Decision making + Ethical behavior in international business.

RetrievedfromJanuary2011: http://coffeequill.blogspot.com/2009/12/writers-angel-and-devil-aka-giving.html

This is a very important topic inside a company because people is constantly facing decision-making situation and this situations can be divided in two branches such: programmed decisions and Non-programmed decisions.

·         Programmed decisions: A simple, routine matter for which a manager has an established decision rule.

·         Non-Programmed decisions: A new, complex decision that requires a creative solution.

There are 8 steps that lead to a successful decision making and are:

1.    Recognize the problem.

2.    Identify the objective of the decision.

3.    Gather and evaluate data and diagnose the situation.

4.    List and evaluate alternatives.

5.    Select the best course of action.

6.    Implement the decision.

7.    Gather feedback.

8.    Follow up.

And the models of the decision making are:

1.    Rational model: Describes how individuals should behave in order to optimize some outcome.

2.    Bounded rationality model: a theory that suggests that there are limits upon how rational a decision maker can actually be. It was proposed by Herbert Simon.

3.    Garbage can model: a theory that contends that decisions in

Organizations are random and unsystematic.

Decisions are taken base on the type of risk managers are willing to take, they are categorized in 2 ways:

1.    Risk aversion: the tendency to choose options that entail fewer risks and less uncertainty.

2.    Risk takers: accept greater potential for loss; tolerate greater uncertainty, more likely to make risky decisions.

When managers took a decision, there is certain probability to get into an escalation of commitment situation in which they tend to continue to

Commit resources to a failing course of action.

Participative decision making:

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

Groupthink: this theory by Irving Janis states that there are some deterioration of mental efficiency, reality testing, and moral judgment resulting from pressures within the group which its consequences are: Incomplete survey of alternatives, Failure to evaluate the risks of the preferred course of action, Biased information processing, failure to work out contingency plans and The overall result of groupthink is defective decision making.

Techniques for group thinking:

1.    Brainstorming.

2.    Nominal group technique.

3.    Delphi technique.

4.    Devil`s advocacy.

5.    Dialectical inquiry.

And for finish, I will define some important term of the ethics and theories.

·         Morals: the values and principles that distinguish right from wrong

·         Ethics: behavioral norms and rules. Do the right thing.

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

Ethical Theories

·         Consequential Theory–an ethical theory that emphasizes the consequences or results of behavior.

·         Rule-based Theory–an ethical theory that emphasizes the character of the act itself rather than its effects.

·         Character Theory–an ethical theory that emphasizes the character, personal virtues, and integrity of the individual.

As a summary we can say that manager should take an ethical Behavior (Acting in ways consistent with one’s personal values and the commonly held values of the organization and society.) in order to lead the company in a right direction being respectful with all laws and policies that regulates the good living in society.

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

Organizations should encourage the participative decision-making inside the company in order to motivate employees to make their job well done and make them feel there are important assets of the company, but organizations have to limit the responsibility and control employees have implementing those ideas in order to avoid the escalation of commitment due that the ultimate decisions should be made by the managers.

References:

• Mintzberg, H. & Westley, F. (2001, Spring). Decision making: It’s not what you think. MIT Sloan Management Review, 42(3), 89 –93.
• Nelson, D.L. & Quick, J.C. (2010) OrganizationalBehavior: Science, TheReal Worldand You. South-Western CollegePublication, 7th. Ed.
• Wong, K. F. E., & Kwong, J. Y. Y. (2007). The role of anticipated regret in escalation of commitment. Journal of Applied Psychology, 92, 545–554.