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DECISION MAKING

Decision Making 651

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Decision making is a business process (with a decision being the result of
that process) that allocates goods and values in a system (such as
one’s own time and assets, family or organizational wherewithal, or
community and national resources). In a business context, the system is
the business organization as the decision unit, with the manager or
executive the decision maker.

All businesspersons recognize the painful necessity of choice.
Furthermore, choice must be timely because “not to decide to is to
decide” (as the popular saying goes). Ultimately, what drives
business success (where success is defined as producing, repeatedly,
high-quality results [HQR]) is making high-quality decisions (HQD) and
delivering high-quality implementation (HQI). (HQD + HQI = HQR.) Good
decisions mean good business; great decisions mean great business.

The concept of decision making has a long history; choosing among
alternatives has always been a part of life. But sustained research
attention to business decision making has developed only in recent years.
Contemporary advances in the field include progress in such elements of
decision making as the problem context; the processes of problem finding,
problem solving, and legitimization; and procedural and technical aids,
and includes the very conception of decision making itself.

As with many fields, the language needs to be expanded to convey the
richness of the processes within. Decision discourse is a phrase that
attends to this task. “Decision work” replaces, in a way,
the gaggle of concepts that used to be called “decision
making.” Decision work refers to all the parts of the decision
process. Decision making is coming to have a much more specific meaning.
“Making” a decision carries the implication that
“a” decision is a unitary thing. It’s really not. The
word decision is a collective noun. One should really think of the
decision as a mosaic of smaller pieces. In that case, decisions are
“built” or constructed rather than made. Decision making,
then, refers to work on the series of elements in the mosaic. These
elements might be called “micro” decision work. Decision
making works with the smallest part of the decision mosaic.
“Decision building” refers to constructing the mosaic
itself. Decision sculpting addresses decisional work on the whole mosaic,
taken as a whole. It might be thought of as “meso” decision
work. “Decision sculpting” refers to shaping the whole
mosaic after it has been built and making some changes and adjustments in
the overall way the whole mosaic fits together. It might be called
“macro” decision work. “Decision taking” is a
phrase that refers to decision action (making, building, sculpting) in a
generic or general sense.

From the business perspective—which looks at the world through the
lens of action—the following eight areas seem most salient for a
brief consideration of this large field of study. First is the
“issue context,” or arena in which the issue is occurring.
As firms globalize, context matters more and affects, as well, all the
remaining issues. A second element deals with “problem
finding.” Exactly how is the “problem” defined, and
by whom? Agenda setting refers to the movement from “issue”
to “problem” to “ready for decision work.”
“Option creation” deals with the development of acceptable
alternatives among or between which decisions will be taken.
“Decision making process” addresses questions about the
steps and rationale that organizations and individuals use in decision
taking. Decisions, of course have “results.” The
“outcomes” looks at what, if anything, comes out of the
decision work. Decision taking must concern itself not only with getting a
result but also with legitimating that result. What, after all, would
allow a loser to accept a decision that goes against his or her interests?
Decision “legitimating processes” considers this issue.
“Evaluating decision making and decision making patterns” is
becoming more and more crucial, as “decisions” are coming to
be recognized as crucial organizational “products.” And
finally, organizations are interested in “improving decision
making.”

All decisions are about issues (problems or opportunities). Three kinds of
context help to shape the issues and the way we approach them. The
macrocontext draws attention to issues outside the
organization—global issues (exchange rates, for example), national
concerns, markets, customers, supplier
concerns, and so on. National style (the cultural orientations toward
decision processes of different countries), and provincial and state laws
and cultures within nations are also important in the macrocontext.

The mesocontext considers how issues are shaped by elements within the
organization that affect the decision process. Typically these are
organizational values, and structure and culture both overall and in terms
of a firm’s specific approach to decision making. Structure refers
to the way the organization is configured—flat, hierarchical,
loosely coupled, and so on. Values refer to commitments espoused by the
organization (“values, vision, mission”). Culture refers to
the particular combination of policy and practice that characterizes the
firm at any given moment. Microsoft and General Motors have rather
different cultures. Decision making within them is different. We need to
consider how universities are different from governments, and how these in
turn differ from Fortune 500 companies. More concretely, each organization
has a “decision subculture”—that is, ideas and
practices about how the decision process should be handled. This too is a
part of the mesocontext. Technical and information aids are a part of the
mesocontext as well. Readers might want to consider the decision
subculture at their firm. For example, how does Microsoft approach
decisions, as opposed to General Motors?

The microcontext addresses the immediate decision environment—the
organization’s employees, board, or office, the time of day, the
amount of pressure, and so on.

To be a problem, an issue must be identified as problematic and of
consequence. An important difficulty in decision making is failure to act
until one is too close to the decision point—when information and
options are greatly limited. Organizations usually work in a
“reactive” mode. Problems are “found” when
there is a “whack on the side of the organizational head.”
Nevertheless, processes of environmental scanning and strategic planning
are designed (though they often do not work well) to perform problem
reconnaissance to alert businesspeople to problems that will need
attention. Proactivity can be a great strength in decision making,
allowing less fateful experiments, prototypes, and research. Proactivity
requires, however, a decision intelligence process that is missing from
many organizations.

Even if problem finding works, a subsequent procedure of agenda setting is
needed. Less is known about how potential problems get on the action
agenda in companies. Too frequently, potential areas of difficulty are
noticed, and even mentioned, but are neither heeded nor resolved.

As a problem is identified, information is needed about the problem and
potential actions to be taken. One kind of information is purely
factual—what is the problem? A complication is that the processes
and procedures of gathering and packaging
information—”editing”—often leaves business
executives at the mercy of “editors.” In 1958 James March
and Herbert Simon (who later won the Nobel prize in economics) pointed to
an important aspect of the editing process, one they called
“uncertainty absorption.” They suggest that since uncertain
information may imply the editors (other staff in the organization) are
inept, editors tend to edit out the uncertainty and present information to
their superiors as more certain than it really is.

Another kind of information reflects the array and priority of solution
preferences. These options are the “values” in the famous
“fact and value in decision making” idea. What is selected
as possible or not possible, acceptable or unacceptable, negotiable or
nonnegotiable depends upon the culture of the firm itself and its
environment, as in the statement, “We here at J&L always
look for victory.”

A third area of information is the possible scope and impact that the
problem and its consequent decision might have. Knowledge about impact may
alter the decision preferences. To some extent, knowledge about scope
dictates who will need to be involved in the decision process.

Typically decision making groups cannot handle too many options.
Sometimes, when there is really only one option, decision taking is really
a ratification or validation of action. At other times the “painful
necessity of choice” sits right on the table. The process through
which “agendas” (or “issues”) get translated
into “alternatives” is a vital one. At issue here is the
radical nature of the alternatives (transaction or transformational ones)
and the number of choices. Research suggests that an odd number of choices
is better than an even one, and that about three to five options seem
optimal. If there are more than five options, brainstorming is best
continued until the main planes of choice are revealed.

Several sets of elements need to be considered in looking at the decision
process. One set refers to the rationales used for decisions. Others
emphasize the setting, the scope and level of the decision, and the use of
procedural and technical aids.

RATIONALES.

One approach to process is optimizing, in which all decision possibilities
are listed, explored, and prioritized. The rational decision maker
proceeds, perhaps one-item-at-a-time, through the list and the
“best” solution is found after a complete review. This is
also called the rational-individual approach. The problem, of course, is
that such a process in its pure form cannot really be accomplished, and it
is time consuming and exhausting. Alternatively, one can decide on
something that is acceptable for the matter at hand, though less than
optimal. These approaches reflect the famous distinction made by Simon,
and reported (later) by March and Simon, between optimizing and
“satisficing” in the solution of day-to-day organizational
problems—the difference between finding the sharpest needle in the
haystack and finding one sharp enough to sew with.

From a welfare economics perspective, the economist would list
preferences, and similarly work through the list. This perspective focuses
somewhat on system optimality, and questions might be raised about whether
individual optimality should be replaced by system optimality (does Adam
Smith’s “hidden hand” really work?). David Braybrooke
and Charles E. Lindblom presented a good discussion of these problems in

A Strategy of Decision.

They also discussed an approach called disjointed incrementalism. Lindblom
also called it “muddling through.” Decisions are made
“at the margin” or built, element by element (with an
element being the smallest irreducible part of the decision matrix, a
matrix that contains many such small parts), until the overall decision
has been assembled. In this approach what we often call
“decisions” might better be called a “decision
mosaic”—a construction made of decisions about each element.
(Once the mosaic has been constructed, one can use “decision
sculpting” to look at the overall mosaic and make adjustments so
that everything fits).

Timing and order can be crucial in the “disjointed
incremental” approach. To be effective, decisions must be taken in
a timely manner, such that the overall “construction
project” can proceed. This just-in-time approach occurs at the
appropriate moment, not the last possible moment. Sequence is also
important. Dominant elements that influence later elements need to be
completed first. While it is clear in construction that one does the
basement first, then adds the other floors, such clarity is not always
obvious in decision processes.

Sometimes events take over, in what R. Daft called
“nonprogrammed” decisions. A process of constraints and
tradeoffs dominate, often simultaneously.

SETTINGS.

In most cases, business decisions are made in collective settings called
“meetings.” Meetings, committees, and task forces have taken
on a pejorative meaning. Most meeting humor expresses a meeting’s
ineptitude, as in the examples, “A camel is a horse constructed in
a meeting,” and “A meeting is a group which takes minutes to
waste hours!” Meetings can be improved, and made into effective
information processing systems that have decisions as their outcome. Much
work has been done to develop more effective meetings. Antony Jay’s
famous piece, “How to Run a Meeting,” essentially became the
script for the well-known meeting improvement video starring John Cleese,
“Meetings, Bloody Meetings” (Video Arts). Meetings can be
thought of as places where “coalitions” crystallize and ebb.
Coalitions are important in business organizations because of the myth of
the individual decision maker. As discussed, organizational
“editors” assemble information, making subdecisions along
the way. But also, different perspectives are needed. The final decision
mosaic is a construction of many hands, as often blessed as made by the
decision maker. Our individualistic culture retains a fiction that
individuals decide; more often they are components in a decision process.
(The truth is even more stark—many times decisions are made, or not
made, in the meeting situation without an actual decision maker; rather,
there is a decision system/team that works well, or not.)

SCOPE AND LEVEL.

Finally, attention must be paid to problem scope and organizational level.
Problems of large scope need to be dealt with by top levels of the
organization. Similarly, problems of smaller scope can be handled by lower
levels of the organization. Most organizations could improve on getting
the right problems to the right decision groups. Typically, top-level
groups spend much too much time deciding low-level, low-impact problems,
while at the same time avoiding problems of high importance and
organizational impact.

USE OF PROCEDURAL AND TECHNICAL AIDS.

In recent years, a number of procedural and technical aids have been
developed to deal with effective group decision making in meetings. Other
such aids deal with the use of computers and computer-based decisions.
Decision assistance software, called groupware, is helpful. Groupware is a
term used for computer-based decision support systems, group writing
programs, and group spreadsheet programs—programs that tally
preferences in order to aid the business team in making high-quality
decisions. There are many new titles in this area. One is

Groupware and Teamwork: Invisible Aid or Technical Hindrance?,

edited by Claudio U. Ciborra. For example, in
“chauffeur-driven” systems individuals respond over a set of
keypads to questions. Overall preferences can be displayed anonymously
without regard to race, gender, or power. These improvements have led to
virtual meetings and team interaction. Virtual meetings
are becoming very much the norm. Here too there is much new literature.
One example is

Virtual Teams: Reaching across Space, Time, and Organizations with
Technology,

by Jessica Lipnack and Jeffrey Stamps.

Whatever the process, there also needs to be an outcome. Many times there
is uncertainty in business meetings about what has actually happened. In
exit interviews the author has conducted, participants of decision making
meetings were unclear about what happened, and in a considerable number of
instances different participants thought different results had been
achieved. Stepping away from a decision, or failing to nail it down, is a
nonresult that occurs for many reasons. One cause is stalling; opposing
interests neutralize each other. Another cause is that decision making
tears at group cohesion, something groups resist, especially when the same
individuals defeated this morning are one’s colleagues this
afternoon. And there is sometimes honest confusion about what is up for
decision, and which group (or person) should make it.

Once made, or while being made, decisions need to be legitimated.
Decisions are accepted by the losers, even if they do not like the
outcome. In an article published in

Personnel,

Robert Quinn, J. Rohrbaugh, and M. R. McGrath provided an excellent slant
on decision legitimacy with four perspectives or orientations to decision
making in organizations—consensual, empirical, rational, and
political (see Table 1).

Readers will doubtless recognize their own styles, and may also sense that
their business approaches different kinds of decisions with different
perspectives, There may also be conflict over which perspective is
appropriate. Two key points are important, and for high-quality decisions,
some of each of these perspectives is needed. First, if an executive or
firm works only in one area, then there is vulnerability and exposure from
the others. Secondly, one can supplement or buttress one’s own
style with that of others, in a “decision team.” It’s
unlikely that any of us have the ability to work in all of these areas; we
can build a decision ensemble that can.

Another approach to decision legitimacy is to look at decision rules,
which are defined as “extra group norms which make decisions
ok.” There are several decision rules, and they conflict with the
other (an outcome determined by any one of them would have a different
distribution of winners and losers). So far, five rules seem prominent:
the extensive rule (one person, one vote); the intensive rule (what people
who care or feel deeply about the issue want); the involvement rule (what
those who might have to implement any decision prefer); the expert rule
(what the “lawyers” or other experts think); and the power
rule (what the boss wants). It appears these rules are brought into
decision settings from the culture at large. Since they conflict,
decisions tend to be sought that will address as many as possible. Three
or more seems like the minimum acceptable number. In other words, managers
who can frame decision options that can be seen to address at least three
of these five at any one time are more likely to make decision progress
than managers who can’t.

Managers, executives, and businesspeople attending to each of these areas
still have more elements to take into consideration. One of them is the
quality of the decision. In the press for action, groups not only avoid
decisions, they make premature decisions (and exhibit other problems).
Quality decreases, and may even become negative (in which everyone is
worse off than before.)

Table 1 Four Perspectives on Decision Making and Their Central Concerns, Bases, and Results (based on Quinn, Rohrbaugh, and McGrath, 1985)

Perspectives

Concerns/Bases/Results

Consensual

Empirical

Rational

Political

Chief Concern

Supportability

Accountability

Efficiency

Legitimacy

Key Base

Participation Base

Data Base

Goal Base

Adaptive (Interests) Base

Result/Outcome

Good Feelings Results

Numbers Add Up

Logic Is Flawless

Stakeholder Needs Met

DEFINING THE QUALITY OF DECISIONS.

Decisions are a product, and decision makers need to look at those
products and ask if they are of high quality. One method is to sample the
group’s decisions (or your own, for that matter) and give them a
grade: A B C D F. An A decision is one in which all stakeholders come out
ahead, though they do not need to come out equally ahead. The B decisions
involve winners and losers, but the final result is that the organization
is better off. The C decision, a very common one, occurs when there is a
shift in the winner/loser mix, but the organization is no better off than
it was. The D is the opposite of the B; now there are some losses that
mean that the organization is worse off. Finally there is the
“nuclear war” decision, the F. In this decision, everyone
winds up worse off than before.

This method relies on judgment, as a small group looks at each decision in
the sample and gives it a grade. It certainly has no claim to superiority
over other methods the businessperson might develop. The important thing
about decision analysis, however, is that some system be used so that a
review can occur. Once decision making systems are aware that their
decisions are being reviewed, greater attention will be paid, and they are
likely to improve, for reasons of the measurement itself.

What happens after the “grading”? The executive can sit down
with a staff or an operations group and review the results, seeking to
find out, in the spirit of constant improvement, what—about problem
finding, problem context, decision legitimization, or problem
solving—could be improved. This “decision audit” can
be helpful in pointing to specific problem areas, and in calling attention
to the whole area of decision making in general. Care must be taken to
avoid blame, and to avoid a “shooting the messenger”
mentality, in these situations.

A further step one can take is the decision autopsy. Here, one takes an A
and an F decision and takes each of them apart. One seeks to find out what
went right, and continue it; and what went wrong, and stop it. For most
companies, these are not the same things. Because most organizations are
doing some things right and some things wrong at the same time (we all
have many processes going on), they tend to assume that if they are doing
things right then they are not doing things wrong. This error is a common
one, because wrong things and right things are generally in different
business behavioral repertoires. Consider Figure 2. It assumes that an
organization has a mix of success decisions and failure decisions.
Depending upon the mix or ratio of these, the organization can be in any
quadrant. True excellence requires that one do lots right, and little
wrong (the upper left quadrant). Executives should seek to have a decision
pattern that can fit there. Doing lots right and lots wrong at the same
time can lead to a shooting star organization, one that can “drop
dead” at any moment (upper right quadrant). Many organizations
don’t make many right decisions, or many wrong ones—they
don’t do much at all. These organizations are
“lingering,” and may move into “organizational
death” (from the lower right to the lower left quadrant).

Figure 2 Decisions Gone Right/ Decisions Gone Wrong Template

Why do decisions go wrong? Given the great desire to do the right thing,
decision-wise, one might wonder why things go wrong, so badly, so often.
The reason is that there are important limitations in each of the five
areas mentioned above, especially in the decision process.

The following list (adapted from Braybrooke and Lindblom’s

A Strategy of Decision)

suggests some of the more common and perhaps inherent, process
limitations: limited organizational capacity; limited information; the
costliness of analysis; interdependencies between fact and value; the
openness of the system(s) to be analyzed; the diversity of forms on which
business decisions actually arise. Problems of time insufficiency,
distraction, low level of decision making skill, conflict over goals (and
no way to resolve the conflict) are also important. While these cannot be
completely controlled, executives can be alert to them.

A second category of difficulties is captured in a number of common
pitfalls of the decision procedure. One such pitfall is “decision
avoidance psychosis” that occurs when organizations put off until
the very last minute making decisions that need to be made. One form of
this is the “nondecision.” It may appear a decision has been
made, when in reality one has not. For example, one organization I knew
put contentious things on the “list.” Putting an item
“on the list” had the “feel” of a decision; in
reality, of course, as everyone knew, the list was never revisited.

Things here, and usually, go along very much as they have. Over time this
pattern of nondecision can lead to the boiled-frog phenomenon, as
described by Noel Tichy and Mary Anne Devanna in

The Transformational Leader.

This phenomenon takes its name from an experiment in which one puts a
frog in a petri
dish filled with water, and slowly heats the water over a burner. The
frog boils to death. Why does it not leave? The answer seems to be that
the barely perceptible difference in the temperature is never enough to
cause action. This “just noticeable” difference phenomenon
is an important source of nondecision in organizations. Members see things
pretty much as they were, and thus wrongly conclude that there is no need
to act.

A second problem is decision randomness. This process was outlined in the
famous paper entitled “A Garbage Can Model of Organizational
Choice,” written by M. James Cohen, G. March, and J. Olsen. They
argued that organizations have four roles or vectors within them: problem
knowers (people who know the difficulties the organization faces);
solution providers (people who can provide solutions but do not know the
problems); resource controllers (people who don’t know the problems
and don’t have solutions but control the allocation of people and
money in the organization); and a group of “decision makers looking
for work” (or decision opportunities). For effective decision
making, all these elements must be in the same room at the same time. In
reality, most organizations combine them at random, as if tossing them
into a garbage can.

Decision drift, or the Abilene Paradox, is another famous bad decision
case (described by Jerry B. Harvey). A group of people were outside of
Abilene, Texas, with nothing to do. It was hot. Somehow they wound up
going into town (many miles, dusty drive, no air conditioning) to have a
very bad meal. On the way back, the “search for guilty
parties” began. As they sought to find out whose idea this was, the
troubling truth emerged that it was no individual’s
idea—each had thought the others wanted to do it; no one had
questioned it. The Abilene Paradox has come to refer to group actions
where there never really was a decision to take that action.

Decision coercion, also known as

groupthink,

is another very well-known decision problem, made famous by Irving Janis,
author of

Groupthink.

In groupthink, decisions are actually coerced. It is a false agreement in
the face of power. When the boss says, “We’re all agreed
then,” most at the table say “Aye.” Only later, in
the hallway, when the real discussion occurs, do the problems surface.

Naming these common problems will not prevent them. Because they are so
common, however, executives can be more aware of them, and seek to prevent
them.

What can businesspersons do to improve the decision making process at
their firms? Six sets of possibilities are explored below.

Improve the setting. Organize better meetings, with more focused agenda,
clear questions, the right information and the right people. Avoid the
garbage can; get the relevant people in the same room at the same time.
Pay attention to planning and seek closure.
Use logical techniques. In the film “Meetings, Bloody
Meetings,” a five-step discussion sequence is proposed: (1) state
the problem; (2) present the evidence; (3) argue about what the evidence
proves; (4) decide; and (5) act. And, as the narrator says, “Keep
people from jumping ahead or going over old ground.” This
technique is as good as any. The use of the

Delphi technique,

in which group preferences are continually sought, tallied, and then
fed back to the group, is another approach.
Enlist decision aids. Groupware and decision software might be helpful,
as well as steps to improve one’s meeting processes. Specific
attention to the structure of the decision system might yield useful
results.
Evaluate decisions and decision making patterns. Evaluation tends to
focus the attention, and make individuals and teams more sensitive to
what they are actually doing in their decision making tasks. Evaluation
is especially helpful in today’s business environment because of
the interdependency of individuals in a decision matrix. No one person
does it all, regardless of what she or he may think.
Be prepared to deal with poorly structured problems. The executive may
still seek some answers to questions of what she or he could do to
develop personally. This question is especially pertinent to a certain
class of problems that require decision, but are poorly structured. The
executive needs to develop his or her own approach to a point where it
can be dealt with by others. In

The Executive Challenge,

Michael McCaskey suggested skill areas that would help in dealing with
such poorly structured problems.
Play the right game. Much emphasis here has been on business decision
making. But what kinds of decisions might executives be looking for?
Complaints about “micromanaging” and
“pie-in-the-sky” are common
enough that one might conclude executives have a substantial lack of
clarity about the types of decisions they should be looking to make. In

Managing Large Systems,

Leonard R. Sayles and Margaret K. Chandler provided a useful list:
- Giving problems their proper weight and context
- Taking problems at the right time
- Taking problems in the right sequence
- Establishing and shifting decision criteria
- Acting as the coxswain (beating out the pace of decision action)

Decision making is at the heart of business operations. High-quality
decision making is essential for businesses to thrive and prosper.
Unfortunately, the decision process is hard to pin down and understand and
often receives far less attention than it deserves. The future of
one’s business is written in the decisions of today. Every effort
to make those decisions of high quality will be rewarded.

[

John

E.

Tropman

]