Interpersonal, Organizational, And Group Decisions D1

interpersonal,
organizational
and group
decisions

Sharif University of Technology
Graduate School of Management and Economics

Decision making is
a social activity

Possible effects of decisions On Others

Anticipate how they might React

Sense of Fairness

You must Cooperate with others to reach your own

ends

Interpersonal decisions Organizational decisions Group decisions

Behavioral Game Research

Prisoner's Dilemma

Both prisoners care about the other player and
try to anticipate what the other prisoner will do.



Prisoner's Dilemma

B
Silent Confess

A 6 months A 10 Years
Silent
B 6 months B goes free
A
A goes free A 5 Years
Confess
B 10 years B 5 Years

Making decisions in Light of Assumptions about
other player decision


The Centipede Game

Game theory : Player A must stop on the first leg



The Centipede Game

By contrast, players do not stop early!

The point: Trust long enough to build up the
pay offs, but not so long that the other player
stops first



Game Theory

Mathematical approach to decision making

Decision making takes place in Social Environment

Players are
 Rational
 strictly Self-interested whose behavior solely
determined by the Pay-offs
Tempered by judgments about what the other
player(s) might do



Behavioral Game Theory

Behavioral Game Research determines how
human beings react

Attention is directed toward two non-economic
factors: fairness & cooperation



Fairness
Players take into account
fairness (as opposed to Game
Theory Assumptions)
Example: Distribution of a Resource
A: 4 A: 5 A: 12
B: 10 B: 5 B: 0
Player A chooses one distribution and
negotiates with B
If player B doesn't agree, neither player
receive anything


Fairness

The Theoretical Solution:
Player A chooses the largest total payoff (4, 10)
and negotiates with B to increase it

In Reality:
Players go for what they perceive to be the fair
distribution



Ultimatum Game

No Negotiation for side payment

The Theoretical Solution:
Player B accepts any amount greater than zero

In Reality:
Players pursue fairness
B doesn't accept less than 20% of the payoff
A doesn't offer less than 40%



Dilemma of the Commons

a village has a common
pasture that can support only
n cows

If a villager adds one cow, he
has 2 slightly unhealthy cows
rather than 1 healthy cow



Cooperation

In Reality:
People tend to avoid taking the
self-interested position of a free
rider

People are sensitive to economic
factors but impose their own
standers of fairness and
cooperation


Behavioral
Negotiation Research
Negotiation: A process in which two or more players decide
what they give & take in an exchange between them.

Assumptions:
Players presume they have
conflicting interests
Communication is possible
Compromise is possible
Players may make provisional offers &
counteroffers
Offers & counteroffers do not result in
outcomes until accepted by both players


Behavioral Negotiation Research

Negotiations can be about:
Distributive Bargaining: Dividing some
fixed amount of a resource

Takes place when players
do not have compatible
interests

Each player tries to maximize his/her gains at
the expense of the other player


Integrative Bargaining: Adding to the resource

Takes place when players have at least some
compatible interests
Each player tries to maximize the joint profit


Integrative Bargaining
Two people negotiating over the distribution of a
basket of oranges

One wants the juice and
the other wants the peels

The integrative agreement is the optimal solution



Cooperation

Cooperation is generally necessary in
integrative bargaining

THEREFORE
if fairness & cooperation
are ignored, negotiations
often reach an impasse.


Organizational
decisions

Complexities of studying
organizational decisions:

 organization’s personnel
perceives problems
differently

 Coalition and power
differentiation between
units

ORGANIZATIONAL
MODELS

• Rational Model

• Information Model

• Structural Model

• Garbage Can Model

• Participation Model


ORGANIZATIONAL MODELS

The Rational Model

 One paramount Goal
 Ultimate Information & Enough Cognitive Ability
 The optimal course of action using appropriate
normative analysis
Rationality

Analysis
Orderliness

Maximization



The Information Model

Handling
Limited
Limited Resource
Cognitive
Information Constraints SATICFICING
Ability
at a Time option

Using only part of the information that is
potentially available to reach a solution
Only 20% of the time are new options sought



The Structural Model

Limited Information Processing and Properly
Analysis Capacities of Individuals structuring the
organization




 disadvantages

 Problems with Agreement about the organization’s goals
 Lack of concentrated control over Implementation
 Instrumentalism

 Changes cannot quikly be made
 The process become unduly conservative



 disadvantages:

Limited View

Diversity of Power
interests
conflicts
issues

 Solution:
 Meta decision making



The Garbage Can Model

Participants

Solutions

Problems

Choice
Opportunities

Organization = Organized Anarchy


The Participation Model

Member Participation
 Better Decisions?
 The pool of resources?
 Greater confidence in result?
 Greater satisfaction?



The Participation Model

 Not better decisions in quality
 Reduced productivity
 Greater confidence in results
 Greater acceptance on the part of participants
 Greater commitment to the implementation


Group decisions

Three areas in decision research:

 Participation

 Option Generation

 Consensus and confidence



participation
• The organization’s members can participate to different
degrees in managerial decision making

A1
More Participation

A2
C1
C2
G

Group decisions

participation
Problem characteristics
1. The quality of the decision is important
2. The leader possesses the expertise and information
necessary to make the decision alone
3. The problem is clearly structured
4. Member acceptance and commitment is critical to
successful implementation of the decision
5. An autocratic decision by the leader will be accepted by
members
6. Members are motivated by organization’s goals rather
than their own agendas
7. Members are likely to be able to reach consensus


Group decisions

participation

Five More Situational Factors
1. Members have sufficient information to make a quality
decision
2. Time constraints preclude involvement of members in the
decision
3. It is prohibitive to bring together geographically dispersed
members for group participation
4. The decision must be made quickly
5. It is important to foster member development through
participation


Group decisions

Option generation
1957, A.F.Osborn published his book about
“Brainstorming”

Free discussion
and exchange Idea
More cautious and
Generation
Evaluation
of ideas
less imaginative


Group decisions

Option generation

Rules of brainstorming
1. Criticism must be withheld during the generation stage
so participants are not discouraged from contributing
novel ideas
2. Odd, even crazy, ideas are encouraged so that unique,
unapparent options can be discovered
3. The more ideas, the better because quantity increases
the chances that a good option will appear
4. Using others’ suggestions as a source of ideas about
options is acceptable (Piggybacking)


Group decisions

Option generation
What else in brainstorming…
• Usual measure of brainstorming effectiveness :
– Number of generated ideas (Group vs. independently)
– Creativity of the ideas

• An extensive body of research shows
that evaluative groups are more
productive than supportive groups

Brainstorming is seldom more
effective than individuals


Group decisions

Consensus and confidence
Two areas of interest :
 The risky shift phenomenon
 The procedural effects


Group decisions

Risky shift

 Groups tend to be more extreme than individuals in their
willingness or unwillingness to endorse risky decisions

 Explanations :
 Diffusing responsibility
 Evoking Social Values
 Majority Rule


Group decisions

Procedural effects
What may influence the outcomes of group decision making :
• Majority rule (straw votes)
• Using explicit agenda for meetings
• Rules for speaking (recognition by the chair, turn talking)
• Voting procedures (secret ballot, show of hands)
• Criteria for arriving at a decision


Group decisions

Groupthink

• Examination of group consensus in decision making done
by Irving Janis (1972)

• Groupthink : an overemphasis on consensus and a
consequent failure to critically evaluate assumptions and
options when the group is highly cohesive


Group decisions

Groupthink

Symptoms Stereotyping of
oppositions as : Self-censorship
enemy, weak,
evil or stupid

Censorship of
Unanimity and
others
Group Morality

Illusions of Direct pressure
invulnerability,
unanimity and
groupthink to keep errant
members in line
morality


Group decisions

Consensus and confidence

• Consensus is one thing, but actually believing (confidence)
in the correctness of the decision is another thing because
subsequent support of the decision implementation is
dependant upon it


Ways of looking at
confidence…

The confidence of
individual decision
makers in their
group’s decision

the confidence in
that decision
arrived at by the
group as a whole


Be careful !!!

• Using groups in organizational decision making
permits pooling of information and contributes
to more informed and better decisions

But
• Examinations of information sharing in groups
shows that group discussion tends to focus on
what is known by everyone, and uniquely held
information tends to be ignored


Interpersonal, Organizational, And Group Decisions D1

Interpersonal, Organizational, And Group Decisions D1

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