Organizational Decision Making: An Information Aggregation View

Abstract

We study four information aggregation structures commonly used by organizations to evaluate opportunities: individual decision making, delegation to experts, majority voting, and averaging of opinions. Using a formal mathematical model, we investigate how the performance of each of these structures is contingent upon the breadth of knowledge within the firm and changes in the environment. Our model builds on work in the Carnegie tradition and in the group and behavioral decision-making literatures. We use the model to explore when delegation is preferable to other structures, such as voting and averaging. Our model shows that delegation is the most effective structure when there is diversity of expertise, when accurate delegation is possible, and when there is a good fit between the firm's knowledge and the knowledge required by the environment. Otherwise, depending on the knowledge breadth of the firm, voting or averaging may be the most effective structure. Finally, we use our model to shed light on which structures are more robust to radical environmental change and when crowd-based decision making may outperform delegation. This paper was accepted by Jesper Sørensen, organizations.

Intrinsic Variability in Group and Individual Decision Making

“…In our framework, the reverse holds but the tools developed here can be easily implemented in their framework. Furthermore, the delegation procedure in Csaszar and Eggers (2013) is in exact correspondence to the model developed in the present paper.…”

“…Next, denote pq = (p q), qr = (q r) ; pr = (p r) ; and 9 We are grateful to one of the reviewers for referring us to this analysis and for inducing us to clarify the relationship between this approach and the propositions of Section 4.2. 10 An example of a transitve linear order is a preference ranking such that p is preferred to both q and r, and q is preferred to r. = pq ; pr ; qr . It can be veri…ed that a PDM with a probability distribution satis…es WST if and only if the vector belongs to the unshaded area in Figure 2 panel (a), that is, to the complement of the union of the two shaded half-cubes.…”

Manipulative Imputation in Distributed Decision Support Settings: The Implications of Information Asymmetry and Aggregation Complexity

“…the search for and processing of information, and evaluation and implementation of options (Csaszar & Eggers, 2013;Gavetti et al, 2007;Simon, 1972Simon, , 1997. Intuitively, more information reduces uncertainty, and can lead to a better payoff.…”

“…Our study examines such imputations during instances of information aggregation, as the pooling of information over many individuals making a group decision is referred to (Bettencourt, 2009;Csaszar & Eggers, 2013). In particular, it examines the effects of two systemic GDSS features on the group member's tendency to deceive: 1) the presence of information asymmetries during the aggregation of information, and 2) the complexity characterizing this aggregation.…”

Relations between mental workload and decision-making in an organizational setting

“…They are, in turn, developed in contexts far from the classical paradigms of rational choice. Thus, decisions are conditioned by elements such as open problems; uncertain and dynamic settings; changing, multiple, and competitive goals; multiple feedbacks; time pressure and contrasts; consequences involving some risk; multiple decision-makers; and external standards (Orasanu & Connolly, 1993;Csaszar & Eggers, 2013). DM has critical effects on professional achievement and acquires special relevance when performance and actions involve direct consequences on people's integrity or well-being (Secchi, 2014).…”