POLC Information and Decision Making

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Arriving at Decisions

Decision-making is influenced by sources, quality, and reliability of information

Decisions pertaining to the number of subordinates that report to one manager falls within the organising function, in particular, the chain of command element of organisational design.


The ability to engage in critical thinking, analysis, and reflection that determines how well one makes decisions based on available information.

Bounded Rationality（Decisions made within the parameters of a simplified model that captures the
essential features of a problem）

Rationality: Managerial decision making is assumed to be rational (maximise benefit for the organisation)

Bounded by the limitations and constraints, managers attempt to behave rationally - “Good enough”decisions. As managers can't possibly analyse all information on all alternatives, managers satisfice, rather than maximise when engaged in managerial decision-making.

Intuition is a product of: - Previous experience

  • “Gut-Level Feeling”
  • Accumulated Judgement

Group Decision Making

Managerial Problems and Decisions

Well Structured Problems result in Programmed Decisions

  • Structured problems are easily defined
  • Goal of decision-maker is clear, problem is familiar and information well defined
  • Programmed decisions are those handled by a routine approach
    Procedure → Rule → Policy

Un-Structured Problems result in Non-Programmed Decisions

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Un-structured problems are new or unusual, Information is ambiguous or incomplete

  • Non-programmed decisions need a custom approach Unique + Non-recurring → Tailored solution

The value of collaborative decision-making: Groups can be both beneficial as well as detrimental to effective decision making

Advantages
More complete information and knowledge
More diverse alternatives
Increases acceptance of a solution
Increases legitimacy

disadvantage
Time consuming
Minority domination
Pressure to conform
Ambiguous responsibility

Decision Making Conditions and Errors

Certainty – A manager can make accurate decisions because the outcome of every alternative is known
Risk – A manager can estimate the likelihood of certain outcomes.

Uncertainty – A manager has neither certainty nor reasonable probability estimates

Managerial decision-making is undertaken within diverse conditions using linear as well as non-linear thinking fraught with numerous errors/biases

The linear thinking style is characterised by a person’s preference for using external data and processing this information through rational, logical thinking. The non-linear thinking style is characterised by a preference for internal sources of information and processing this information with internal insights, feelings and hunches.

Decision Making Errors and Biases

  • Overconfidence
  • Immediate gratification
  • Anchoring effect
  • Selective perception
  • Confirmation
  • Framing
  • Availability
  • Representation
  • Randomness
  • Sunk costs
  • Self-Serving
  • Hindsight