A Brief History of Decision-making – Part 1

Your Corporate Doctor is back in full gear in the year 2018. I am very sure you have been looking forward to seeing me, and probably asking where is Corporate Doctor? Well, for your information, I went to “mount up with more wings” to be able to fly to the nooks and crannies in search of quality information in order to provide better corporate solutions for your ailing businesses and employees.  We are all surrounded with issues and opportunities to choose from, and this calls for decision-making.

Decision-making is part of our daily life. An average of human being makes hundreds of decisions daily. Decision-making is an integral part of our lives and it is indispensable; even mad people or mentally retarded people make decisions. Breast-feeding or suckling babes makes decision as to which breast to feed from or suck, and at what time and intervals. Decision-making is crucial, tough, time-consuming, frustrating, costly, indispensable, and yet profitable if it is done properly.

I have taken a decision to start the year with this crucial subject because of its importance to life and organisations. This subject will travel for fourteen (14) weeks, and I hope by the end of this long journey you will appreciate the power and benefits of quality decision-making and consequences of poor or bad decision-making. Keep reading and never miss this series. Happy New Year with Good Decision-making.

Sometime in the middle of the last century, Chester Barnard – a retired telephone executive and author of The Functions of the Executive – imported the term ‘decision-making’ from the lexicon of public administration into the business world. There, it began to replace narrower descriptors such as ‘resource allocation’ and ‘policymaking’.

The introduction of that phrase changed how managers thought about what they did and spurred a new crispness of action and desire for conclusiveness, argues William Starbuck, professor in residence at the University of Oregon’s Charles H. Lundquist College of Business. “Policymaking can go on and on endlessly, and there are always resources to be allocated,” he explains. “Decision implies the end of deliberation and the beginning of action.”

So, Barnard – and such later theorists such as James March, Herbert Simon and Henry Mintzberg – laid the foundation for studying managerial decision-making. But decision-making within organisations is only one ripple in a stream of thought flowing back to a time when man, facing uncertainty, sought guidance from the stars. The questions of who makes decisions, and how, have shaped the world’s systems of government, justice, and social order. “Life is the sum of all your choices,” Albert Camus reminds us. History, by extrapolation, equals the accumulated choices of all mankind.

 

The study of decision-making, consequently, is a smorgasbord of intellectual disciplines: mathematics, sociology, psychology, economics, and political science, to name a few. Philosophers ponder what our decisions say about ourselves and about our values; historians dissect the choices leaders make at critical junctures.

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Research into risk and organisational behaviour springs from a more practical desire: to help managers achieve better outcomes. And while a good decision does not guarantee a good outcome, such pragmatism has paid off. A growing sophistication with managing risk, a nuanced understanding of human behaviour, and advances in technology that support and mimic cognitive processes have improved decision-making in many situations.

Even so, the history of decision-making strategies is not one of unalloyed progress toward perfect rationalism. In fact, over the years we have steadily been coming to terms with constraints—both contextual and psychological—on our ability to make optimal choices. Complex circumstances, limited time, and inadequate mental computational power reduce decision-makers to a state of ‘bounded rationality’, argues Simon.

While Simon suggests that people would make economically rational decisions if only they could gather enough information, Daniel Kahneman and Amos Tversky identify factors that cause people to decide against their economic interest even when they know better. Antonio Damasio draws on work with brain-damaged patients to demonstrate that in the absence of emotion it is impossible to make any decisions at all. Erroneous framing, bounded awareness, excessive optimism: the debunking of Descartes’s rational man threatens to swamp our confidence in our choices, with only improved technology acting as a kind of empirical breakwater.

Faced with the imperfectability of decision-making, theorists have sought ways to achieve if not optimal outcomes, at least acceptable ones. Gerd Gigerenzer urges us to make a virtue of our limited time and knowledge by mastering simple heuristics, an approach he calls “fast and frugal” reasoning.

Amitai Etzioni proposes “humble decision-making”, an assortment of nonheroic tactics that include tentativeness, delay, and hedging. Some practitioners, meanwhile, have simply reverted to the old ways. Last April, a Japanese television equipment manufacturer turned over its US$20million art collection to Christie’s when the auction house trounced archrival Sotheby’s in a high-powered round of rock-paper-scissors, a game that may date back as far as Ming Dynasty China.

Chances Are

Risk is an inescapable part of every decision. For most of the everyday choices people make, the risks are small. But on a corporate scale, the implications (both upside and downside) can be enormous. Even the tritely expressed (and rarely encountered) win-win situation entails opportunity costs in the form of paths not taken.

The Meeting of Minds

In the fifth century BC, Athens became the first (albeit limited) democracy. In the seventeenth century, the Quakers developed a decision-making process that remains a paragon of efficiency, openness, and respect. Starting in 1945, the United Nations sought enduring peace through the actions of free peoples working together.

There is nobility in the notion of people pooling their wisdom and muzzling their egos to make decisions that are acceptable—and fair—to all. During the last century, psychologists, sociologists, anthropologists, and even biologists (studying everything from mandrills to honeybees) eagerly unlocked the secrets of effective cooperation within groups. Later, the popularity of high-performance teams, coupled with new collaborative technologies that made it ‘virtually’ impossible for any man to be an island, fostered the collective ideal.

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The scientific study of groups began, roughly, in 1890 as part of the burgeoning field of social psychology. In 1918, Mary Parker Follett made a passionate case for the value of conflict in achieving integrated solutions in The New State: Group Organisation—The Solution of Popular Government.

A breakthrough in understanding group dynamics occurred just after World War II, sparked—oddly enough—by the U.S. government’s wartime campaign to promote the consumption of organ meat. Enlisted to help, psychologist Kurt Lewin discovered that people were more likely to change their eating habits if they thrashed the subject out with others than if they simply listened to lectures about diet. His influential ‘field theory’ posited that actions are determined, in part, by social context – and that even group members with very different perspectives will act together to achieve a common goal.

Over the next decades, knowledge about group dynamics and the care and feeding of teams evolved rapidly. Victor Vroom and Philip Yetton established the circumstances under which group decision-making is appropriate. R. Meredith Belbin defined the components required for successful teams. Howard Raiffa explained how groups exploit ‘external help’ in the form of mediators and facilitators. And Peter Drucker suggested that the most important decision may not be made by the team itself, but rather by management about what kind of team to use.

Meanwhile, research and events collaborated to expose collective decisionmaking’s dark underbelly. Poor group decisions—of the sort made by boards, product development groups, management teams—are often attributed to the failure to mix things up and question assumptions. Consensus is good, unless it is achieved too easily – in which case it becomes suspect.

Irving Janis coined the term ‘groupthink’ in 1972 to describe “a mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members’ strivings for unanimity override their motivation to realistically appraise alternative courses of action”. In his memoir, A Thousand Days, former Kennedy aide Arthur Schlesinger reproached himself for not objecting during planning for the Bay of Pigs invasion: “I can only explain my failure to do more than raise a few timid questions by reporting that one’s impulse to blow the whistle on this nonsense was simply undone by the circumstances of the discussion”.

Consensus is good, unless it is achieved too easily, in which case it becomes suspect.

It seems that decisions reached through group dynamics require, above all, a dynamic group. As Clarence Darrow neatly put it: “To think is to differ”.

FIN

Writer’s Information

The writer is an Organisational Design & Development and Human Resource Consultant working with Premium Consultancy Services Ltd. You can contact him for all your corporate solutions on:

Telephone: 0245 082 660

Email:  premiumconsult.gh@gmail.com

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