One approach to decision theory made popular by Cyert and March (he of the "garbage model of organizations") is the consideration of the organization as a coalition of individuals, in which goals are arrived at by a bargaining process and change over time . Decisions are dependent on the amount and kind of information available and the expectations of those involved.
Thus, three variables become the focus in this formulation: Goals, Expectations, Choice.
Goals. Most organizations comprised of many people have multiple goals, which of course raises the possibility of conflict. Different coalitions of people within the organization form and develop their own goals.
Expectations. Expectations depend on information held by individuals. They are affected by how the information is presented, how it was gathered, who conveys it.
Choice. The everyday choices made are the response to the organization's problems. Choice reduces uncertainty.
Cyert and March also pioneered in distinguishing between well-structured and ill-structured problems, which call for different approaches to decision making. An SOP (Standard Operating Procedure) is an efficient approach to a well- structured problem. More ill-structured problems require formulating alternatives in light of expectations and goals, and choosing the one which meets at lease of minimum level of acceptability.
This approach to decision-making is sometimes called Incrementalism, because it focuses on short term rather than long-term decisions. It favors continuity with the past rather than discontinuity. Decisions made under this approach often favor s ecurity and the status quo and are risk averse. Top managers have influence but the result is compromise.
Herbert Simon is another important name in decision-making theory. He formulated the difference between programmed and non-programmed decisions. Programmed decisions are routine and repetitious (well-structured) and lend themselves to sol ution by habit, SOP, organizational structure (establish who is responsible), MIS.
Non-programmed decisions require judgment, intuition, creativity, rules of thumb (heuristics). Often an organization selects managers who are specially educated in making decisions of this sort (professionals). Sometimes the organization establishes sp ecial organization units to deal with these kinds of problems.
Simon emphasizes the problem-solving, thinking and learning aspects of decision-making (cf. "the Learning Organization" of which we will be reading more later).
Setting a goal
Detecting the difference between the present state and the goal state
Finding tools to lessen the difference.
Simon says every problem can be broken down into sub-problems. Work in parallel on the sub-parts and then put small solutions together for the big picture.
Simon also is responsible for two other decision-making concepts:
Bounded Rationality: This is the notion that a human manager has limits to degree of rationality he/she can bring to a problem. The decision-maker cannot have complete knowledge of all the alternatives to the consequences of choice. Simon sugges ts that managers often simply the problem in order to make a decision.
Satisficing: This refers to the selection of a satisfactory alternative -- not the most optimal (the best) but rather the first one that works in light of the circumstances. In other words, a feasible solution not an exhaustive search for the be st solution possible.
The third decision theory comes from work by Mintzberg (the very same one who outlined the various roles of the manager). Mintzberg, as is true of most decision-theorists, was interested in unstructured decision-making (the nonprogrammed ones that Mont ana discusses).
Mintzberg in empirical observations/interviews with managers noticed that decisionmaking under ambiguity usually begins with a vague idea which is then matched to an opportunity that happens to be at hand and which then helps to shape the vague idea. < /P>
Mintzberg distinguishes three phases of the decision-making process:
Identification - Recognizing the need to make a decision. Followed by Diagnosis -- that is, the issues are clarified and defined.
Development - The second phase is marked by a search for ready-made solutions. If a satisfactory alternative is not found, the development moves into a Design phase, either modifying an existing solution or custom making a new one.
Selection - In this phase, the possible solutions/alternatives are screened and evaluated (often sequentially rather than all at the same time) and a choice is made. A course of action is selected (the Decision). Mintzberg goes on to say that Au thorization is needed to ratify the choice before the decision becomes final.