🏢Power and Politics in Organizations Unit 7 – Decision-Making in Organizations

Key Concepts and Theories

• Bounded rationality recognizes that decision-makers have limited time, information, and cognitive capacity, leading to satisficing rather than optimizing decisions
• Garbage can model suggests that decisions are often made by chance, with problems, solutions, and decision-makers coming together in a haphazard manner (university administration)
• Groupthink occurs when the desire for group consensus overrides critical thinking and individual dissent, leading to poor decisions (Bay of Pigs invasion)
  • Symptoms include illusion of invulnerability, belief in inherent morality, rationalization, stereotyping of out-groups, and self-censorship
• Escalation of commitment describes the tendency to continue investing in a failing course of action, often due to sunk costs and the desire to justify past decisions (Concorde project)
• Prospect theory posits that people make decisions based on the potential value of losses and gains rather than the final outcome, and that losses loom larger than gains (insurance purchases)
• Intuition plays a significant role in decision-making, particularly for experienced decision-makers in complex, time-pressured situations (emergency room doctors)
• Organizational politics involves the use of power and influence to achieve desired outcomes, often through informal networks and alliances (lobbying for resources)

Decision-Making Models

• Rational decision-making model assumes that decision-makers have complete information, clear preferences, and the ability to make optimal choices
  • Involves defining the problem, identifying criteria, weighing alternatives, and selecting the best option
• Bounded rationality model recognizes the limitations of human cognition and the complexity of real-world problems, leading to satisficing
• Incremental model suggests that decisions are made through small, incremental changes rather than radical shifts (government policy-making)
• Garbage can model emphasizes the role of chance and the unpredictable confluence of problems, solutions, and decision-makers
• Political model views decision-making as a process of negotiation and bargaining among stakeholders with competing interests (budget allocation)
• Intuitive decision-making relies on gut feelings, past experiences, and pattern recognition, often in complex, time-pressured situations
• Participative decision-making involves the inclusion of employees or stakeholders in the decision process, leading to increased buy-in and commitment (quality circles)

Organizational Structure and Decision-Making

• Centralization concentrates decision-making authority at the top of the organizational hierarchy, allowing for greater control and consistency
  • Suitable for stable environments and routine decisions
• Decentralization distributes decision-making authority throughout the organization, enabling faster responses and local adaptability
  • Appropriate for dynamic environments and non-routine decisions
• Matrix structure combines functional and project-based reporting lines, facilitating cross-functional collaboration but potentially leading to role ambiguity (NASA)
• Flat organizational structures have fewer hierarchical layers, promoting employee empowerment and rapid decision-making (start-ups)
• Mechanistic structures are characterized by high formalization, standardization, and centralization, suitable for stable environments (manufacturing)
• Organic structures are more flexible, decentralized, and adaptable, appropriate for dynamic environments (tech companies)
• Organizational culture shapes decision-making by influencing values, norms, and assumptions (Google's emphasis on innovation)

Power Dynamics in Decision Processes

• Legitimate power stems from formal authority and position within the organizational hierarchy
• Reward power involves the ability to provide or withhold rewards, such as bonuses or promotions
• Coercive power is based on the threat of punishment or negative consequences for non-compliance
• Expert power arises from specialized knowledge, skills, or expertise that others depend on
• Referent power is derived from personal charisma, likability, and the desire of others to identify with the power holder
• Information power comes from control over critical information or communication channels
• Coalitions form when individuals or groups combine their power to influence decision outcomes (labor unions)
  • Coalitions can be temporary or long-lasting, and may involve both internal and external stakeholders

Cognitive Biases and Heuristics

• Confirmation bias is the tendency to seek out and interpret information in a way that confirms pre-existing beliefs (political echo chambers)
• Anchoring bias occurs when initial information disproportionately influences subsequent judgments and decisions (real estate negotiations)
• Availability heuristic leads people to overestimate the likelihood of events that are easily recalled, such as vivid or recent experiences (fear of flying after a plane crash)
• Representativeness heuristic involves judging the probability of an event based on its similarity to a typical case, often ignoring base rates (stereotyping)
• Framing effect demonstrates that the way a problem or decision is presented can significantly influence the chosen option (organ donation opt-in vs. opt-out)
• Sunk cost fallacy is the tendency to continue investing in a failing course of action because of past investments, even when it is no longer rational to do so
• Overconfidence bias leads individuals to overestimate their abilities, knowledge, or chances of success (entrepreneurial ventures)

Ethical Considerations

• Utilitarianism focuses on maximizing overall happiness or well-being for the greatest number of people
  • Decisions are evaluated based on their consequences rather than the means used to achieve them
• Deontology emphasizes the inherent rightness or wrongness of actions, based on moral rules or duties (Kant's Categorical Imperative)
  • Decisions are judged by their adherence to ethical principles, regardless of outcomes
• Virtue ethics stresses the importance of moral character and the cultivation of virtues such as courage, temperance, and justice
• Ethical egoism holds that moral agents ought to do what is in their own self-interest, even if it conflicts with the interests of others
• Rights-based ethics argues that individuals have fundamental rights that should be respected in decision-making processes (privacy rights)
• Justice as fairness, proposed by John Rawls, suggests that decisions should be made as if behind a "veil of ignorance," ensuring impartiality and equality
• Stakeholder theory asserts that organizations have a moral obligation to consider the interests of all affected parties, not just shareholders (corporate social responsibility)

Case Studies and Real-World Examples

• Cuban Missile Crisis (1962) demonstrates the importance of diverse viewpoints and the avoidance of groupthink in high-stakes decision-making
• Challenger Space Shuttle disaster (1986) highlights the dangers of ignoring expert advice and succumbing to production pressures
• Enron scandal (2001) illustrates the consequences of unethical decision-making, lack of transparency, and misaligned incentives
• Apple's decision to remove the headphone jack (iPhone 7, 2016) showcases the role of innovation, consumer preferences, and market leadership in product design choices
• Volkswagen emissions scandal (2015) underscores the importance of corporate integrity, regulatory compliance, and the long-term costs of unethical behavior
• Facebook's Cambridge Analytica data privacy scandal (2018) raises concerns about the handling of user data, informed consent, and the political implications of social media platforms
• COVID-19 pandemic response (2020-present) exemplifies the challenges of decision-making under uncertainty, the need for adaptability, and the balancing of public health and economic considerations

Strategies for Effective Decision-Making

• Encourage diversity of thought and constructive dissent to prevent groupthink and stimulate innovative solutions
• Use decision support systems and data analytics to gather and analyze relevant information, reducing uncertainty and enhancing decision quality
• Implement structured decision-making processes, such as the Analytic Hierarchy Process (AHP), to systematically evaluate alternatives based on weighted criteria
• Foster a culture of psychological safety, where individuals feel comfortable expressing opinions and admitting mistakes without fear of retribution
• Engage in scenario planning to anticipate and prepare for a range of possible future outcomes, increasing organizational resilience
• Apply the ladder of inference to distinguish between observable facts, interpretations, and conclusions, minimizing the impact of cognitive biases
• Conduct pre-mortems and post-mortems to identify potential pitfalls and learn from past successes and failures
  • Pre-mortems involve imagining that a decision has failed and working backwards to identify possible reasons
  • Post-mortems are conducted after a decision has been implemented to evaluate its effectiveness and gather lessons learned