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Decision Theory in Complex Systems

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In an organization, management is the agent that makes decisions. Once the decision has been made and implemented, systems of review and feedback are put into place to ensure the actions of the organization move toward accomplishment of the chosen solution. Ralph Stacey, in his book Complexity and Creativity in Organizations describes this feedback loop: “The second time around the loop, discovery consists of monitoring the actual outcome against the intended outcome expressed in the plan and feeding any deviation between them back into the choice procedure to identify corrective action. Choice and action then consists of choosing in carrying out this corrective action. The whole purpose of this technically rational decision-making and this monitoring form of control is to remove surprises, to damp down change and keep an organization moving stably through time according to the joint, prior intention of its members.” Thus the process of decision-making changes from rational to one of power and control in the organization.

Many criticisms are leveled against this approach to decision making. No individual organization can claim to be totally rational and ignore the input of preference and emotion in the decision-making process. Possible options and alternatives considered in the decision making process may not represent all the options actually available, especially if the time horizon is far off. The process of assigning expected values to the available options is not as precise as pictured. If the decision time frame is long, expected values may change radically or vanish. Uncertainty in the decision-making process does not represent lack of knowledge, but reflects those elements that are actually unknowable.

Stacey summarizes the heart of the criticisms, “The immediate conclusion drawn is that ignorance can be overcome by greater investment in gathering information, funneling it to some central point or it can be analyzed, and then feeding it back to the actors. The dominant schema therefore leads people to believe that ignorance can be overcome by research into organizational excellence, incompetence can be overcome by training and developing managers, and systems can be used to prevent bad behavior.”

The problem with decision theory, as we have described it, is that it is based on a Newtonian clock-like universe and does not accurately describe the universe as it really exists. The science of Complexity Theory provides us with a much better framework to understand the dynamic process of decision-making in organizations.

Decision Making in Complex Organizations

Organizations are complex systems. A system can be considered complex if its agents meet four qualifications: diversity, connection, interdependence, and adaptation. In an organization the agents are all the people who work within the organization. These agents are diverse in that they are individuals with their own unique personalities, experiences, intelligence, emotions, preferences, etc. They are connected with each other by affiliation within the organization for the purpose of achieving the goals of the organization. They are interdependent since the work of each depends upon the other members of the organization. They adapt because each member of the organization is learning, changing, and evolving as a result of his interactions with the other members of the organization.

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