quality and acceptance Decision quality and decision acceptance are the two most important criteria for judging the adequacy of a decision. Decision quality-means a rational or objectively determinable “better or worse” alternatives. Decision acceptance-means followers accepting decision as if it were their own and do not merely comply with the decision.  Decision quality and acceptance Leaders decision style and the degree of subordinates participation are affected by three factors: Decision quality Subordinate commitment Time constraints  Rational vs. incremental model Rational decision Bonded rationality Incremental decision Often used in public policy Decision choice  Rational decision model Rational decision makers examine various alternative ways to deal with problems. Weigh costs and benefits to select the best alternative Choose decisions that bring more gains to firms than costs Leaders should not take decision if its costs exceed its benefits Choose decision alternatives decision that produces greatest benefit over cost  Rational decision process Problem identification Evaluate values, goals and objectives and ranked in order of priority Assign each value a relative weight Discover all the policy alternatives available Do cost- benefit analysis Know all the consequences of each alternative, Calculate how the selection of any one policy will affect the remaining alternatives in terms of opportunity costs Ultimately select the policy alternative that is the most efficient in terms of costs and benefits  Incremental decision model Incrementalism means that only a limited selection of decisions alternatives are provided to a leader. Constraints of time, information, predictive capacity, and cost, policymakers cannot identify the full range of policy alternatives and consequences. Lindblom submits that decision makers do not annually review the whole range of existing and proposed policies.  Incremental decision model It is viewed as fine tuning of existing programs. Leaders do not do cost-benefits analysis and evaluation For expediency and consensus building. Conflict reduction, maintaining stability, and preserving the system When consequences of new programmes cannot be predicted.  Decision-making strategies Decision-making strategies: Autocratic (A1 and A2) Consultative (C1 and C2) Democratic ( G2)  Decision-making strategies Autocratic (A1) – leaders’ take decision alone using available information Autocratic (A2) – leaders’ obtain information from subordinates but take decision alone Consultative (C1) – leaders’ share problem with each subordinate, seek information and advice, but take the decision alone Consultative (C2) – same pattern, but subordinates are consulted in groups Group (G2) – leaders’ share problem with subordinates in groups and invites them to participate fully in decision making  Questions about decision-making point Leaders must answer ‘Yes’ or ‘No’ with the following scenarios. Is there a quality requirement for the decision? Is the nature of the solution required critical? Are there technical or rational grounds for selecting among possible solutions? Do I have sufficient information to take a high quality decision? Is the problem structured or unstructured? Are the alternative and methods for their evaluation known?  Questions about decision-making point Is acceptance of the decision critical to its implementation? If I were to make the decision by myself, is it reasonably certain that it would be accepted by my subordinates? Do subordinates share the organizational goals in solving this problem? Is conflict among subordinates likely to offer solution? Based on the answers the leaders can find out the best decision strategy to use.  Situational factors to consider When decision quality is important and followers possess useful information, A1 and A2 are not the best method. When the leader sees decision quality as important but followers do not, then G2 is inappropriate. When decision quality is important but the problem is unstructured and the leader lacks information or skills to make decision alone, then G2 is best. When decision acceptance is important and followers are unlikely to accept an autocratic decision, then A1 and A2 are inappropriate.  Situational factors to consider When decision acceptance is important but followers are likely to disagree with one another, then A1, A2 and C1 are not appropriate, because they do not give opportunity for differences to be heard. When decision quality is not important but decision acceptance is critical, then G2 is the best method. When all parties agree that decision quality is important and the decision is not likely to result from an autocratic decision then G2 is best. Principles in decision making process When leaders have enough information to make good decision, they must again seek information from somewhere. When information is not structured to facilitate a decision, leaders must seek help and clarify to structure the problem. When followers’ acceptance and commitment is required to implement a decision, involve the followers’ in the decision-making to enlist acceptance. Principles in decision making process When followers’ are not committed to the organizational goals, they must not be involved in the decision When followers are in conflict over the most desirable solution, they must be brought together to air their opinions before a decision is taken. Followers should be fully represented, solicited and heard, about decisions that affect them. Factors affecting decision-making Time or speed Structure of the task / nature of the problem Number of people involved Caliber of people involved Subject matter Audience / stakeholders Interests Experience Stress