Readings week 4
Paper 1: Strategic decision making - Eisenhardt, K.M. and M.J. Zbaracki (1992)
Paper 2: The organization as a reflection of its top managers - Hambrick, D.C. and P.A. Mason
(1984)
Paper 3: Strategic Change: Logical incrementalism - Quinn, J.B. (1989)
Seminar notes week 4
1
,Readings week 4
Paper 1 - Strategic decision making
Eisenhardt, K.M. and M.J. Zbaracki (1992)
● This article reviews the strategic decision making literature by focusing on the
dominant paradigms:
○ Rationality and bounded rationality
○ Politics and power
○ Garbage can
● Strategic decision = decision which is important in terms of the actions taken, the
resources committed, or the precedents set
● Article focus: infrequent decisions made by the top leaders of an organisation that
critically affect organisational health and survive
Rationality and bounded rationality
● The rational model of choice follows the assumption that human behaviour has some
purpose -> common model of rational action, also referred to as the synoptic or
comprehensive model of decision
○ Actors enter decision situations with known objectives
○ The objectives determine the value of the possible consequences of an action
○ The actors gather appropriate information and develop a set of alternative
actions
○ Then they select the optimal alternatives
● A simple rational model of choice: identification, development and selection model
● The debate between rationality and bounded rationality -> originally involved the nature
of cognitive assumptions
Cognitive limitations
● Global critique to rational model: goals can be inconsistent across people and time,
search behaviour is often local, and standard operating procedures guide much of
organisational behaviour
● Carter formulated a fine-grained view of search processes by segmenting them into
two types:
○ Personnel-induced search -> strong executives with definite objectives in mind
stimulate the search
○ Opportunity-induced search -> firm engage in search when unexpected
opportunities arise
● Anderson (1983) captured the decision making by objection model:
○ Organisation considered a few alternative courses of action simultaneously,
instead, participants raised objections to a current alternative
○ In order to avoid high risk, decision-makers select alternatives that are not
expected to solve the problem
○ Instead of the rational process of goal definition, followed by alternative
generation and choice, the organisation nearly simultaneously discovered goals
and choices through social processes
2
, Readings week 4
● There are limitations at each step of the rational model (as shown above):
○ Goals are unclear and shift over time
○ People search for information and alternatives haphazardly and
opportunistically
○ Analysis of alternatives may be limited and decisions often reflect the use of
standard operating procedures rather than systematic analysis
Rearrangement and repetition
● A more recent variation of the rational model accepts the model but rearranges its
pieces to allow repetition and variety in their order -> this recognises that decisions
have unique patterns for the solution
● Mintzberg’s study: three phases of strategic decision - identification, development and
selection phase of decision making
○ The rational model of choice: stages occur sequentially
○ New model/study: stages have no sequential relationship
■ Within each phase, decisions follow various routines:
● Decision recognition and diagnosis routines during the
identification phase
● Search and design routines during the development phase
● Screen, evaluation-choice and authorisation routines during the
selection phase
■ The phases and their routines can come in any order and can repeat
● Decision processes vary depending upon decision characteristics as executives
apparently bypass or revisit different aspects of the choice over time
Rationality vs bounded rationality
● Rationality and bounded rationality as a dichotomy or continuum
○ Dichotomy = division or a contrast between two things that are or are
represented as being opposite or entirely different
○ Bounded rationality = rationality is limited when individuals make decisions;
they attempt to satisfy, not optimise; a decision that is good enough but not the
best
● Reasons for decreasing rationality:
○ Threatening environments
○ High uncertainty
○ External control decreased rationality
● Decision-makers can move along the rationality vs bounded rationality continuum,
typically by increasing conflict
● Decision processes are often boundedly rational and so seek to improve the rationality,
usually by using more information and creating more diverse viewpoints
○ Groupthink is an excessive tendency to seek concurrence; divergence-inducing
antidotes:
■ Creating a devil’s advocate
■ Introducing outside experts
■ Encouraging argument
3
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