Organizational Constraints On Decision Making.

 

We turn here to a discussion of organizational constraints. Organizations can constrain decision makers, creating deviations from rational model.

 

Performance Evaluation

Managers are strongly influenced by the criteria on which they are evaluated. If a division manager believes the manufacturing plants under his responsibility are operating best when he hears nothing negative, we shouldn't be surprised to find his plant managers spending a good part of their time ensuring that negative information does not reach him.

 

Reward System

The organization's reward system influences decision makers by suggesting what choices have better personal payoffs. If the organization rewards risk aversion, managers are more likely to make conservative decisions.

 

Formal Regulations

All but smallest organizations create rules and policies to program decisions and get individuals to act in the intended manner. And of course, in doing so, they limit decision choices.

 

System-Imposed Time Constraints

Almost all important decisions come with explicit deadlines. A report on new-product development may have to be ready for executive committee by the first of the month. Such conditions often make it difficult, if not impossible, for managers to gather all the information they might like before making a final choice.

 

Historical Precedents

Decisions aren't made in vacuum, they have a context. In fact, individual decisions are points in a stream of choice. Those made in the past are like ghosts haunt and constrain current choices. It is common knowledge that the largest determinant of the size of any given year´s budget is the last year´s budget. Choices made today are largely a result of choices made over the years.