Organizational Theory, Design, and Change

Sixth Edition
Gareth R. Jones
Decision Making, Learning,
Knowledge Management, and
Information Technology
Program Magister Manajemen Universitas DR.
Soetomo Surabaya
Organizational Decision Making
• Organizational decision making: the
process of responding to a problem by searching
for and selecting a solution or course of action
that will create value for organizational
stakeholders
• Programmed decisions: decisions that are
repetitive and routine
• Non programmed decisions: decisions that
are novel and unstructured
Models of Organizational
Decision Making
• The rational model: decision making is
straightforward, three-stage process:
Stage 1: Identify problems that need to be solved
Stage 2: Design and develop a list of alternative
solutions and courses of action to solve the
problems
Stage 3: Compare likely consequences of each
alternative and decide which course of action
offers the best solution
Figure 1: The Rational Model of Decision Making
Models of Organizational
Decision Making (cont’)
• The rational model (cont’)
Underlying assumptions:
 Decision makers have all the information they
need
 Decision makers can make the best decision
 Decision makers agree about what needs to be
done
Models of Organizational
Decision Making (cont’)
• The rational model (cont’)
• Criticisms of the assumptions:
 Information and uncertainty: the assumption
that managers are aware of all alternative courses of
action and their consequences is unrealistic
Managerial abilities: managers have only a
limited ability to process the information required to
make decisions
Preferences and values: assumes managers
agree about what are the most important goals for
the organization
The Carnegie Model
• Introduces a new set of more realistic
assumptions about the decision-making process
▫ Satisfying: limited information searches to
identify problems and alternative solutions
▫ Bounded rationality: a limited capacity to
process information
▫ Organizational coalitions: solution chosen is a
result of compromise, bargaining and
accommodation between coalitions
Table 1: Differences Between the Rational
and Carnegie Models
Models of Organizational Decision Making (cont’)

• The incrementalist model: managers select

alternative courses of action that are only
slightly, or incrementally, different from those
used in the past
Perceived to lessen the chances of making a
mistake
Called the science of “muddling through”
They correct or avoid mistakes through
succession of incremental changes
Models of Organizational Decision Making (cont’)

• The unstructured model:

describes how decision making takes
place in environments of high
uncertainty
Unstructured model recognizes uncertainty in the
environment
Managers rethink their alternatives when they hit a
roadblock
Decision making is not a linear, sequential process
Tries to explain how organizations make non-
programmed decisions
Models of Organizational
Decision Making (cont’)
• The garbage can model: a view of decision making
that takes the unstructured process to the extreme
▫ Decision makers are as likely to start decision making from the
solution side as the problem side
▫ Create decision-making opportunities that they can solve with ready-
made solutions based on their competencies and skills
▫ Different coalitions may champion different alternatives
▫ Decision making becomes a “garbage can” in which problems,
solutions, and people all mix and contend for organizational
action
▫ Selection of an alternative depends on which person’s or
group’s definition of the current situation holds sway
The Nature of Organizational Learning
• Organizational learning: the process
through which managers seek to improve
organization members’ desire and ability to
understand and manage the organization and its
environment
 Creates an organizational capacity to respond
effectively to the changing business
environment
The Nature of Organizational
Learning (cont’)
• Types of organizational learning
• Exploration: organizational members search
for and experiment with new kinds or
forms of organizational activities and procedures
• Exploitation: organizational members learn
ways to refine and improve existing
organizational activities and procedures
The Nature of Organizational Learning (cont’)

• Learning organization: an organization that

purposefully designs and constructs its
structure, culture, and strategy so as to enhance
and maximize the potential for organizational
learning to take place
• Employees at all levels must be able to analyze the
way an organization performs and experiments
with change to increase effectiveness
Levels of Organizational Learning
• Individual-level learning: managers need to
facilitate the learning of new skills, norms, and
values so that individuals can increase their own
personal skills and abilities
• Employees develop a sense of personal mastery to
create and explore what they want
• Employees must develop a commitment and
attachment to their job so they will enjoy
experimenting and risk taking
• Organizations should encourage employees to
assume more responsibility for their decisions
Levels of Organizational Learning (cont’)
• Group-level learning: managers need to
encourage learning by promoting the use of
various kinds of groups so that individuals can
share or pool their skills and abilities
• Allows for the creation of synergy
• Group routines can enhance group effectiveness
• Group learning is even more important than
individual learning in promoting organizational
learning
Levels of Organizational Learning
(cont’)
• Organizational-level learning: managers can
promote organizational learning through the way
they create an organization’s structure and culture
 Cultural values and norms are an important
influence on learning
 Adaptive cultures: value innovation and encourage
and reward experimentation and risk taking by middle
and lower-level managers
 Inert cultures: are cautious and conservative, and
do not encourage risk taking by middle and lower-level
managers
Levels of Organizational Learning (cont’)
• Organizations can improve their effectiveness by
copying and imitating each others’ distinctive
competences
 Encourages explorative and exploitative learning
by cooperating with suppliers and distributors to
discover new ways to handle inputs and outputs
 Systems thinking: argues that in order to create
a learning organization, manager must recognize
the effects of one level of learning on another
Figure 2: Levels of Organizational Learning
Knowledge Management and Information
Technology
• Knowledge management: a type of IT-
enabled organizational relationship that has
important implications for both organizational
learning and decision making
• Involves sharing and integrating of expertise
within and between functions and divisions
through real-time, interconnected IT
Knowledge Management (cont’)
• Codification approach: knowledge is carefully
collected, analyzed, and stored in databases where it
can be retrieved easily by users who input
organization specific commands and keywords
• Suitable for standardized product or service
• Personalization approach: IT designed to
identify who in the organization might possess the
information required for a custom job
• More reliance on know-how, insight, and judgment to
make decisions
Factors Affecting Organizational Learning

• Several factors may reduce organizational

learning over time
• Managers may develop rules and standard
operating procedures to facilitate programmed
decision making
• Past success with SOPs inhibits learning
• Programmed decision making drives out
nonprogrammed decision making
Factors Affecting Organizational Learning
(cont’)
• Cognitive structure: system of interrelated
beliefs, preferences, expectations, and values
that predetermine responses to and
interpretations of situations
• These shape the way managers make decisions
and perceive environmental opportunities and
threats
Factors Affecting Organizational Learning
(cont’)
• Types of cognitive biases
• Cognitive biases: systematically bias cognitive
structures to cause misperception and
misinterpretation of information, thereby affecting
organizational learning and decision making
• Cognitive dissonance: state of discomfort or
anxiety experienced when there is an inconsistency
between one’s beliefs and action.
 Managers seek or interpret information that confirms and
reinforces their beliefs and ignore information that does
not
Factors Affecting
Organizational Learning (cont’)
• Types of cognitive biases (cont’)
• Illusion of control: causes managers to
overestimate the extent to which the outcomes of
an action are under their personal control
• Frequency: deceives people into assuming
that extreme instances of a phenomenon are
more prevalent than they really are
• Representativeness: leads managers to form
judgments based on small and unrepresentative
samples
Factors Affecting
Organizational Learning (cont’)
• Types of cognitive biases (cont’)
• Projection: allows managers to justify and
reinforce their own preferences and value by
attributing them to others
• Ego-defensiveness: leads managers to interpret
events in such a way that their actions appear in the
most favorable light
• Escalation of commitment: leads managers to
remain committed to a losing course of action and
refuse to admit that they have made a mistake
Improving Decision Making
and Learning
• Strategies for organizational learning
• Cause managers to continuously
unlearn old ideas and confront errors in
their beliefs and perceptions
 Listening to dissenters
 Converting events into learning
opportunities
 Experimenting
Improving Decision Making and Learning
(cont’)
• Learning occurs best when there is heterogeneity
of the top management team

• Groupthink: the conformity that emerges

when like-minded people reinforce one another’s
tendencies to interpret events and information in
similar ways
Danke..
Continued to next chapter