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Decision Making in Organizations

 

Key Terms

Chapter Outline: 8-1 Decision Making in Organizations

8-2 Power in Organizations

8-3 Politics in Organizations

8-4 Conflict in Organizations

Summary Review Questions Glossary Endnotes

8Decision Making, Power and Politics

bounded rationality Carnegie model coalition incremental decision model intuitive decision making nonprogrammed decisions organizational conflict

organizational decision making organizational politics power programmed decisions rational model of decision making satisficing unstructured model of decision making

W I L L I S , K A S S A N D R A 2 1 6 1 T S

 

 

Organizational Theory 8-2

organizational decision making the process of identifying problems or opportunities and finding solutions or courses of action that further the goals of the organization

programmed decisions decisions made on a routine, repetitive basis that are addressed by company policy and procedures

nonprogrammed decisions decisions that involve nonroutine, out-of-the ordinary situations and are generally not covered by existing policy or procedure

This book has emphasized the importance of strategically managing organizations, whether they are operating in the for-profit sector or the not-for-profit sector. The challenge of competitive forces, discussed in chapter 2 on strategy, is reaching a zenith. This fact particularly impacts the first topic of this chapter, which is decision making. Because competition for resources and customers has reached the hypercompetitive level, decisions by organizations must be made quickly and accurately.

8-1 Decision Making in Organizations Why do organizations make decisions? Primarily, decisions are required because organizations represent the merger of people, systems, and technology. Such a complicated conflagration inevitably leads to problems that beg solving or creates opportunities that need courses of action. Hence, organizational decision making is the process of identifying problems or opportunities and finding solutions or courses of action that further the goals of the organization.

When firms are small, such as those usually found in the existence stage of the organizational life cycle, all important decisions and most minor decisions are made by one person or a small group of people. However, as organizations add capacity to produce, employees, and markets, the need for decision making increases exponentially. Modern organizations are pushing this decision making responsibility to the lowest possible levels to increase speed and efficiency. This concept, known as empowerment, puts the responsibility for solving a problem or acting on an opportunity in the hands of those closest to the situation.1

As technology continues to permeate our organizations, markets and competition become global, and productivity increases accelerate, the time available for mulling over important matters in the decision making process shrinks. Fortunately, most decisions faced by organizations are somewhat routine. Decisions made on a routine, repetitive basis addressed by company policy and procedures are known as programmed decisions.

Nonprogrammed decisions involve nonroutine, out of the ordinary situations and are generally not covered by existing policy or procedure. An example of a nonprogrammed decision would be a competitive situation where an organization is faced with a serious threat from a substitute product. Think about the difficulty faced by steel producers when automobile manufacturers began to utilize plastic on a widespread basis in their new cars. This is an example of a strategic threat from the external environment that resulted in a loss of revenue. That is a serious enough issue. However, this substitution led to the utilization of plastic into other products, replacing glass, steel, and even paper.