Organizational Decision Making

Front 1

Decision Making

Back 1

Organizations tend to have formalized decision making process, as apposed to what we generally think in our day to day activities. The steps for decision process is perceived need to decide something….identify alternatives……value alternatives…choose….enact

Front 2

Rational Choice Assumptions

Back 2

perfect information, unitary actor, free knowledge/information, perfect mobility, optimization, all options known

Front 3

Meaning of Rationality

Back 3

Rationality in rational choice is maximizing utility (or happiness or profit depending on specific theory and historical period)

Front 4

Critiques of Rational Choice

Back 4

- oversimplifies complex problems
- ignores measures of real world decision situations
- imposes causal order on decision process
- requires untenable assumptions
- erroneously claims certainty for highly contingent outcomes
- overvalues "maximization"
- tautological (in some formulations)

Front 5

Tautology

Back 5

- A critique of Rational Choice?
- It is an argument where the premises presuppose the conclusion to the degree that they're the same.
- In the case of theories that assign comprehensive rationality to actors (individual or collective) we run the risk of arguing by tautology.
- We assume the actor is rational. We know, then, that any act she undertakes is definitionally rational. Why is it rat'l...because she did it. Why did she do it...because it is rational. Why is it rational....
- We risk running into a similar loop in org theory w/ fitness and selection.

Front 6

Utilitarianism

Back 6

A social and/or political philosophy that argues (various thinkers apply it to individuals, groups, and gov'ts) the best way to choose a course of action is to select the alternative that yields the greatest happiness net of harm.
There are personal utilitarianisms that only consider the happiness/harm of the actor and universal utilitarianisms that consider the happiness/harm of everyone affected by a decision.
Bentham (and to a lessor extent Mill) argue that gov'ts should use utilitarian principles to craft legislation that will improve society.

Front 7

Greatest Happiness Principle

Back 7

Start with the Utilitarianism answer above. To act thusly is to act (or govern) in accord with the greatest happiness principle

Front 8

Post-Hoc Rationality

Back 8

Looking at a decision in hindsights and defining its rationality by the outcome.

Front 9

Game Theory

Back 9

(one of the applications of rational choice)
The idea of modeling decisions through simple mathematical games.
In the Prisoner's Dilemma, two partners commit a crime and are arrested but the authorities don't have enough evidence to convict them on the main charge. The prisoners are seperated and each is given the following information: if both confess 10 years each, if A confesses but B doesn't 5 years for A life for B, if neither confesses 2 years each.
The values change but the point is that we can mathmatically determine an ideal strategy for a prisoner, independent of the behavior of the other.
The Prisoner's Dilemma and other game theoretical games are used to model and predict real world decision situations.

Front 10

Rational Actor Model (RAM)

Back 10

- First used by Graham T. Allison to evaluate the Cuban missile crisis.
- Decision can be made without transaction cost.
1. Identify Problem
2. Identify all alternatives
3. Value all alternatives/consequences of decision
4. Maximize utility in decision (you chose the one alternative w/ greatest net value of benefits minus costs).

Front 11

Transaction Cost Economics (TCE): What is it?

Back 11

A decision making theory that argues that different decisions have different transaction cost. There are two sets of cost, cost of what you are buying and transaction costs. TCE is worried with minimizing transaction costs….

Front 12

TCE: How it relates to rational choice

Back 12

Rational choice says that people do not consider transaction cost because it is assumed that all transaction cost for the same task are the same, so that should not factor into decision.

Front 13

Determinants of transaction cost (3)

Back 13

1. uncertainty - ?
2. frequency - ?
3. asset specificity - ability of firm to substitute if something goes wrong.

Front 14

Transaction as a unit of analysis

Back 14

Williamson argues that to make a decision, the org should focus on the transactions entailed by each alternative and act to minimize transaction costs.
- it makes the transaction - rather than commodities - as the unit of analysis

Front 15

Assumptions about TCE

Back 15

- actors operate within constraints of bounded rationality, and much of human behavior is driven by opportunity...intendedly rational decision maker
- relatively clear preferences, alternatives, etc.
- ABILITY TO CALCULATE TRANSACTION COSTS
- ability to make and enforce decisions
- "boy in the bubble"?
- order of decision process

Front 16

Bounded Rationality

Back 16

refers to the limitations of individuals as information processors……. We can't predict the future, know what others are thinking, etc. Both of these are necessary to use Rat. Choice decision making in its most comprehensive sense.
In a more limited way, we can't possibly know every alternative in a decision situation or compute the consequences of each alternative with any confidence. We as humans simply lack the hardware to do so.

Front 17

Bounded Rationality: critique of Rational Choice

Back 17

says that people do not have cognitive skills to make a perfectly rational decision, information is not free.

Front 18

Bounded Rationality: limits of cognition and processing

Back 18

people have limited cognition because of certain internal and environmental factors

Front 19

Bounded Rationality: Limited Rationalities

Back 19

1. Intendedly rational
2. Contextually rational
3. Selectedly rational
4. A posteriori rationaltiy

Front 20

Bounded Rationality: Limited Rationalities: Intendedly Rational

Back 20

intendely rational means that you make decisions that you think will be the most rational

Front 21

Bounded Rationality: Limited Rationalities: Contextually Rational

Back 21

contextual: an otherwise irrational decision rendered rational by a peculiar set of circumstances.
personal ex. irrational to dart in front of traffic on foot. Rational if it is Cameron Ave., you're in a group of 10 and are late for class.
Org. ex. It is generally irrational for a Board of Directors to fire a CEO without long planning and clear successors. If said CEO is about to be indicted, the decision is contextually rational

Front 22

Bounded Rationality: Limited Rationalities: Selectedly Rational

Back 22

Org chooses one or several dimensions of the decision and acts rationally with regard to those to the exclusion of any other factors.
With suppliers, a selectedly rational org. could choose to minimize cost and act rationally in this regard but to do so would ignore quality, etc. or vice versa.

Front 23

Bounded Rationality: Limited Rationalities: A Posteriori Rationality

Back 23

The researcher presumes that the org was at least intendedly rational and knows what action/decision they chose.
Given these two facts, the researcher estimates the constraints, cost/benefits, etc. faced by the org that made the decision taken the one that maximized their utility.
It is sort of an algebraic manipulation of the RAM.

Front 24

Complicated and messy real world problems

Back 24

This asks you to recall the reasons why bounded rat. theorists think that Rational Choice Theories don't work well in the real world.

Front 25

Bounded Rationality: Assumptions

Back 25

- situation defined as problem
- org. searches for solution(s) to problem
- decision is enacted
- org. attempts to act rationally in some form
- SHOULD KNOW HOW THIS IS DIFFERENT FROM RAM/RC AND TCE.

Front 26

Satisficing

Back 26

coming up with categories that are important to you and set standards – find a choice that satisfies all of those standards… Instead of optimal decision all the organization really wants is to find one that is satisfactory, which meets their minimum standard. They do this because the search for alternatives is more expensive than the difference between a satisfactory and an optimal outcome.

Front 27

Garbage Can Theory (GCT)

Back 27

Organizations, under certain conditions, are fundamentally anarchic in their decision making process. That is to say, they rarely, if ever, follow a neat process from problem identification to solution. In fact, GCT argues that contingency and randomness better characterize actual decision processes than does rationality.
In GCT, solutions already exist and are looking for questions or problems.

Front 28

GCT: Critique of causal order in decision making theory

Back 28

It is implicit throughout the reading.
More decision making theories assume implicitly or explicitly that organizations generate solutions only after identifying problems. The causal order here is problem, then solution.
GCT argues that solutions can come before problems in decision making.

Front 29

GCT: Streams

Back 29

GCT suggests that both problems and solutions always exist in an organization. Most are never acted on in a serious way. Instead they flow through the organization untethered from each other or any attention/resources.

GCTers characterize these flows as streams (and add several others). It is only when something is plucked from the stream and placed in a garbage can that the org acts upon it in a decision making situation.
1. problems
2. solutions
3. participants
4. choice opportunities

Front 30

GCT: Attention Structures

Back 30

There are always more problems in the organization (and solutions) than an organization could ever deal with. Situations are only defined as problems when some influential actor chooses to devote attention, time, and resources to it.
To figure out what the org. will do re. decision, then, the researcher does better to look the attention structure of actors (what they pay attention to, when, and why) than any specific problem or decision situation.

Front 31

GCT: The boy in the bubble

Back 31

GCT theorists critique other decision theories by arguing that the other theories treat the decision maker like a "boy in a bubble". They mean that in other theories the decision maker is presumed to focus solely and totally on the decision and the the actor, decision situation and the parameters of the decision are utterly uninfluenced by anything in the world around them.
Instead, according to GCT, decisions, problems, solutions, etc. trip all over each other and make decision making complicated and messy.

Front 32

GCT: Resolution

Back 32

One of three types of decision in GCT.
Decision by resolution is when an organization behaves more or less like other decision theories say they will. Problems are paired with solutions and the org actively and decisively acts. ex. (fantasy land edition)
UNC wants to boost in-state applications. To attract in-state students who choose other options, the org. decides to significantly reduce in-state tuitions.
Decide, resolve, do it.

Front 33

GCT: Oversight

Back 33

2nd of 3 decision types in GCT
The org. makes a decision that effectively eliminates the need to make other decisions.
Indiv. level example. If you decide to spend Wednesday night drinking heavily, you won't need to decide whether to study using your notes or using the readings.
Org. example. Budgeting is the easiest example of decision by oversight (allocation of any scarce resource works fine too). If the Sociology Dept. chooses to spend money upgrading the computers, they don't have to decide whether or not to give me a raise.

Front 34

GCT: Flight

Back 34

3rd type of decision in GCT
Deciding by not deciding, essentially running out the clock.
Ex. A buddy of mine wants to establish a new course in sociology. The department keeps putting off deciding, asking for more info, etc. Effectively, they decide not to offer a new class by repeatedly putting off the decision.

Front 35

Neo-Institutionalism

Back 35

when faced with a decision orgs base them on something that has happened before, so in essence they recreate themselves

Front 36

Neo-Institutionalism: Myth

Back 36

organizations differentiate structure, do different than they say which creates myth and ceremony

Front 37

Neo-Institutionalism: Common Beliefs

Back 37

even in false pasts) lead to social cohesion

Front 38

Neo-Institutionalism: Synchronic/Diachronic

Back 38

It is in the reading.
It is about classical elements of myth. Every myth (according to Levi-Strauss)has elements of synchronicity and diachronicity.
Synchronicity allows the myth to be placed at a specific point in historical time. George Washington and the Cherry Tree is synchronic in that it could be dated to a relatively small historical window (early 1700s). The time period a myth is rooted in doesn't have to be real but it has to be definite. Synchronicity makes the myth believable, or at least plausible.
Diachronicity are elements of a myth that transcend time. These can be values, morals, ideas, etc. The diachronic element of the Washington myth is the honesty, integrity, etc. of America's first president and thereby the morality of the nation as a whole.
The diachronic is what makes the myth enduring and valuable.

Front 39

Neo-Institutionalism: Myth about causes and effects

Back 39

It isn't the causes and effects of myths.
It is untested beliefs organizations and their members hold about cause and effect relationships within the common practice of the organization.
eg. If I (the instructor) work hard on the discussion review board, I'll get good evaluations and will therefore continue having a job teaching here.
In this statement there are two sets of causal relationships that the organization and its members treat as true that may or may not be.