Consensus in team decision making involving resource allocation

Purpose – The purpose of this paper is to provide a practical method to be used in team decision making when allocating resources. Design/methodology/approach – The paper proposes the following hypothesis: the selected team consensus strategy from among all available strategies must have minimum sum of squares of monetary regrets. A general algebraic representation of the above hypothesis is developed. Findings – This hypothesis can be interpreted as a Nash equilibrium involving mixed strategies when the entire problem is viewed in game theoretic framework. The paper provides an explanation in quantitative terms of the reasoning process pursued by five business college department chairs faced with three strategies, in an actual consensus decision making to illustrate the above hypothesis. By making observations of the behavior of decision makers in the selection of a budget allocation formula, the paper shows that the hypothesis holds true for the specific reasoning process pursued by the chairs in arriving at the consensus solution. However, the chairs' consensus solution is found to be a local solution vis‐à‐vis the global optimal solution found by solving the game theoretic model. Research limitations/implications – The authors plan to conduct further empirical testing of the hypothesis using allocation strategies found in diverse decision‐making environments involving diverse decision makers such as business executives, government officers, education administrators, and others. Practical implications – If this hypothesis can be validated to be true, decision makers should propose for consideration only those rational strategies that have minimal or low variance in monetary regrets since these are the strategies that would most likely be selected in team decision making. Originality/value – Team decision making involving resource allocation abounds in all organizations, at all levels and in diverse applications. The practical procedure proposed in this paper, based on analytical foundation of game theory, provides decision makers a viable tool for allocating resources that results in consensus of all rational parties involved.