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1200 words total. 3 APA cited references and reference list. NO PLAGIARISM PLEASE!!!1. In a narrative format, discuss the key facts and critical issues presented in the case.2. Explain the dilemma for organizations that have particularly serious regulatory issues. How should Jay resolve the differences in requirements from the Federal agency, OSHA, versus the state?3. Employing Porter’s Five Forces model, analyze the industry niche of care for the intellectually disabled. What specific conclusions can be drawn from your analysis?4. Jay believes the required vaccinations would cost almost $30,000 a year, primarily due to his staff turnover rate, which is approximately 40%. Are there any suggestions you might have for Jay as to how he could reduce that turnover rate? Does the general environment model’s socio-cultural segment offer any clues?For question # 5, a total of 250 words. 2 APA cited references and reference list. NO PLAGIARISM PLEASE!!!5. Why do some view organizational politics as scheming, conniving, and self-serving? What is your view?
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Decision Making, Power
and Politics
Chapter Outline:
8-1
Decision Making in
Organizations
8-2
Power in Organizations
8-3
Politics in Organizations
8-4
Conflict in Organizations
Summary
Review Questions
Glossary
Endnotes
Key Terms
bounded rationality
Carnegie model
coalition
incremental decision model
intuitive decision making
nonprogrammed decisions
organizational conflict
V
I
C
K
E
R
S
,
T
E
A
R
D
R
A
1
1
9
1
T
S
organizational decision making
organizational politics
power
programmed decisions
rational model of decision making
satisficing
unstructured model of decision making
8
This book has emphasized the importance of strategically managing organizations,
whether they are operating in the for-profit sector or the not-for-profit sector. The
challenge of competitive forces, discussed in chapter 2 on strategy, is reaching
a zenith. This fact particularly impacts the first topic of this chapter, which is
decision making. Because competition for resources and customers has reached
the hypercompetitive level, decisions by organizations must be made quickly and
accurately.
8-1 Decision Making in Organizations
V
Why do organizations make decisions? Primarily, decisions
I are required because
organizations represent the merger of people, systems, C
and technology. Such a
complicated conflagration inevitably leads to problems that beg solving or creates
K
opportunities that need courses of action. Hence, organizational decision making
E
is the process of identifying problems or opportunities and finding solutions or
courses of action that further the goals of the organization.R
S
When firms are small, such as those usually found in the
, existence stage of the
organizational life cycle, all important decisions and most minor decisions are
made by one person or a small group of people. However, as organizations add
T for decision making
capacity to produce, employees, and markets, the need
E this decision making
increases exponentially. Modern organizations are pushing
A and efficiency. This
responsibility to the lowest possible levels to increase speed
concept, known as empowerment, puts the responsibility R
for solving a problem or
1
acting on an opportunity in the hands of those closest to the
D situation.
R
As technology continues to permeate our organizations, markets
and competition
A available for mulling
become global, and productivity increases accelerate, the time
over important matters in the decision making process shrinks. Fortunately, most
decisions faced by organizations are somewhat routine.1 Decisions made on a
routine, repetitive basis addressed by company policy and
1 procedures are known
as programmed decisions.
9
Nonprogrammed decisions involve nonroutine, out of1the ordinary situations
and are generally not covered by existing policy or procedure.
An example of a
T
nonprogrammed decision would be a competitive situation
S where an organization
is faced with a serious threat from a substitute product. Think about the difficulty
faced by steel producers when automobile manufacturers began to utilize plastic
on a widespread basis in their new cars. This is an example of a strategic threat
from the external environment that resulted in a loss of revenue. That is a serious
enough issue. However, this substitution led to the utilization of plastic into other
products, replacing glass, steel, and even paper.
organizational
decision making
the process of identifying
problems or opportunities
and finding solutions or
courses of action that
further the goals of the
organization
programmed decisions
decisions made on a
routine, repetitive basis
that are addressed by
company policy and
procedures
nonprogrammed
decisions
decisions that involve
nonroutine, out-of-the
ordinary situations and
are generally not covered
by existing policy or
procedure
Organizational Theory
8-2
8-1a The Rational Decision Making Model
Regardless of whether decisions are programmed or nonprogrammed, everyone
has a process that they follow when confronted with the need for a decision. As
organization theory has evolved over the years, a clear need has been recognized
by researchers and practitioners alike for a model for decision makers to adopt.
Too many organizational managers were making decisions based only on past
experience, or expediency, or whatever might make them look good to their
superiors.
Allowing organizational decision-makers to “fly by the seat of their pants” works
V
against the goals and objectives set by most firms. To overcome
this problem, a
I
rational or classical model of decision making has been developed.
The rational
model is a decision making process that relies on a C
step-by-step systematic
approach to solving a problem. This model has been portrayed
K as anywhere from
a three-step2 to a six-step3 to an eight-step4 process. FigureE8.1 depicts a version of
the rational model based on a strategic management
R
S
,
rational model of
decision-making
a decision making process
that relies on a step-bystep systematic approach
to solving a problem
T
E
Figure 8.1 The Rational Decision Making Model
A
Each step in Figure 8.1 will be explained using a practicalRexample from the Coca
Cola Company headquartered in Atlanta, Georgia. During
Dthe early 1980’s Coke
began losing market share in supermarkets to Pepsi. Although newly-introduced
R
Diet Coke had recently become the No. 1 diet soft drink, Coke executives were
A
concerned with their competitive position in relation to Pepsi’s. To make matters
worse, Pepsi had been running taste test advertisements on television for several
1 based on taste.
years where blindfolded consumers picked Pepsi over Coke
1
Robert Goizeuta, chairman of Coca Cola, initiated a secret project to tinker with
9
Coke’s formula, developed in 1886 by Georgia pharmacist John Pemberton,
1
believing that the sweeter taste of Pepsi was leading to Coke’s loss of market
T in consumer trials in
share. By 1984 the company was ready to try the new formula
S firm, Coke conducted
over 30 cities in America. With the aid of a market research
its own taste tests, with close to 40,000 people choosing New Coke over the old
classic by 55 to 45 %. The also chose it over Pepsi.
The introduction of New Coke, and the withdrawal of Old Coke, came in April of
1985. To Coke’s surprise, the outcry over the new formula and the pulling of the
old Coke was met with outrage. Less than 90 days later, the old formula was reOrganizational Theory
8-3
introduced to the market as Coca-Cola Classic. Coke’s stock price went up over $5 in one week after bringing
back the old formula.5 This example is not an illustration of a successful initial decision, as Coke’s decision to
introduce New Coke could only be described as a failure. However, it very clearly demonstrates how difficult
important strategic decisions can be, and it reveals one firm’s ability to recognize when it had made a mistake.
Step 1: Recognize and confront the situation – do not sit on a situation that is a potential
problem or opportunity for your organization hoping that it will take care of itself. Coca-Cola
executives became concerned with a drop in market share in the early 1980’s as Pepsi began
outselling Coke in supermarkets. The company decided the problem was the taste of their
product, in that Pepsi was sweeter than Coke.
Step 2: Develop the solution options V
– strategic managers base decision-making options
I
on their compatibility with the organization’s
strategy to accomplish its goals and objectives.
Anything else is counterproductive.CCoca-Cola owned the most recognizable brand in the
world. To protect its market share andKits name, Coke looked at introducing new products (like
Diet Coke), changing advertising strategies (conducting its own taste tests), or actually altering
E
the formula of its main product (introducing New Coke).
R
S of each option – Sometimes a possible solution to
Step 3: Evaluate the possible outcomes
a situation sounds very good until it, is evaluated based on the possible outcomes. As they
evaluated each option, Coke executives knew they already had six brands on the shelves of
stores, they believed their marketing campaign was already one of the best in the world, and
T
they were concerned that tinkering with their tried and true formula was risky.
E
A
Step 4: Choose the best option and implement
– Once the best option is identified based on
an evaluation of possible outcomes,R
implement the option. After analyzing this situation for
some time, CEO Robert Goizueta, with
D support from Robert Woodruff, the 95 year-old former
chairman of Coca-Cola, put the wheels in motion for the introduction of New Coke.
R
The example of decision making at Coca-Cola by itsA
top management team demonstrates that even a rational,
objective, research-based decision can be wrong. In the end, after spending over $4 million to taste test its
new formula, Coca-Cola failed in its introduction of 1
New Coke. Some say an intangible, e.g., the consumer’s
6
emotional tie to the brand, was to blame for New Coke’s
1 failure. Yet, Coca-Cola survived and prospered under
Goizueta’s leadership as its stock price increased 3800% during his tenure. Since his death in October of 1997,
9
however, Coca-Cola has struggled to find the right leader at the right time.7
1
Critics are quick to point out that the rational modelThas several flaws. For example, managers do not have
complete, perfect information most of the time. They
Sdo not know all possible alternatives, and they do not
understand nor can they predict all possible outcomes of those alternatives. Decision makers also have limited
mental capability, something that is not recognized by this model. The rational model is a prescriptive model
in that it lays out a process for how decisions should be made. A second model will be discussed below that is
more descriptive, demonstrating how decisions actually are made in organizations.
Organizational Theory
8-4
8-1b The Carnegie Model
A second model of decision making is the administrative model, or the Carnegie
Model. Developed by organizational researchers James March and Herbert Simon
from Carnegie-Mellon University, this model tries to explain how organizational
decision makers actually make decisions. The result is a realistic snapshot
of the limitations decision makers bring to the process, particularly in light of
the tremendous number of variables involved in decision making in today’s
organizations.
The Carnegie model reflects a descriptive decision-making process in organizations
V information, social
where coalitions determine a final choice based on incomplete
I makers, and the need
and psychological processes, limited abilities of decision
8
to find quick, satisficing solutions. The Carnegie Model
C is a good example of
what happens to a behavioral theory in management whenKit is actually studied in
practice. Rarely does one single top manager make all ofEthe important decisions
in an organization without input and buy-in from many other key managers.
R
Although an organization may have clearly defined goals, conflict as to how to
obtain those goals or whether they are actually the properS
goals often develops. In
, between employees,
these situations, coalitions can form within the organization
managers, and/or shareholders to push forward a solution.9 In contrast, the rational
model of decision making tends to assume no conflict exists
T in organizations and
that organizational goals are all commonly shared by immediate
stakeholders.
E
Mintzberg categorizes the possible reasons for coalitionsAin an organization and
identifies the actual groups, both external and internal, thatR
might result. He defines
a coalition as “a group of people who band together to win
D some issue.”10 Below
is a list of these possible coalitions.
R
External Coalitions:
A
Carnegie model
reflects a descriptive
decision-making process
in organizations where
coalitions determine a
final choice based on
incomplete information,
social and psychological
processes, limited abilities
of decision makers, and
the need to find quick,
satisficing solutions
coalition
a group of people who
band together to win some
issue
Owners
1
– those who have legal control of the organization
1
Associates
9
– Suppliers and buyers of organizational resources
1
and products/services
Employee Associations
– Unions and professional associations
T
S
Publics
– this term refers to general groups such as families and
opinion leaders, special interests groups, and government
Directors
– board members
Organizational Theory
8-5
Internal Coalitions:
Top Management Team
– also referred to by some as the dominant coalition
Operators
– describes the workers who actually produce the firm’s
product or service
Line Managers
– all managers from the CEO down to first-line supervisors;
Analysts of the Technostructure
– systems planning and control personnel;
V
I
Support Staff
– specialists who work on matters of law, public
C relations, etc.
K
Ideology Supporters
– those who share a set of beliefs that distinguish
E the
11
organization from others.
R
S
This list emphasizes the fact that coalitions are powerful, yet fundamental forces to
be reckoned with in any organization. The vast number of ,special interests, causes,
needs, and other considerations that can be conjured up by this list confirms the
practical approach to decision making that coalition building
T represents. This is
not to say that coalitions are only concerned with self-interest,
E but it does make one
aware of the importance of coalition building in managing an organization.
A
A second major difference between the rational model andRthe Carnegie model has
D
to do with choosing the optimal solution in the decision-making
process. March
and Simon have described that, in many cases, solutionsR
to problems are arrived
at through a process of satisficing. The concept of satisficing
A is choosing a course
of action that is the most acceptable to the greatest number of people involved or
affected. In a perfect world, this would not be the case. Decision makers would
1
always choose whatever solution was best for the organization. Remember,
organizations are groups of people who must work 1
together to accomplish
9
anything. Unfortunately, optimal solutions are not always going to be supported
by organizational stakeholders.
1
satisficing
choosing a course of
action that is the most
acceptable to the greatest
number of people involved
or affected
T
Another factor involved in decision making that the rational model overlooks is the
S bounded rationality.
sheer limitations of human decision makers based on their
Although organizational decision makers are usually well-versed in their industry,
trained in their jobs, and networked to opportunities and threats in the external
environment, they are also limited by their own cognitive ability. So, bounded
rationality refers to the limitations of the mind that restrict the ability of decision
makers to solve problems or take advantage of opportunities. Operating within this
limited framework, decision makers can make a quick list of alternatives based on
bounded rationality
refers to the limitations of
the mind that restrict the
ability of decision makers
to solve problems or take
advantage of opportunities
Organizational Theory
8-6
past experience and personal knowledge of the situation at hand, prioritize them
based on importance, and move on with a solution. Are all relevant alternatives
likely to be included? The answer is probably not. However, the need not to
spend too long deliberating a situation, the tendency to satisfice, and the personal
preferences of the primary decision maker usually overrule any inclination to try
to be exhaustive in identifying alternatives.
V
I
C
K
E
R
S
,
Input and buy-in
from key managers
aid and strengthen
the decision making
process.
8-1c Incremental Decision Making
T
E
A different model of decision making is the incremental decision model. The name
A
incremental is quite descriptive, as managers make decisions that are only slightly
R ones they themselves
different than the ones made by their predecessors or the
12
D is that managers are
made in the past. The idea behind the incremental model
only “muddling through” as they are confronted with important
decision-making
R
opportunities. Many managers practice this decision making
A style because the
chance for failure is reduced when you only incrementally change what has been
happening for a long time. Although new courses of action may eventually develop
1
when the incremental model is practiced, they take a long time to come about due
1
to the small step-by-small step process.
9
8-1d The Unstructured Model
1
While the Carnegie model emphasizes the need toTrecognize social and
psychological processes, the unstructured model, based onS
the observance of actual
decision makers in operating organizations, focuses more on the actual steps taken
by decision makers. The unstructured model of decision making, developed by
Henry Mintzberg, sometimes referred to as the Father of Strategic Management,
describes decision making in uncertain environments as a sequence of activities
that require smaller decisions throughout the process. 13
incremental decision
model
managers make
decisions that are only
slightly different than
the ones made by their
predecessors or the ones
they themselves made in
the past
unstructured model
of decision making
describes decision making
in uncertain environments
as a structured sequence
of activities that require
smaller decisions
throughout the process
Organizational Theory
8-7
Mintzberg and his colleagues studied twenty-five organizational decisions as a
process from beginning to end. They outlined three major phases common to the
firms studied: the identification phase, the development phase, and the selection
phase. The identification stage involved recognizing the problem or opportunity
and gathering more information, or diagnosing. The development phase was
focused on searching for alternatives or designing a solution that was customized
to fit the situation. In the selection phase a judgment is made, followed by analysis,
bargaining, and eventual authorization. In their research, Mintzberg and his coauthors noted that sometimes major barriers would be bumped into, requiring
decision makers to go back and repeat steps they had already taken.
V
What is important to remember in any decision model is the fact that most critical
decisions are made over a period of time. And, as we have Iemphasized in this book,
the environment for most businesses changes over time,Csometimes drastically.
Mintzberg’s model is realistic in that regard, particularly K
when an organization is
operating in an uncertain internal or external environment,
E since it accounts for
barriers that can arise.
8-1e Intuition in Decision Making
R
S
,
A somewhat recent school of thought in the decision making literature looks at the
importance of intuition. Using intuition, or practicing intuitive decision making,
T
involves relying on judgment and feel for a situation based on past experience.14
E
Intuition is invaluable because it represents an informed gut reaction to a problem
or opportunity, it allows decisions to be made faster asAthe reaction intuitively
R been burned into the
is fairly immediate, and it relies on information that has
15
subconscious over a long period of time.
D
intutive decision
making
involves relying on
judgment and feelings
for a situation based on
experience
R
Intuition plays an important role in the decision making of Meg Whitman,
A Practices box in this
president and CEO of eBay who is featured in our Best
chapter. Whitman must make decisions on critical business issues like expansion,
1 decisions to make that
acquisitions, personnel and so forth. However, …
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