CHAPTER 7 DECISION MAKING AND CREATIVITY Describe the six stages in the rational choice decision process Decision making: the conscious process of making choices among alternatives with the intention of moving toward some desired state of affairs. Rational choice paradigm of decision making: the view in decision making that people should and typically do, use logic and all available information to choose the alternative with the highest value. Decision making involves identifying, selecting and applying the best possible alternative.
The best decision use pure logic and all available information to choose the alternative with the highest value Such as highest expected profit, customer satisfaction, employee wellbeing or some combination of these outcomes. Subjective expected utility: the probability (expectation) of satisfaction (utility) resulting from choosing a specific alternative in a decision. Decision making process: systematic application of stages of decision making. 1. Identify problem or opportunity 2. Choose the best decision process 3. Develop alternative solutions 4. Choose the best alternative . Implement the selected option 6. Evaluate decision outcomes Problem with Rational choice paradigm: 1. Impossible to apply in reality 2. Difficulty recognising problems 3. Process the huge volume of information 4. Difficulty recognising when choices have failed 5. Focusing on logical thinking, ignores emotion influence making decision IDENTIFYING PROBLEMS AND OPPORTUNITIES Explain why people have difficulty with it Problem identification is not just the first step in decision making: it is the most important There are five most widely recognised concerns.
Stakeholder framing: attention-based theory of the firm: states that, organisational decisions and actions are influenced mainly by what attracts management’s attention, rather than by objective reality. Mental mode: if an idea does not fit the existing mental mode of how things should work, the idea is dismissed as unworkable or undesirable. Decisive leadership: being decisive includes quickly forming an opinion of whether an event signals problem or opportunity.
Many decisions happens too quickly before having a chance to logically assess the situation, more often it is a poorer decision than would result if more time had been devoted to identify the problem and evaluating the alternatives. Solution-focused problems: decision makers engage in solution-focused problem identification because it provides comforting closure to the otherwise ambiguous and uncertain nature of problems. Perceptual defence: people sometimes block out bad news as a coping mechanism. Some people inherently avoid negative information.
People are more likely to disregard danger signals when they have limited control over the situation. Identifying problems and opportunities more effectively * Be aware of the 5 problem identification biases * Increase awareness of problem identification, need willpower to resist the temptation of looking decisive * Create a norm of “divine discontent” * Discussing the situation with others to ease difficulty EVALUATING AND CHOOSING ALTERNATIVES Explain why people do not follow the rational choice model when evaluating alternative choices
Bounded rationality: the view that people are process limited and imperfect information and rarely select the best choice. Problem with goals: assumes that organisational goals are clear and agreed on. Goals are often ambiguous or in conflict with each other. Problem with information processing: assumes that decision makers can process info about all alternatives and in their consequences, but it is not possible in reality. Implicit favourite: preferred alternative that the decision maker uses repeatedly as a comparison with other choices. iased decision heuristics: key element of rational choice paradigm, as people can estimate the probabilities of outcomes. 1. Anchoring and adjustment heuristic: people to be influenced by an initial anchor point such that they do not sufficiently move away from that point as new info is provided. Initial info influences evaluation of subsequent info 2. Availability
Representativeness heuristic: we estimate probabilities by how much they are similar to something else, even when better information available. Problem with maximisation: people engage in satisficing, selecting an alternative that is good enough rather than the alternative with the highest value. To choose the best alternative is also demand more info processing capacity than what they willing to apply. Making the best choice among many, can be cognitively and emotionally draining. Evaluating opportunities: opportunity is different from the process of problem solving.
Decision makers not evaluate alternatives, after all, the opportunity is the solution, so why look further, they tend to have an emotional attachment to the opportunity. EMOTIONS AND MAKING CHOICES: Describe 3 ways in which emotions influences the selection of alternatives 1. Emotions from early preferences: emotions form preferences before we consciously evaluate those choices 2. Emotions change the decision evaluation process: moods and emotions influence how well we follow the decision process. . Emotions serve as info when we evaluate alternatives: we “listen in” on our emotions and use that info to make choices Intuitive decision making: ability to know when a problem or opportunity exist and select the best action without conscious reasoning. * Gut feelings we experience are emotional signals that have enough intensity to make us aware * Not all emotional signals are intuitions * Intuitions are involves rapidly comparing nonconscious analysis Making choices more effective: Systematically evaluate alternatives against relevant factors * Be aware of effects of emotions on decision preferences and evaluating process * Scenario planning: imagining possible future, choosing the best possible solution long before they occur Evaluating decision outcomes: confirmation bias known as “post-decisional justification” * Forget or downplay the negative features of selected alternative and highlight the positive features * Typically nonconscious and driven by emotions * Gives people an excessively optimistic evaluation of their decision
Escalation of Commitment: the tendency to repeat an apparently bad decision or allocate more resources to a falling course of action 4 main causes of escalation: 1. Self-justification: individuals motivated maintain course of action when need to justify their action 2. Prospect theory effect: a natural tendency to feel more dissatisfaction from losing a particular amount than satisfaction from gaining an equal amount 3. Perceptual blinders: occurs because decision makers do not see the problems soon enough, they screen out or explain away negative information, serious problems looks like random errors 4.
Closing costs: decision makers will because the cost of ending the project are high or unknown Evaluating decision outcomes more effectively: * Separate decision makers from evaluators to minimise self-justification * Establish a preset level to abandon or re-evaluate the project * Find a source of systematic and clear feedback * Involve several people in the evaluation EMPLOYEE INVOLVMENT IN DECISION MAKING Describe benefits of employee involvement in decision making Employee involvement: when employees influence how their work is organised and carried out Benefits: improves quality and commitment – recognising problem more quicker – defining problem more accurately – improve solutions generated – specific conditions improves the evaluation of alternatives Contingencies of employee involvement Identify four option thet affect the optimal level of employee involvement 1. Decision structure: decision can be programmed and non-programmed, programmed decision need less involvement, because solution is already worked out from past incidents 2. Source of decision knowledge: employee have relevant knowledge than leaders, it is improves decision quality 3.
Decision commitment: participation is improving employee commitment 4. Risk of conflict: employee goals and norms conflict with the organisation’s goals, whether employees will reach agreement on the preferred solution CREATIVITY Outline the four steps in creative process Creativity: the development of original ideas that make a socially recognised contribution Rely on to find problems, alternatives and implement solutions Creative process: 1. Preparation: person or team effort to gain knowledge and skills regarding the problem or opportunity, clear understanding of what we are trying to achieve 2.
Incubation: the period of reflective thoughts, put the problem aside, however our mind is still working on it, maintain a low level of awareness…”divergent thinking” reframing the problem and generating different approaches to the issue “convergent thinking”: calculating the accepted “right answer” to logical problem 3. Insight: refers to experience of suddenly becoming aware of a unique idea CHARACTERISTICS OF CREATIVE PEOPLE Describe the characteristics of creative employee and workplaces that support creativity 1.
Cognitive and practical intelligence: creative people recognise the significance of small bits of information and are able to connect them in ways like no one else could imagine, they also have practical intelligence, the capacity to evaluate the potential usefulness of their ideas 2. Persistence: higher need for achievement, a strong motivation from the task itself and a moderate or high degree of self-esteem, persistence is vital because creative ideas meet with plenty of resistance from others as well as failures along the way to success 3.
Subject knowledge and experience: creative people have sufficient knowledge and experience on subject 4. Independent imagination: -high openness to experience, moderately low need for affiliation, high self-direction stimulation values Creative work environment * Learning orientation: leaders recognise that employees make reasonable mistakes as part of the creative process, and need to tolerate “creativity comes from failure” * Work motivation: employees can be more creative if they believe their work. Benefit the organisation * Open communication and sufficient resources Activities that encourage creativity