Primer on Decision Making

1. Decision making is driven by logics of consequence and appropriateness

Decision makers are imagined to ask (explicitly or implicitly) three questions: The question of recognition: What kind of situation is this? The question of identity: What kind of person am I? Or what kind of organization is this? The question of rules: What does a person such as I, or an organization such as this, do in a situation such as this?

Two fundamental logics. Decision making follows two primary logics: the logic of consequence and the logic of appropriateness. The logic of consequence involves choosing among alternatives by evaluating their expected outcomes against preferences. Decision makers consider available options, anticipate future consequences, and select the alternative that best satisfies their goals.

Identity and rules. The logic of appropriateness, on the other hand, focuses on fulfilling identities and following rules. Decision makers determine what kind of situation they face, consider their identity or role, and then follow the rules appropriate for that identity in that situation. This approach emphasizes matching behavior to socially defined expectations rather than calculating outcomes.

Interplay of logics. In practice, most decisions involve elements of both logics. Decision makers may start with rule-based behavior but switch to consequence-based calculation when rules conflict or are ambiguous. The relative importance of each logic varies across different decision contexts and cultures. Understanding both perspectives provides a more comprehensive view of how decisions actually happen in organizations and society.

2. Rationality in decision making is limited by cognitive constraints

Problems of attention. Time and capabilities for attention are limited. Not everything can be attended to at once. Too many signals are received. Too many things are relevant to a decision.

Bounded rationality. Human decision makers face significant cognitive limitations that prevent purely rational decision making. We have limited attention, memory, and processing capacity. As a result, we cannot consider all alternatives, consequences, and preferences simultaneously when making choices.

Satisficing strategies. To cope with these constraints, decision makers often use "satisficing" strategies:

• Considering only a few alternatives rather than all possible options
• Evaluating options sequentially rather than simultaneously
• Choosing the first satisfactory option rather than the optimal one
• Using simple heuristics and rules of thumb to simplify decisions

Attention scarcity. Perhaps the most critical limitation is attention scarcity. Decision makers must selectively focus on certain aspects of a decision while ignoring others. This makes the allocation of attention a key factor in shaping decision outcomes. Understanding these cognitive constraints is essential for developing more realistic models of organizational decision making.

3. Rule following shapes decisions through identities and situations

Identities are both constructed by individuals and imposed upon them. Creating or accepting an identity is a motivational and cognitive process by which order is brought to the concept of self and to individual behavior.

Identity-based decisions. Rule following is grounded in identities - conceptions of self organized into rules for matching actions to situations. Individuals and organizations develop identities that provide guidelines for appropriate behavior in different contexts. These identities shape decisions by specifying what a person or organization "like me" should do in a given situation.

Situational recognition. A key aspect of rule-based decision making is recognizing what kind of situation one faces. The same objective circumstances may be interpreted differently based on which identity is salient. For example, a manager may see a decision as a financial issue, an ethical dilemma, or a personnel matter depending on which aspect of their identity is activated.

Evolution of rules. Rules and identities evolve over time through experience, socialization, and deliberate design. Organizations develop standard operating procedures that encode lessons from past decisions. Professions cultivate shared identities with associated behavioral expectations. Understanding how rules and identities form and change is crucial for comprehending organizational behavior and decision making.

4. Multiple actors complicate decisions through inconsistent preferences

Different people want different things, and not everyone can have everything he or she desires. Different people have different identities, and their different definitions of appropriate behavior are mutually inconsistent.

Preference inconsistency. When multiple actors are involved in decisions, their preferences and identities are often inconsistent or even conflicting. This creates challenges for reaching collective decisions and coordinating action. Different individuals or groups may prioritize different goals or have divergent views on appropriate courses of action.

Key sources of inconsistency include:

• Differing personal interests and values
• Varied organizational roles and responsibilities
• Conflicting professional or cultural identities
• Misaligned incentives and rewards

Strategic behavior. In multi-actor settings, decision making becomes strategic. Actors must anticipate others' preferences and likely actions. This can lead to various political behaviors like coalition formation, bargaining, and the strategic use of information. Understanding these dynamics is crucial for navigating organizational decision processes.

5. Power and coalitions influence organizational decision making

Actors with "power" and "resources" may fail because they are distracted, and actors with few resources and little power may succeed because they are alert or persistent.

Power dynamics. Power plays a significant role in shaping organizational decisions. Those with more formal authority or control over resources can often exert greater influence. However, power is not just about formal position - it also derives from expertise, information control, and network connections.

Key aspects of power in decision making:

• Ability to set agendas and frame issues
• Control over information flows
• Capacity to form and lead coalitions
• Influence over implementation processes

Coalition formation. Many organizational decisions involve the formation of coalitions to garner sufficient support. Building winning coalitions often requires negotiation, compromise, and logrolling (exchanging support on different issues). The structure of decision-making processes and rules can significantly impact which coalitions form and succeed.

Attention as power. Interestingly, the allocation of attention can be a crucial form of power. Even actors with few formal resources may succeed by persistently focusing attention on certain issues or alternatives. Conversely, powerful actors may fail if they are distracted or inattentive to important decisions.

6. Ambiguity pervades decision processes and interpretations

Ambiguity refers to a lack of clarity or consistency in reality, causality, or intentionality. Ambiguous situations are situations that cannot be coded precisely into mutually exhaustive and exclusive categories.

Pervasive uncertainty. Ambiguity is a fundamental feature of organizational decision making. Many situations cannot be clearly categorized, causal relationships are often unclear, and the intentions behind actions may be opaque. This ambiguity extends to preferences, identities, and the interpretation of past experiences.

Sources of ambiguity include:

• Incomplete or conflicting information
• Multiple plausible interpretations of events
• Shifting or unclear goals and priorities
• Complex interdependencies among decisions

Coping with ambiguity. Organizations develop various ways to cope with ambiguity:

• Using loose coupling to buffer inconsistencies
• Employing garbage can decision processes that mix problems, solutions, and participants
• Constructing shared interpretations and meanings
• Relying on rules and standard procedures to provide structure

Understanding how organizations navigate ambiguity is crucial for developing more realistic models of decision making that go beyond simplistic assumptions of clarity and consistency.

7. Decisions serve to construct meaning as much as to produce outcomes

Decision making involves symbols, myths, rituals, and stories in the development of meaning.

Symbolic dimension. Decisions are not just about producing concrete outcomes; they also serve important symbolic functions. They communicate values, reinforce identities, and help construct shared meanings within organizations. The process of making decisions can be as important as the resulting choice.

Key symbolic aspects of decisions:

• Affirming organizational culture and values
• Legitimizing authority and roles
• Creating and maintaining social order
• Providing opportunities for sense-making

Rituals and stories. Decision processes often involve rituals that serve symbolic purposes beyond their ostensible function. For example, formal analysis may be conducted more to signal competence and thoroughness than to actually inform choices. Stories about past decisions become part of organizational lore, shaping future interpretations and actions.

Meaning construction. By participating in decision processes, organizational members engage in collective meaning-making. They develop shared understandings of their environment, their organization's identity, and appropriate ways of behaving. Recognizing this symbolic dimension is crucial for fully comprehending the role and impact of decisions in organizations.

8. Improving decision intelligence requires balancing exploration and exploitation

Exploration includes things captured by such terms as search, variation, risk taking, experimentation, play, flexibility, discovery, and innovation. Exploitation includes such things as refinement, choice, production, efficiency, selection, implementation, and execution.

The exploration-exploitation tradeoff. A key challenge in improving decision making is balancing exploration of new possibilities with exploitation of existing knowledge and capabilities. Exploration involves search, experimentation, and risk-taking to discover new opportunities. Exploitation focuses on refining and efficiently executing known strategies.

Key considerations:

• Exploration is necessary for long-term adaptation and innovation
• Exploitation is crucial for short-term performance and efficiency
• Over-emphasis on either can be detrimental

Adaptive strategies. Organizations need to develop strategies that allow for both exploration and exploitation. This might involve:

• Structural ambidexterity: Separating units focused on exploration vs. exploitation
• Temporal cycling: Alternating periods of exploration and exploitation
• Contextual ambidexterity: Enabling individuals to make situational choices between exploring and exploiting

Learning dynamics. The balance between exploration and exploitation is closely tied to organizational learning processes. Effective learning requires both generating new knowledge through exploration and efficiently applying existing knowledge through exploitation. Understanding these dynamics is crucial for sustained organizational adaptation and performance.

9. Knowledge acquisition and use are critical but problematic for decisions

Decision makers gather information and do not use it; ask for more and ignore it; make decisions first and look for relevant information afterward; gather and process a great deal of information that has little or no direct relevance to decisions.

Knowledge paradoxes. While knowledge is crucial for effective decision making, its acquisition and use are fraught with challenges. Organizations often struggle to effectively leverage the information they possess. Paradoxically, they may gather excessive information without using it, or make decisions before seeking relevant data.

Key issues in organizational knowledge use:

• Information overload and attention scarcity
• Political manipulation of information
• Difficulties in knowledge transfer across units
• Competency traps that inhibit new learning

Strategic dimensions. Knowledge in organizations is not neutral - it has strategic and political dimensions. Control over information flows can be a source of power. The framing of knowledge can shape which alternatives are considered and how they are evaluated. Recognizing these dynamics is essential for understanding how knowledge influences decisions.

Balancing knowledge types. Organizations need to balance different types of knowledge:

• Explicit vs. tacit knowledge
• Local vs. global knowledge
• Present-focused vs. future-oriented knowledge
  Effective decision making requires integrating these diverse knowledge types while navigating the inherent challenges and paradoxes of organizational knowledge processes.

Last updated: October 21, 2024