This
chapter has covered several approaches to organizational decision making,
including management science, the Carnegie model, the incremental decision
process model, and the garbage can model. It has also discussed rational and
intuitive decision processes used by individual managers. Each decision
approach is a relatively accurate description of the actual decision process,
yet all differ from each other. Management science, for example, reflects a
different set of decision assumptions and procedures than does the garbage can
model.
One
reason for having different approaches is that they appear in different
organizational situations. The use of an approach is contingent on the
organization setting. Two characteristic of organizations that determine the
use of decision approaches are (1) goal consensus and (2) technical knowledge
about the means to achieve those goals. Analyzing organizations along these two
dimentions suggests which approach will be used to make decisions.
GOAL CONSENSUS
Goal
consensus refers to the agreement among managers about which organizational
goals and outcomes to pursue. This variable ranges from complete agreement to
complete disagreement. When managers agree, the goals of the organization are
clear and so are standards of performance. When managers disagree, organization
direction and performance expectations are in dispute. One example of goal
uncertainty occurred among cabinet members and presidential advisors during the
Cuban missile crisis. Participants fought intensely over what goals should be
pursued. Another example of goal uncertainty occurred within the Penn Central
Railroad after it went bankrupt. Some managers wanted to adopt the goal of
becoming more efficient and profitable as a railroad. Other managers wanted to
diversify into other businesses. Eventually a strong coalition formed in favor
of diversification, and that goal was adopted.
Goal
consensus tends to be low when organizations are differentiated, as described
in chapter 3. Recall that uncertain environments cause organizational
departments to differentiate from one another in goals and attitudes in order
to specialize in specific environmental sectors. This differentiation leads to
disagreement and conflict about organizational goals. When differentiation
among departments or divisions is high, managers must make a special effort to
build coalitions during decision making.
Goal
consensus is especially important for the problem identification stage of
decision making. When goals are clear and agreed upon, they provide clear
standards and expectations for performance. When goals are not agreed upon,
problem identification is uncertain and management attention must be focused on
gaining agreement about goals and problem priorities.
TECHNICAL KNOWLEDGE
Technical
knowledge refers to understanding and agreement about how to reach
organizational goals. This variable can range from complete agreement and
certainty to complete disagreement and uncertainty about cause effect
relationships leading to goal attainment. An example of low technical knowledge
was reflected in market strategies at 7-up. The goal was clear and agreed upon
increase market share from 6 percent to 7 percent, but the means for achieving
this increse in market share were not known or agreed upon. A few managers
wanted to use discount pricing in supermarkets. Other managers believed they
should increase the number of soda fountain outlets in restaurants and fast
food chains. A few other managers insisted that the best approach was to
increase advertising through radio and television. Managers did not know what
would cause an increase in market share. Eventually, the advertising judgment
prevailed at 7-up, but it did not work very well. The failure of its decision
reflected 7-up’s low technical knowledge about how to achieve its goal.
Technical
knowledge is especially important to the problem solution stage of decision
making. When means are well understood, the appropriate alternatives can be
identified and calculated with some degree of certainty. When means are poorly
understood, potential solutions are ill defined and uncertain. Intuition,
judgment, and trial and error become the basis for decisions.
CONTINGENCY FRAMEWORK
The
contingency decision making framework brings together the two organizational
dimentions of goal consensus and technical knowledge. Exhibit 11.7 shows how
these two variables influence the decision situation. Goals and technical
knowledge determine the extent to which problem identification and solution
stages are uncertain. Depending on the situation, an organization may have to
focus on gaining goal consensus, increasing technical knowledge, or both. Low
uncertainty leads to greater use of judgment, bargaining, and other less
systematic procedures.
Exhibit
11.8 describes the contingency decision framework. Each cell represents an
organizational situation that is appropriate for the decision making approaches
described in this chapter.
Cell 1. In
cell 1 of exhibit 11.8, rational decision procedures are used because goals are
agreed upon and cause effect relationships are well understood. Decisions can
be made in a computational manner. Alternatives can be identified and the best
solution adopted through analysis and calculation. The rational models
described earlier in this chapter, both fro individuals and for the
organization, are appropriate when goals and technical means are well defined.
When problems occur, a logical process can be used to decide upon the
solutions.
Cell 2. In
cell 2, bargaining and compromise are used to reach consensus about goals and
priorities. Diverse opinions are present in this situation. Achieving one goal
would mean the exclusion of another goal. The priorities given to respective
goals are decided through discussion, debate, and coalition building.
Managers
in this situation should use broad participation to achieve goal consensus in
the decision process. Opinions should be surfaced and discussed until
compromise is reached. The organization will not otherwise move forward as an
integrated unit. In the case of Penn Central Railroad, the diversification
strategy was eventually adopted, but only after much bargaining. During the
Cuban missile crisis, debate finally led to the goal of establishing a blockade
to prevent Russian ships from reaching Cuba. At Gillette, much debate
surrounded the struggle between executives favoring disposable versus permanent
Sensor razors, eventually consolidating toward the permanent.
The
Carnegie model applies when there is dissension about organizational goals. When
groups within the organization disagree, or when the organization is in
conflict with constituencies (government regulators, suppliers, union),
bargaining and negotiation are required. The bargaining strategy is especially
relevant to the problem identification stage of the decision process. Once
bargaining and negotiation are completed, the organization will have support
for one direction.
Cell 3. In
cell 3 situation, goals and standards of performance are certain, but
alternative technical solutions are vague and uncertain. Techniques to solve a
problem are ill defined and poorly understood. When an individual manager faces
this situation, intuition will be the decision guideline. The manager will rely
on past experience and judgment to make a decision. Rational, analytical
approaches are not effective because the alternatives cannot be identified and
calculated. Hard facts and accurate information are not available.
The
incremental decision process model reflects trial and error on the part of the
organization. Once a problem is identified, a sequence of small steps enables
the organization to learn a solution. As new problems arise, the organization
may recycle back to an earlier point and start over. Eventually, over a period
of months or years, the organization will acquire sufficient experience to
solve the problem in a satisfactory way. Solving the engineering and
manufacturing problems for the Sensor razor, described earlier, is an example
of a cell 3 situation. Gillette engineers had to use trial and error to develop
an efficient manufacturing process.
The
situation in cell 3, of senior managers agreeing about goals but not knowing
how to achieve them, occurs frequently in business organizations. If managers
use incremental decisions in such situations, they will eventually acquire the
technical knowledge to accomplish goals and solve problems.
Cell 4. The
situation in cell 4, characterized by low consensus and low technical
knowledge, occurs infrequently but is difficult for decision making. An
individual manager making a decision under this high level of uncertainty can
employ techniques from both cell 2 and cell 3. The manager can attempt to build
a coalition to establish goals and priorities, and use judgment or trial and
error to solve problems. Additional techniques, such as inspiration and
imitation, also may be required. Inspiration refers to an innovative, creative
solution that is not reached by logical means. Imitation means adopting a
decision tried elsewhere in the hope that it will work in this situation.
For
example, in one university accounting department faculty were unhappy with
their current circumstances, but could not decide upon the direction the
department should go. Some faculty members wanted a greater research orientation,
others wanted greater orientation toward business firms and accounting
applications. The disagreement about goals was compounded because neither group
was sure about the best technique for achieving their goals. The ultimate
solution was inspirational on the part of the dean. An accounting research
center was established with funding from Big Eight accounting firms. The
funding was used to finance research activities for faculty interested in basic
research and to provide a common goal and unified people within the department
to work toward that goal.
When
an entire organization is characterized by low goal consensus and low technical
knowledge, and many decisions are characterized by a high level of uncertainty,
elements of the garbage can model will appear. Managers may first try
techniques from both cell 2 and 3, but logical decision sequences starting with
problem identification and ending with problem solution will not occur.
Potential solutions will precede problems as often as problems precede solutions.
In this situation, managers should encourage widespread discussion of problems
and idea proposals to facilitate the opportunity to make choices. Eventually,
through trial and error, the organization will solve some problems.
