SlideShare uma empresa Scribd logo
1 de 29
Baixar para ler offline
Decision Making
http://www.themanagementskills.com
Introduction
  How can you make decisions?
  – Average the predictions of many people
  – Meet to deliberate and discuss the decision
  – Use the help of a person who you prefer
  – Use some form of a price system where people who are correct are
    rewarded
  – Put the question on the internet and see how people respond




                http://www.themanagementskills.com
                                                                       2
The Wisdom of the Crowd
    The average of the crowd is often an excellent
    predictor.
     – The weight of a horse
     – The amount of money in a jar

    It “works” when people are more likely to be right than
    wrong.
    It does not work when people are more likely to be
    wrong than right (conventional wisdom is incorrect)
    Surveys are good in this regard.
    The problem is that there is no penalty for a wrong
    answer, so there is no “sorting” in a survey. You can
    do potentially better.                                    3
Committees and Discussion
    The idea is to gather information in a group discussion
    rather than averaging. There are serious problems
    with this approach:
     – If people have similar views, group discussion tends to lead to extreme
       results. Other views are crowded out.
     – People are reluctant to present their view if they believe that it is in the
       minority.
     – The majority will tend to disregard a minority view as being incorrect so that
       new information is ignored.

    It may therefore be better to ask views individually
    There is the “Eureka” situation where groups are good:
    when it takes several people to put together a solution
    (crossword puzzles) – the solution is seen immediately
    when it is suggested                                                                4
Prediction Markets
  Prices play the role of information in markets. You can
  get better results when people are sorted based on
  their own judgment of the value of their information
   – The Iowa experiment
   – Google

  These are modeled after market economies and the
  “invisible hand.”




                                                            5
Overview
1. Markets as a metaphor for economics of
   organizational design
2. Centralization v. decentralization
3. Coordination
4. Decision making, hierarchy, & control
5. (next lecture) Job design & decision making
6. (next module) Incentives




                                                 6
1. Organizational Design of an Economy
  Adam Smith
      » “… he intends only his own gain, & is … led by an invisible hand to promote an
        end which was no part of his intention … By pursuing his own interest he frequently
        promotes that of society more effectually than when he really intends to promote it.”

  Leontief: central planning (centralization) is efficient
   – coordination, economies of scale, control

  Hayek: market (decentralization) is more efficient
   – costly to move all info. to central planner; decentralization makes better use of
     specific knowledge of time & place:
      » “How can … fragments of knowledge existing in different minds bring about results
        which, if they were to be brought about deliberately, would require a knowledge on
        the part of the directing mind which no single person can possess?”



                                                                                                7
Markets as
Information & Incentive Systems

  Examples of markets as forms of organization
  – prediction markets (insurance, financial, etc.)

  Market economies have 3 important features:
  – decentralization makes good use of “specific knowledge of time & place”
  – prices provide good “general knowledge” for coordination
  – incentives (through ownership)
     »   motivates good decision making
     »   moves decision rights to person with most valuable/ relevant specific knowledge
     »   motivates investments in human capital
     »   motivates creativity / innovation




                                                                                           8
Organizational Design of a Firm
  Org. design must address the same problems
    use of specific knowledge of time & place
    coordination across decision makers
    incentives for both
    innovation & adaptation

  Can we design an organization to mimic a market?
   – even if we can’t completely, the intuition is very useful

  Note, though, the limits of markets
   – they are best at aggregating information (e.g., into prices or predictions)
   – when coordination in the sense of coordinated actions is important,
     organizations tend to be set up


                                                                                   9
2. Benefits of Centralization
   Economies of scale
    –   physical capital
    –   managerial talent
    –   brand name & reputation
    –   design

   Better use of central knowledge
    – aggregated information & experience of the combined organization

   Better coordination
    –   knowledge transfer across units
    –   consistency / standardization
    –   synchronization
    –   control
    –   common strategy


                                                                         10
Benefits of Decentralization

  Better use of specific knowledge dispersed throughout
  the organization
  Prevents senior management from being overwhelmed
  Training/ development & intrinsic motivation for lower
  level managers
  Less bureaucratic/ more manageable scale




                                                           11
Specific Knowledge
                             Cost of Transferring Knowledge
Costly                                                                             Cheap

Specific Knowledge                                                     General Knowledge



         Attributes of knowledge / information that make it more “specific”
          – costly to transfer
              » perishable
              » complex
          – costly to understand
              » requiring scientific or specialized technical skills
              » subjective or experiential
          – unreliable / risky to use
              » noisy (garbling)


                                                                                           12
3. Coordination & Structure
  The classical approach: centralized hierarchy
  Decentralization implies that coordination must happen
  at lower levels of the organization
   – roughly speaking, 2 kinds of coordination problems: “simple” & “integration”

  Simple coordination: getting units to act in concert
   – real-time communication not needed, as long as actions of all units are
     compatible
   – use incentives, communication, job rotation, culture
      » e.g., UPS;




                                                                                    13
Modularization
  Putting people with the most interdependent jobs together
  amounts to modularizing overall structure
   – ex: break XP Consulting into smaller divisions
       » regional? (NA; Europe; Asia)
       » type of customer? (Corporate; Government; Not-for-profit; etc.)
       » practice area? (Strategy; IT; 6 )

  You can structure authority w/ some decisions organized by one
  set of divisions, others a different set
       » ex: decisions about hiring & compensation determined by region; decisions about training &
         promotion determined by practice area

  Note how complex it starts to get … there are clear advantages to
  reducing overlapping lines of authority
   – hypothesis: the largest source of dis-economies of scale is bureaucracy
     (coordination costs)


                                                                                                      14
Integration

 Integration: for some decisions, pockets
 of specific knowledge throughout org.
 need to be combined
                                                                           CEO
  – ex: Apple Computer laptop product design
  – use lateral mechanisms
                                                     Engineering   Sales         Production   Other
     » teams, matrix
     » informal networks
                                                            B          A
     » e.g., product design
  – the most cumbersome organizational designs              A                           B

    tend to involve integration problems                               B                A


 Or, balance the 2 goals of coordination
 & use of specific knowledge
  – separate decision management & control (below)


                                                                                                      15
4. Decision Making, Hierarchy, & Control


     Think of decision making as a 4-stage process

                                   Decision Management
     1. initiatives
     2. ratification
     3. implementation
     4. monitoring                   Decision Control
                                       (Hierarchy)




     Different stages can be more centralized or
     decentralized


                                                         16
Notes on Decision Mgt. v. Control
   It often makes sense to separate decision
   management from decision control
   – if decision maker has weak incentives
      » Board v. CEO
   – can provide benefits of decentralization & centralization at the same time
      » decentralizing decision management
      » centralizing decision control

   The distinction is useful in practice
   – innovation process
   – managing change
   – empowerment



                                                                                  17
How Much Decision Control?

  Consider 2 firms with 2 employees
                                                          Hierarchy            Flat
  The units evaluate new ideas differently
   – “Hierarchy”: W evaluates new ideas, passes             Gladys
     some to G. G approves or rejects those
                                                                      Gladys          Willie
   – “Flat”: G&W both different new ideas
                                                            Willie
  N = # of ideas each can evaluate per
  period
   – flat firm evaluates twice as many ideas per period




                                                                                               18
Evaluating New Ideas

  Assume new ideas are binary (good or bad / profitable
  or unprofitable)
  At first stage, p = probability of correct decision; p > ½
  At second stage (hierarchy only), q = probability of
  correct decision; q > p




                                                               19
Hierarchy
                                                       Accepts
                                                         p∙q
                               Accepts
                                  p
                                                       Rejects
                  Good                                 p(1-q)

                                Rejects                Rejects
                                 (1-p)                  (1-p)


       New Idea
                                                       Accepts
                               Accepts                 (1-p)(1-q)
                                (1-p)
                                                       Rejects
                                                       (1-p)q
                  Bad

                                Rejects                Rejects
                                   p                      p




                         Willie Evaluates   Gladys Evaluates Willie’s
                                               Recommendations

                                                                        20
Flat

                           Accepts
                              p

                  Good

                           Rejects
                            (1-p)


       New Idea

                           Accepts
                            (1-p)

                  Bad

                           Rejects
                              p




                         Gladys or Willie
                            Evaluates

                                            21
Results

                              Flat       Hierarchy
     Rate For One New Idea
         Accept Good Idea    p         pּq
         False Negative      1-p       1-pּq
         False Positive      1-p       (1-p)(1-q)
         Reject Bad Idea     p         1-(1-p)(1-q)

     Overall Throughput
         Accept Good Ideas   2Nּp      Nּpּq
         False Negatives     2N(1-p)   N(1-pּq)
         False Positives     2N(1-p)   N(1-p)(1-q)
         Reject Bad Ideas    2Nּp      N[1-(1-p)(1-q)]



                                                         22
Are Hierarchies Conservative?
                                                         Most           Middle
                   Rate For One New Idea
                       Accept Good Idea                   Flat     >   Hierarchy
                       False Negative                  Hierarchy   >      Flat
                       False Positive                     Flat     >   Hierarchy
                       Reject Bad Idea                 Hierarchy   >      Flat

                   Overall Throughput
                       Accept Good Ideas                 Flat      >   Hierarchy
                       False Negatives                   Flat      >   Hierarchy
                       False Positives                   Flat      >   Hierarchy
                       Reject Bad Ideas                  Flat      >   Hierarchy

Flat structures
 –   evaluate ideas more quickly
 –   evaluate more ideas for the same # of employees
 –   make more changes, good & bad
 –   have more successes & failures

What kind of environments favor a more hierarchical or flat structure?
                                                                                   23
Other Methods to Increase Control

    Resources spent on accuracy (a & b)
    Skills & emphasis of decision makers
     – liberal v. conservative evaluator
     – conservative org. likely to recruit / train more carefully

    Incentives of decision makers
     – e.g., downside punishments & upside rewards

    Constraints on decisions
     – e.g., budgets

    Culture & process

                                                                    24
Structure and Errors
  •Hierarchical
      •Reduce false positive and increase false negative
      •Approve fewer projects overall
      •Good where careful consideration is needed. Good with
      traditional industry; regulated industry. Bad for rapid
      change
  •Second Opinion - symmetrical upside and downside
  •Flat
      •Reduce fall negative and increase false positive
      •“Creative people not attracted to hierarchical firm”
      •Good when unprofitable projects are not too costly or
      when profitable projects are likely to be very profitable
                                                                  25
5. Implementation
    So what should XP Consulting consider in its structure?
    First, Modularize overall structure, possibly in overlapping ways
     – ex: Cambridge Technology Partners
     – makes the problem more manageable
     – put most interdependent parts together, reducing coordination problems

    Second, allocate decisions within each division: ask “who / what /
    where / when / why?” to identify key specific knowledge
     –   who has valuable specific knowledge?
     –   what kind of knowledge?
     –   where in (& out) of the organization?
     –   when (is timing relevant)?
     –   why is it of economic value?

    Third, think about what needs to be made consistent or coordinated
    across the division or whole organization
                                                                                26
Implementation
    The last two give strong guidance on what to decentralize &
    centralize
    Fourth, go back & refine the overall structure
     – try to streamline further to cut bureaucracy
     – look for & address coordination problems
     – integration problems require the most attention, & will create most of your day-to-day
       headaches

    Fifth, design jobs (next lecture)
     – balance benefits of specialization, standardization against benefits of using specific
       knowledge, intrinsic motivation

    In all of this, balance desires for control v. creativity & adaptation
     – self organizing systems can be extraordinarily powerful; don’t be a control freak!

    Sixth, design performance evaluation & incentives to match job
    design (after Midterm)
                                                                                                27
6. Economic Ideas

   The “knowledge problem” of organizational design
   – specific knowledge
   – coordination types & mechanisms
   – incentives & price mechanisms

   Decision making
   – decentralization v. centralization
   – decision management v. control
   – degrees of decision control / hierarchy, & their effects




                                                                28
Summary Points

  The metaphor of a market highlights the role of
  economics in organizational design
   – design is largely about creating & making use of knowledge
      » by its nature, specific knowledge tends to have more economic value
   – incentives play a crucial role
      » approximating ownership
      » performance measures are “prices”
   – but market approaches are limited when complex coordination (especially of
     the “integration” kind) is needed

  The concepts apply to design of an individual job, to a
  workgroup, to structure of a global conglomerate

                http://www.themanagementskills.com
                                                                                  29

Mais conteúdo relacionado

Mais procurados

Decision support systems, group decision support systems,expert systems-manag...
Decision support systems, group decision support systems,expert systems-manag...Decision support systems, group decision support systems,expert systems-manag...
Decision support systems, group decision support systems,expert systems-manag...clincy cleetus
 
Decision support systems & knowledge management systems
Decision support systems & knowledge management systemsDecision support systems & knowledge management systems
Decision support systems & knowledge management systemsOnline
 
Information and decision support system
Information and decision support systemInformation and decision support system
Information and decision support systemNaveed Zahoor
 
Ch01 A decision support system (DSS)
Ch01 A decision support system (DSS)Ch01 A decision support system (DSS)
Ch01 A decision support system (DSS)Bn3wad
 
Decision support systems
Decision support systemsDecision support systems
Decision support systemsAneel Ahmed
 
Unit 1 Introduction to MIS, MIS & Data Mining , MIS & Decision Making
Unit  1 Introduction to MIS, MIS & Data Mining , MIS & Decision MakingUnit  1 Introduction to MIS, MIS & Data Mining , MIS & Decision Making
Unit 1 Introduction to MIS, MIS & Data Mining , MIS & Decision MakingAsmita Singh
 
Decision Support System ( DSS )
Decision Support System ( DSS )Decision Support System ( DSS )
Decision Support System ( DSS )Siddhesh Palkar
 
Decision Support System - Management Information System
Decision Support System - Management Information SystemDecision Support System - Management Information System
Decision Support System - Management Information SystemNijaz N
 
Introduction to DSS
Introduction to DSSIntroduction to DSS
Introduction to DSSSoetam Rizky
 
Types of decision support system
Types of decision support systemTypes of decision support system
Types of decision support systemnripeshkumarnrip
 
Mis chapter 4 information systems, management, and decision making
Mis chapter 4 information systems, management, and decision makingMis chapter 4 information systems, management, and decision making
Mis chapter 4 information systems, management, and decision makingFilmon Habtemichael Tesfai
 
Using Modelling and Simulation for Policy Decision Support in Identity Manage...
Using Modelling and Simulation for Policy Decision Support in Identity Manage...Using Modelling and Simulation for Policy Decision Support in Identity Manage...
Using Modelling and Simulation for Policy Decision Support in Identity Manage...gueste4e93e3
 

Mais procurados (19)

Role of Information Technology in Decision Making
Role of Information Technology in Decision MakingRole of Information Technology in Decision Making
Role of Information Technology in Decision Making
 
Decision support systems, group decision support systems,expert systems-manag...
Decision support systems, group decision support systems,expert systems-manag...Decision support systems, group decision support systems,expert systems-manag...
Decision support systems, group decision support systems,expert systems-manag...
 
Mark Dean Notes
Mark Dean NotesMark Dean Notes
Mark Dean Notes
 
Decision support systems & knowledge management systems
Decision support systems & knowledge management systemsDecision support systems & knowledge management systems
Decision support systems & knowledge management systems
 
Dss
DssDss
Dss
 
Mis 2 dss
Mis 2 dssMis 2 dss
Mis 2 dss
 
Information and decision support system
Information and decision support systemInformation and decision support system
Information and decision support system
 
Decision making
Decision makingDecision making
Decision making
 
Ch01 A decision support system (DSS)
Ch01 A decision support system (DSS)Ch01 A decision support system (DSS)
Ch01 A decision support system (DSS)
 
Decision support systems
Decision support systemsDecision support systems
Decision support systems
 
Decision support system
Decision support systemDecision support system
Decision support system
 
Unit 1 Introduction to MIS, MIS & Data Mining , MIS & Decision Making
Unit  1 Introduction to MIS, MIS & Data Mining , MIS & Decision MakingUnit  1 Introduction to MIS, MIS & Data Mining , MIS & Decision Making
Unit 1 Introduction to MIS, MIS & Data Mining , MIS & Decision Making
 
Decision Support System ( DSS )
Decision Support System ( DSS )Decision Support System ( DSS )
Decision Support System ( DSS )
 
Decision Support System - Management Information System
Decision Support System - Management Information SystemDecision Support System - Management Information System
Decision Support System - Management Information System
 
Introduction to DSS
Introduction to DSSIntroduction to DSS
Introduction to DSS
 
Decision Support Systems
Decision Support SystemsDecision Support Systems
Decision Support Systems
 
Types of decision support system
Types of decision support systemTypes of decision support system
Types of decision support system
 
Mis chapter 4 information systems, management, and decision making
Mis chapter 4 information systems, management, and decision makingMis chapter 4 information systems, management, and decision making
Mis chapter 4 information systems, management, and decision making
 
Using Modelling and Simulation for Policy Decision Support in Identity Manage...
Using Modelling and Simulation for Policy Decision Support in Identity Manage...Using Modelling and Simulation for Policy Decision Support in Identity Manage...
Using Modelling and Simulation for Policy Decision Support in Identity Manage...
 

Semelhante a Decision making

Sourcing lecture 2 ITSM Leadership and organizational Change
Sourcing lecture 2 ITSM Leadership and organizational ChangeSourcing lecture 2 ITSM Leadership and organizational Change
Sourcing lecture 2 ITSM Leadership and organizational ChangeFrank Willems
 
Knowledge management & organizations
Knowledge management & organizationsKnowledge management & organizations
Knowledge management & organizationsKaustubh Gupta
 
Knowledge management and learning organization
Knowledge management and learning organizationKnowledge management and learning organization
Knowledge management and learning organizationRajan Neupane
 
Chapter 12Managing Business KnowledgeManaging and Using Info.docx
Chapter 12Managing Business KnowledgeManaging and Using Info.docxChapter 12Managing Business KnowledgeManaging and Using Info.docx
Chapter 12Managing Business KnowledgeManaging and Using Info.docxcravennichole326
 
Knowledge Management Arun VI
Knowledge Management  Arun VIKnowledge Management  Arun VI
Knowledge Management Arun VIArun VI
 
Facilitation Training Materials - Slides
Facilitation Training Materials - SlidesFacilitation Training Materials - Slides
Facilitation Training Materials - SlidesPMSD Roadmap
 
Capture Tacit Knowledge
Capture Tacit KnowledgeCapture Tacit Knowledge
Capture Tacit KnowledgeSajad Nosrati
 
Framework of-knowledge-management-study
Framework of-knowledge-management-studyFramework of-knowledge-management-study
Framework of-knowledge-management-studyIjcem Journal
 
Acs Sept 2008 Leadership Prm Linked In Edited Version
Acs Sept 2008 Leadership Prm Linked In Edited VersionAcs Sept 2008 Leadership Prm Linked In Edited Version
Acs Sept 2008 Leadership Prm Linked In Edited Versiontuffley
 
Follow the Ants: The Knowledge Economy & Big Data Management
Follow the Ants: The Knowledge Economy & Big Data ManagementFollow the Ants: The Knowledge Economy & Big Data Management
Follow the Ants: The Knowledge Economy & Big Data ManagementZola Dube
 
Organize for Complexity, part II (BetaCodex13)
Organize for Complexity, part II (BetaCodex13) Organize for Complexity, part II (BetaCodex13)
Organize for Complexity, part II (BetaCodex13) Niels Pflaeging
 
Rationality and Decision-Making
Rationality and Decision-MakingRationality and Decision-Making
Rationality and Decision-MakingRichard Veryard
 
Knowledge Management and Transfer Concepts
Knowledge Management and Transfer Concepts Knowledge Management and Transfer Concepts
Knowledge Management and Transfer Concepts katcollum
 
Copyright © 2002 Mark W. McElroy11An Excerpt From.docx
Copyright © 2002 Mark W. McElroy11An Excerpt From.docxCopyright © 2002 Mark W. McElroy11An Excerpt From.docx
Copyright © 2002 Mark W. McElroy11An Excerpt From.docxvanesaburnand
 

Semelhante a Decision making (20)

Sourcing lecture 2 ITSM Leadership and organizational Change
Sourcing lecture 2 ITSM Leadership and organizational ChangeSourcing lecture 2 ITSM Leadership and organizational Change
Sourcing lecture 2 ITSM Leadership and organizational Change
 
Knowledge management & organizations
Knowledge management & organizationsKnowledge management & organizations
Knowledge management & organizations
 
Knowledge management and learning organization
Knowledge management and learning organizationKnowledge management and learning organization
Knowledge management and learning organization
 
Chapter 12Managing Business KnowledgeManaging and Using Info.docx
Chapter 12Managing Business KnowledgeManaging and Using Info.docxChapter 12Managing Business KnowledgeManaging and Using Info.docx
Chapter 12Managing Business KnowledgeManaging and Using Info.docx
 
12-KM.pptx
12-KM.pptx12-KM.pptx
12-KM.pptx
 
knowledge management document
knowledge management documentknowledge management document
knowledge management document
 
Knowledge Management Arun VI
Knowledge Management  Arun VIKnowledge Management  Arun VI
Knowledge Management Arun VI
 
Facilitation Training Materials - Slides
Facilitation Training Materials - SlidesFacilitation Training Materials - Slides
Facilitation Training Materials - Slides
 
Capture Tacit Knowledge
Capture Tacit KnowledgeCapture Tacit Knowledge
Capture Tacit Knowledge
 
KM
KMKM
KM
 
Gic2011 aula05-ingles
Gic2011 aula05-inglesGic2011 aula05-ingles
Gic2011 aula05-ingles
 
Knowledge Management Webinar
Knowledge Management WebinarKnowledge Management Webinar
Knowledge Management Webinar
 
Framework of-knowledge-management-study
Framework of-knowledge-management-studyFramework of-knowledge-management-study
Framework of-knowledge-management-study
 
Km
KmKm
Km
 
Acs Sept 2008 Leadership Prm Linked In Edited Version
Acs Sept 2008 Leadership Prm Linked In Edited VersionAcs Sept 2008 Leadership Prm Linked In Edited Version
Acs Sept 2008 Leadership Prm Linked In Edited Version
 
Follow the Ants: The Knowledge Economy & Big Data Management
Follow the Ants: The Knowledge Economy & Big Data ManagementFollow the Ants: The Knowledge Economy & Big Data Management
Follow the Ants: The Knowledge Economy & Big Data Management
 
Organize for Complexity, part II (BetaCodex13)
Organize for Complexity, part II (BetaCodex13) Organize for Complexity, part II (BetaCodex13)
Organize for Complexity, part II (BetaCodex13)
 
Rationality and Decision-Making
Rationality and Decision-MakingRationality and Decision-Making
Rationality and Decision-Making
 
Knowledge Management and Transfer Concepts
Knowledge Management and Transfer Concepts Knowledge Management and Transfer Concepts
Knowledge Management and Transfer Concepts
 
Copyright © 2002 Mark W. McElroy11An Excerpt From.docx
Copyright © 2002 Mark W. McElroy11An Excerpt From.docxCopyright © 2002 Mark W. McElroy11An Excerpt From.docx
Copyright © 2002 Mark W. McElroy11An Excerpt From.docx
 

Mais de Ashit Jain

Electronic Books
Electronic BooksElectronic Books
Electronic BooksAshit Jain
 
Career Development & Succession Planning
Career Development & Succession PlanningCareer Development & Succession Planning
Career Development & Succession PlanningAshit Jain
 
Beautiful Mosques of Istanbul
Beautiful Mosques of Istanbul Beautiful Mosques of Istanbul
Beautiful Mosques of Istanbul Ashit Jain
 
Management Lessons from 3 Idiots
Management Lessons from 3 IdiotsManagement Lessons from 3 Idiots
Management Lessons from 3 IdiotsAshit Jain
 
Negotiating Skills
Negotiating SkillsNegotiating Skills
Negotiating SkillsAshit Jain
 
Personality Development Programme
Personality Development ProgrammePersonality Development Programme
Personality Development ProgrammeAshit Jain
 
Getting started With Excel
Getting started With ExcelGetting started With Excel
Getting started With ExcelAshit Jain
 
Old Chinese Wisdom!
Old Chinese Wisdom!Old Chinese Wisdom!
Old Chinese Wisdom!Ashit Jain
 
Corporate Etiquette
Corporate EtiquetteCorporate Etiquette
Corporate EtiquetteAshit Jain
 
Better Negotioation
Better NegotioationBetter Negotioation
Better NegotioationAshit Jain
 
Effective Communication Skills
Effective Communication SkillsEffective Communication Skills
Effective Communication SkillsAshit Jain
 
Developing a Professional Identity
Developing a Professional IdentityDeveloping a Professional Identity
Developing a Professional IdentityAshit Jain
 
Situational Leadership
Situational LeadershipSituational Leadership
Situational LeadershipAshit Jain
 
Deliver a Presentation
Deliver a PresentationDeliver a Presentation
Deliver a PresentationAshit Jain
 
Organizational Development
Organizational DevelopmentOrganizational Development
Organizational DevelopmentAshit Jain
 
Writing Effective Emails
Writing Effective EmailsWriting Effective Emails
Writing Effective EmailsAshit Jain
 

Mais de Ashit Jain (20)

Electronic Books
Electronic BooksElectronic Books
Electronic Books
 
Sensors
SensorsSensors
Sensors
 
Career Development & Succession Planning
Career Development & Succession PlanningCareer Development & Succession Planning
Career Development & Succession Planning
 
Hr records
Hr recordsHr records
Hr records
 
Good manager
Good managerGood manager
Good manager
 
Beautiful Mosques of Istanbul
Beautiful Mosques of Istanbul Beautiful Mosques of Istanbul
Beautiful Mosques of Istanbul
 
Management Lessons from 3 Idiots
Management Lessons from 3 IdiotsManagement Lessons from 3 Idiots
Management Lessons from 3 Idiots
 
Negotiating Skills
Negotiating SkillsNegotiating Skills
Negotiating Skills
 
Personality Development Programme
Personality Development ProgrammePersonality Development Programme
Personality Development Programme
 
Getting started With Excel
Getting started With ExcelGetting started With Excel
Getting started With Excel
 
Old Chinese Wisdom!
Old Chinese Wisdom!Old Chinese Wisdom!
Old Chinese Wisdom!
 
Corporate Etiquette
Corporate EtiquetteCorporate Etiquette
Corporate Etiquette
 
Better Negotioation
Better NegotioationBetter Negotioation
Better Negotioation
 
Effective Communication Skills
Effective Communication SkillsEffective Communication Skills
Effective Communication Skills
 
Developing a Professional Identity
Developing a Professional IdentityDeveloping a Professional Identity
Developing a Professional Identity
 
Swine Flu
Swine FluSwine Flu
Swine Flu
 
Situational Leadership
Situational LeadershipSituational Leadership
Situational Leadership
 
Deliver a Presentation
Deliver a PresentationDeliver a Presentation
Deliver a Presentation
 
Organizational Development
Organizational DevelopmentOrganizational Development
Organizational Development
 
Writing Effective Emails
Writing Effective EmailsWriting Effective Emails
Writing Effective Emails
 

Último

Team B Mind Map for Organizational Chg..
Team B Mind Map for Organizational Chg..Team B Mind Map for Organizational Chg..
Team B Mind Map for Organizational Chg..dlewis191
 
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfPDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfHajeJanKamps
 
Ethical stalking by Mark Williams. UpliftLive 2024
Ethical stalking by Mark Williams. UpliftLive 2024Ethical stalking by Mark Williams. UpliftLive 2024
Ethical stalking by Mark Williams. UpliftLive 2024Winbusinessin
 
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISING
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISINGUNLEASHING THE POWER OF PROGRAMMATIC ADVERTISING
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISINGlokeshwarmaha
 
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptxHELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptxHelene Heckrotte
 
NewBase 25 March 2024 Energy News issue - 1710 by Khaled Al Awadi_compress...
NewBase  25 March  2024  Energy News issue - 1710 by Khaled Al Awadi_compress...NewBase  25 March  2024  Energy News issue - 1710 by Khaled Al Awadi_compress...
NewBase 25 March 2024 Energy News issue - 1710 by Khaled Al Awadi_compress...Khaled Al Awadi
 
To Create Your Own Wig Online To Create Your Own Wig Online
To Create Your Own Wig Online  To Create Your Own Wig OnlineTo Create Your Own Wig Online  To Create Your Own Wig Online
To Create Your Own Wig Online To Create Your Own Wig Onlinelng ths
 
MC Heights construction company in Jhang
MC Heights construction company in JhangMC Heights construction company in Jhang
MC Heights construction company in Jhangmcgroupjeya
 
Lecture_6.pptx English speaking easyb to
Lecture_6.pptx English speaking easyb toLecture_6.pptx English speaking easyb to
Lecture_6.pptx English speaking easyb toumarfarooquejamali32
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access
 
NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023Steve Rader
 
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfChicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfSourav Sikder
 
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...TalentView
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access
 
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003believeminhh
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access
 
MoneyBridge Pitch Deck - Investor Presentation
MoneyBridge Pitch Deck - Investor PresentationMoneyBridge Pitch Deck - Investor Presentation
MoneyBridge Pitch Deck - Investor Presentationbaron83
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...IMARC Group
 
Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)Lviv Startup Club
 

Último (20)

Team B Mind Map for Organizational Chg..
Team B Mind Map for Organizational Chg..Team B Mind Map for Organizational Chg..
Team B Mind Map for Organizational Chg..
 
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdfPDT 89 - $1.4M - Seed - Plantee Innovations.pdf
PDT 89 - $1.4M - Seed - Plantee Innovations.pdf
 
Ethical stalking by Mark Williams. UpliftLive 2024
Ethical stalking by Mark Williams. UpliftLive 2024Ethical stalking by Mark Williams. UpliftLive 2024
Ethical stalking by Mark Williams. UpliftLive 2024
 
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISING
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISINGUNLEASHING THE POWER OF PROGRAMMATIC ADVERTISING
UNLEASHING THE POWER OF PROGRAMMATIC ADVERTISING
 
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptxHELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
HELENE HECKROTTE'S PROFESSIONAL PORTFOLIO.pptx
 
NewBase 25 March 2024 Energy News issue - 1710 by Khaled Al Awadi_compress...
NewBase  25 March  2024  Energy News issue - 1710 by Khaled Al Awadi_compress...NewBase  25 March  2024  Energy News issue - 1710 by Khaled Al Awadi_compress...
NewBase 25 March 2024 Energy News issue - 1710 by Khaled Al Awadi_compress...
 
To Create Your Own Wig Online To Create Your Own Wig Online
To Create Your Own Wig Online  To Create Your Own Wig OnlineTo Create Your Own Wig Online  To Create Your Own Wig Online
To Create Your Own Wig Online To Create Your Own Wig Online
 
MC Heights construction company in Jhang
MC Heights construction company in JhangMC Heights construction company in Jhang
MC Heights construction company in Jhang
 
Lecture_6.pptx English speaking easyb to
Lecture_6.pptx English speaking easyb toLecture_6.pptx English speaking easyb to
Lecture_6.pptx English speaking easyb to
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024
 
NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023NASA CoCEI Scaling Strategy - November 2023
NASA CoCEI Scaling Strategy - November 2023
 
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdfChicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
Chicago Medical Malpractice Lawyer Chicago Medical Malpractice Lawyer.pdf
 
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...
TalentView Webinar: Empowering the Modern Workforce_ Redefininig Success from...
 
Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024Borderless Access - Global Panel book-unlock 2024
Borderless Access - Global Panel book-unlock 2024
 
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
The Vietnam Believer Newsletter_MARCH 25, 2024_EN_Vol. 003
 
Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024Borderless Access - Global B2B Panel book-unlock 2024
Borderless Access - Global B2B Panel book-unlock 2024
 
MoneyBridge Pitch Deck - Investor Presentation
MoneyBridge Pitch Deck - Investor PresentationMoneyBridge Pitch Deck - Investor Presentation
MoneyBridge Pitch Deck - Investor Presentation
 
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
Boat Trailers Market PPT: Growth, Outlook, Demand, Keyplayer Analysis and Opp...
 
Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)Michael Vidyakin: Introduction to PMO (UA)
Michael Vidyakin: Introduction to PMO (UA)
 
Investment Opportunity for Thailand's Automotive & EV Industries
Investment Opportunity for Thailand's Automotive & EV IndustriesInvestment Opportunity for Thailand's Automotive & EV Industries
Investment Opportunity for Thailand's Automotive & EV Industries
 

Decision making

  • 2. Introduction How can you make decisions? – Average the predictions of many people – Meet to deliberate and discuss the decision – Use the help of a person who you prefer – Use some form of a price system where people who are correct are rewarded – Put the question on the internet and see how people respond http://www.themanagementskills.com 2
  • 3. The Wisdom of the Crowd The average of the crowd is often an excellent predictor. – The weight of a horse – The amount of money in a jar It “works” when people are more likely to be right than wrong. It does not work when people are more likely to be wrong than right (conventional wisdom is incorrect) Surveys are good in this regard. The problem is that there is no penalty for a wrong answer, so there is no “sorting” in a survey. You can do potentially better. 3
  • 4. Committees and Discussion The idea is to gather information in a group discussion rather than averaging. There are serious problems with this approach: – If people have similar views, group discussion tends to lead to extreme results. Other views are crowded out. – People are reluctant to present their view if they believe that it is in the minority. – The majority will tend to disregard a minority view as being incorrect so that new information is ignored. It may therefore be better to ask views individually There is the “Eureka” situation where groups are good: when it takes several people to put together a solution (crossword puzzles) – the solution is seen immediately when it is suggested 4
  • 5. Prediction Markets Prices play the role of information in markets. You can get better results when people are sorted based on their own judgment of the value of their information – The Iowa experiment – Google These are modeled after market economies and the “invisible hand.” 5
  • 6. Overview 1. Markets as a metaphor for economics of organizational design 2. Centralization v. decentralization 3. Coordination 4. Decision making, hierarchy, & control 5. (next lecture) Job design & decision making 6. (next module) Incentives 6
  • 7. 1. Organizational Design of an Economy Adam Smith » “… he intends only his own gain, & is … led by an invisible hand to promote an end which was no part of his intention … By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it.” Leontief: central planning (centralization) is efficient – coordination, economies of scale, control Hayek: market (decentralization) is more efficient – costly to move all info. to central planner; decentralization makes better use of specific knowledge of time & place: » “How can … fragments of knowledge existing in different minds bring about results which, if they were to be brought about deliberately, would require a knowledge on the part of the directing mind which no single person can possess?” 7
  • 8. Markets as Information & Incentive Systems Examples of markets as forms of organization – prediction markets (insurance, financial, etc.) Market economies have 3 important features: – decentralization makes good use of “specific knowledge of time & place” – prices provide good “general knowledge” for coordination – incentives (through ownership) » motivates good decision making » moves decision rights to person with most valuable/ relevant specific knowledge » motivates investments in human capital » motivates creativity / innovation 8
  • 9. Organizational Design of a Firm Org. design must address the same problems  use of specific knowledge of time & place  coordination across decision makers  incentives for both  innovation & adaptation Can we design an organization to mimic a market? – even if we can’t completely, the intuition is very useful Note, though, the limits of markets – they are best at aggregating information (e.g., into prices or predictions) – when coordination in the sense of coordinated actions is important, organizations tend to be set up 9
  • 10. 2. Benefits of Centralization Economies of scale – physical capital – managerial talent – brand name & reputation – design Better use of central knowledge – aggregated information & experience of the combined organization Better coordination – knowledge transfer across units – consistency / standardization – synchronization – control – common strategy 10
  • 11. Benefits of Decentralization Better use of specific knowledge dispersed throughout the organization Prevents senior management from being overwhelmed Training/ development & intrinsic motivation for lower level managers Less bureaucratic/ more manageable scale 11
  • 12. Specific Knowledge Cost of Transferring Knowledge Costly Cheap Specific Knowledge General Knowledge Attributes of knowledge / information that make it more “specific” – costly to transfer » perishable » complex – costly to understand » requiring scientific or specialized technical skills » subjective or experiential – unreliable / risky to use » noisy (garbling) 12
  • 13. 3. Coordination & Structure The classical approach: centralized hierarchy Decentralization implies that coordination must happen at lower levels of the organization – roughly speaking, 2 kinds of coordination problems: “simple” & “integration” Simple coordination: getting units to act in concert – real-time communication not needed, as long as actions of all units are compatible – use incentives, communication, job rotation, culture » e.g., UPS; 13
  • 14. Modularization Putting people with the most interdependent jobs together amounts to modularizing overall structure – ex: break XP Consulting into smaller divisions » regional? (NA; Europe; Asia) » type of customer? (Corporate; Government; Not-for-profit; etc.) » practice area? (Strategy; IT; 6 ) You can structure authority w/ some decisions organized by one set of divisions, others a different set » ex: decisions about hiring & compensation determined by region; decisions about training & promotion determined by practice area Note how complex it starts to get … there are clear advantages to reducing overlapping lines of authority – hypothesis: the largest source of dis-economies of scale is bureaucracy (coordination costs) 14
  • 15. Integration Integration: for some decisions, pockets of specific knowledge throughout org. need to be combined CEO – ex: Apple Computer laptop product design – use lateral mechanisms Engineering Sales Production Other » teams, matrix » informal networks B A » e.g., product design – the most cumbersome organizational designs A B tend to involve integration problems B A Or, balance the 2 goals of coordination & use of specific knowledge – separate decision management & control (below) 15
  • 16. 4. Decision Making, Hierarchy, & Control Think of decision making as a 4-stage process Decision Management 1. initiatives 2. ratification 3. implementation 4. monitoring Decision Control (Hierarchy) Different stages can be more centralized or decentralized 16
  • 17. Notes on Decision Mgt. v. Control It often makes sense to separate decision management from decision control – if decision maker has weak incentives » Board v. CEO – can provide benefits of decentralization & centralization at the same time » decentralizing decision management » centralizing decision control The distinction is useful in practice – innovation process – managing change – empowerment 17
  • 18. How Much Decision Control? Consider 2 firms with 2 employees Hierarchy Flat The units evaluate new ideas differently – “Hierarchy”: W evaluates new ideas, passes Gladys some to G. G approves or rejects those Gladys Willie – “Flat”: G&W both different new ideas Willie N = # of ideas each can evaluate per period – flat firm evaluates twice as many ideas per period 18
  • 19. Evaluating New Ideas Assume new ideas are binary (good or bad / profitable or unprofitable) At first stage, p = probability of correct decision; p > ½ At second stage (hierarchy only), q = probability of correct decision; q > p 19
  • 20. Hierarchy Accepts p∙q Accepts p Rejects Good p(1-q) Rejects Rejects (1-p) (1-p) New Idea Accepts Accepts (1-p)(1-q) (1-p) Rejects (1-p)q Bad Rejects Rejects p p Willie Evaluates Gladys Evaluates Willie’s Recommendations 20
  • 21. Flat Accepts p Good Rejects (1-p) New Idea Accepts (1-p) Bad Rejects p Gladys or Willie Evaluates 21
  • 22. Results Flat Hierarchy Rate For One New Idea Accept Good Idea p pּq False Negative 1-p 1-pּq False Positive 1-p (1-p)(1-q) Reject Bad Idea p 1-(1-p)(1-q) Overall Throughput Accept Good Ideas 2Nּp Nּpּq False Negatives 2N(1-p) N(1-pּq) False Positives 2N(1-p) N(1-p)(1-q) Reject Bad Ideas 2Nּp N[1-(1-p)(1-q)] 22
  • 23. Are Hierarchies Conservative? Most Middle Rate For One New Idea Accept Good Idea Flat > Hierarchy False Negative Hierarchy > Flat False Positive Flat > Hierarchy Reject Bad Idea Hierarchy > Flat Overall Throughput Accept Good Ideas Flat > Hierarchy False Negatives Flat > Hierarchy False Positives Flat > Hierarchy Reject Bad Ideas Flat > Hierarchy Flat structures – evaluate ideas more quickly – evaluate more ideas for the same # of employees – make more changes, good & bad – have more successes & failures What kind of environments favor a more hierarchical or flat structure? 23
  • 24. Other Methods to Increase Control Resources spent on accuracy (a & b) Skills & emphasis of decision makers – liberal v. conservative evaluator – conservative org. likely to recruit / train more carefully Incentives of decision makers – e.g., downside punishments & upside rewards Constraints on decisions – e.g., budgets Culture & process 24
  • 25. Structure and Errors •Hierarchical •Reduce false positive and increase false negative •Approve fewer projects overall •Good where careful consideration is needed. Good with traditional industry; regulated industry. Bad for rapid change •Second Opinion - symmetrical upside and downside •Flat •Reduce fall negative and increase false positive •“Creative people not attracted to hierarchical firm” •Good when unprofitable projects are not too costly or when profitable projects are likely to be very profitable 25
  • 26. 5. Implementation So what should XP Consulting consider in its structure? First, Modularize overall structure, possibly in overlapping ways – ex: Cambridge Technology Partners – makes the problem more manageable – put most interdependent parts together, reducing coordination problems Second, allocate decisions within each division: ask “who / what / where / when / why?” to identify key specific knowledge – who has valuable specific knowledge? – what kind of knowledge? – where in (& out) of the organization? – when (is timing relevant)? – why is it of economic value? Third, think about what needs to be made consistent or coordinated across the division or whole organization 26
  • 27. Implementation The last two give strong guidance on what to decentralize & centralize Fourth, go back & refine the overall structure – try to streamline further to cut bureaucracy – look for & address coordination problems – integration problems require the most attention, & will create most of your day-to-day headaches Fifth, design jobs (next lecture) – balance benefits of specialization, standardization against benefits of using specific knowledge, intrinsic motivation In all of this, balance desires for control v. creativity & adaptation – self organizing systems can be extraordinarily powerful; don’t be a control freak! Sixth, design performance evaluation & incentives to match job design (after Midterm) 27
  • 28. 6. Economic Ideas The “knowledge problem” of organizational design – specific knowledge – coordination types & mechanisms – incentives & price mechanisms Decision making – decentralization v. centralization – decision management v. control – degrees of decision control / hierarchy, & their effects 28
  • 29. Summary Points The metaphor of a market highlights the role of economics in organizational design – design is largely about creating & making use of knowledge » by its nature, specific knowledge tends to have more economic value – incentives play a crucial role » approximating ownership » performance measures are “prices” – but market approaches are limited when complex coordination (especially of the “integration” kind) is needed The concepts apply to design of an individual job, to a workgroup, to structure of a global conglomerate http://www.themanagementskills.com 29