BUS603: Managing People

Decisions are driven by psychological, cognitive, and normative styles, each of which take into account varying influences on the final decision.

LEARNING OBJECTIVES

Recognize the various factors which influence a leader's decision-making style

KEY TAKEAWAYS

Key Points

• The ability to make effective decisions that are rational, informed, and collaborative can greatly reduce opportunity costs while building a strong organizational focus.
• A psychological style to decision-making favors individual values, desires, and needs to determine the best course of action.
• A cognitive style to decision-making is heavily influenced by external factors and repercussions, such as how a given course of action will impact the broader environment in which the organization functions.
• Normative decision-making relies on logic and communicative rationality, aligning people based upon a logical progression from premises to conclusion.
• Regardless of the style or perspective, managers, and leaders must create organizational alignment in decision-making through building consensus.

Key Terms

• communicative rationality: A theory or set of theories which describes human rationality as a necessary outcome of successful communication.

Why Decision-making Matters

Decision-making is a truly fascinating science, incorporating organizational behavior, psychology, sociology, neurology, strategy, management, philosophy, and logic. The ability to make effective decisions that are rational, informed, and collaborative can greatly reduce opportunity costs while building a strong organizational focus. As a prospective manager, effective decision-making is a central skill necessary for success. This requires the capacity to weigh various paths and determine the optimal trajectory of action.

Decision-making Styles

There are countless perspectives and tactics to effective decision-making. However, there are a few key points in decision-making theory that are central to understanding how different styles may impact organizational trajectories. Decision-making styles can be divided into three broad categories:

• Psychological: Decisions derived from the needs, desires, preferences, and/or values of the individual making the decision. This type of decision-making is centered on the individual deciding.
• Cognitive: This is an integrated feedback system between the individual/organization making a decision, and the broader environment's reactions to those decisions. This type of decision-making process involves iterative cycles and constant assessment of the reactions and impacts of the decision.
• Normative: In many ways, decision making (particularly in groups, such as within an organization) is about communicative rationality. This is to say that decisions are derived based on the ability to communicate and share logic, using firm premises and conclusions to drive behavior.

Cognitive Theories

While the above styles give a general sense of the logic that drives choices, it is more useful to recognize that each of these three styles can play a role in any individual's decision-making process. From the cognitive perspective, there are a few specific stylistic models that are useful to keep in mind:

Optimizing vs. Satisficing

Decision-making is limited to the finite amount of information an individual has access to. With limitations on information, true objectivity is impossible. Decisions are therefore intrinsically flawed. A satisficer will recognize this necessary imperfection, and prefer faster but less perfect decisions while a maximizer will take a longer time trying to find the optimal choice. This can be viewed as a spectrum, and each decision (depending on the risk of a mistake) can be viewed with varying levels of perfection.

Intuitive vs. Rational

Daniel Kahneman puts forward the idea of two separate minds that compete for influence within each of us. One way to describe this is a conscious and a subconscious perspective. The subconscious mind (referred to as System 1) is automatic and intuitive, rapidly consolidating data and producing a decision almost immediately. The conscious mind (referred to as System 2) requires more effort and input, utilizing logic and rationale to make an explicit choice.

Combinatorial vs. Positional

This relationship was put forward by Aron Katsenelinboigen based on how the game of chess is played, and an individual's relationship with uncertainty. A combinatorial player has a final outcome, making a series of decisions that try to link the initial position with the final outcome in a firm, narrow, and concrete way (i.e. certainty). The positional decision-making approach is 'looser', with a sense of setting up for an uncertain future as opposed to pursuing a concrete object. Each move from this type of player would maximize options as opposed to pursuing an outcome.