Decision-Making Models in Business Organizations

  Non-cognitive theories see behavior as caused by environmental contingencies. The major cognitive theories are equity theory, goal-setting theory, and expectancy theory.  All of them focus on perceptions of the outcomes that flow from behavior. .

             Equity theory suggests that motivated behavior is a form of exchange in which individuals employ an internal balance sheet in determining what to do.  It predicts that people will choose the alternative they perceive as fair.  The components of equity theory are inputs, outcomes, comparisons, and results.  Inputs are the attributes the individual brings to the situation and the activities required. Outcomes are what the individual receives from the situation.  The comparisons are between the ratio of outcomes to inputs and some standard. Results are the behaviors and attitudes that flow from the comparison, but other standards of comparison, including oneself in a previous situation, seem equally probable (Adams, 1965).  .

             Goals setting theories argue that employees set goals and that organizations can influence work behavior by influencing these goals.  The major concepts in the theory are intentions, performance standards, goal acceptance, and the effort expended. These concepts are assumed to be the motivation.  Participation in goal setting should increase commitment and acceptance.  Individual goal setting should be more effective than group goals because it is the impact of goals on intentions that is important. In goal-setting theory the crucial factor is the goal.  Although the incentive or reward may affect goal acceptance and commitment, neither are the critical element.  Tests of the theory show that using goals leads to higher performance than situations without goals, and that difficult goals lead to better performance than easy ones (Mitchell, 1979).  Although participation in goal setting may increase satisfaction, it does not always lead to higher performance.

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