ETHICAL DECISION MAKING IN ORGANIZATIONS

Two types of decisions…

Programmed Decision:  Routine matter for which a manager has an established decision rule.

Non programmed Decision: A new, complex decision that requires a creative solution

Simple decision making process…

MODELS OF DECISION MAKING

Rational Model…

Describes how individuals should behave in order to optimize some outcome:

1.Problem clarity	2.Known options
3.Clear preferences	4.Constant preferences
5.No time or cost constraints	6.Maximum payoff

Bounded Rationality Model…

Suggests that there are limits upon how rational a decision maker can actually be:

1.Select the first alternative that is satisfactory

2.Develop shortcuts, called heuristics, to save mental activity

Garbage Can Model…

Says  that decisions in organizations are random and unsystematic.

Managing risk-taking behavior…

•Model effective decision making under uncertainty, allow employees to fail without fear of punishment

Ø  Fear of taking risks stifles creativity and innovation

Escalation of Commitment… The tendency to continue to commit resources to a failing course of action:

Why it occurs?	How to deal with it?
Personal pride	Split responsibility for decisions
Optimism	Provide individuals with a graceful exit
Humans dislike inconsistency	Have groups make the initial decision

Creativity in the organization!!

Creativity is highest when there is a match between individual &organizational influences on creativity.

Ø  Some individuals are more creative than others

Ø  Some organizations require more creativity than others

Mental Blocks that Diminish Creativity…

• Ø  Searching for the “right” answer.
• Ø  Trying to be logical.
• Ø  Following the rules.
• Ø  Avoiding ambiguity.
• Ø  Striving for practicality.
• Ø  Being afraid to look foolish.
• Ø  Avoiding problems outside our own expertise.
• Ø  Fearing failure.
• Ø  Believing we are not really creative.
• Ø  Not making play a part of work.

Participative Decision Making…

Decision making in which individuals who are affected by decisions influence the making of those decisions.

Groupthink (Irving Janis)

A deterioration of mental efficiency, reality testing, and moral judgment resulting from pressures within the group.

Consequences:

•Incomplete survey of alternatives

•Failure to evaluate the risks of the preferred course of action

•Biased information processing

•A failure to work out contingency plans

•The overall result of groupthink is defective decision making.

Techniques of group decision making…

Brainstorming	Nominal Group Technique (NGT)	Delphi Technique	Devil’s Advocacy	Dialectical Inquiry
A technique for generating as many ideas as possible on a given subject, while suspending evaluation until all the ideas have been suggested.	A structured approach to group decision making that focuses on generating alternatives and choosing one.	Gathering the judgments of experts for use in decision making.	A technique for preventing groupthink in which a group or an individual is given the role of critic during decision making	A debate between two opposing sets of recommendations.

Ethics…

Ø  Social responsibility: obligation of an organization to behave in ethical way in the social environment in which it operates

• Morals: the values and principles that distinguish right from wrong
• Ethics: behavioral norms and rules. Do the right thing.

Ethical theories…

Locus of Control…

Personality variable that affects individual behavior:

Internal-belief in personal control and personal responsibility
External-belief in control by outside forces (fate, chance, other people)

REFERENCES

• Mintzberg, H. & Westley, F. (2001, Spring). Decision making: It’s not what you think. MIT Sloan Management Review, 42(3), 89 –93.
•  Wong, K. F. E., & Kwong, J. Y. Y. (2007). The role of anticipated regret in escalation of commitment. Journal of Applied Psychology, 92, 545–55.
•  Google images

QUESTION

How can organizations effectively manage both risk taking and escalation of commitment in the decision-making behavior of employees?

Both risk taking and escalation of commitment should be good manage, otherwise the benefits that could come from that tend to be lost. To give it an effectively manage the organization should have a responsible group over the people that is suppose to taking these risk decision or escalating in commitment, these group of prepare people should advice the employees when the limit line is being cross, in this way the company avoid possible big losses and mistakes.