5-1 Lecture 4 Decision Making, Entrepreneurship, Creativity and Organizational Culture

5-2 Managerial Decision Making  Decision Making  The process by which managers respond to opportunities and threats by analyzing options, and making determinations about specific organizational goals and courses of action

5-3 Decision Making  Programmed Decision  Routine, virtually automatic decision making that follows established rules or guidelines. Managers have made the same decision many times before There are rules or guidelines to follow based on experience with past decisions Little ambiguity involved

5-4 Decision Making  Non-Programmed Decisions  Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats.

5-5 Decision Making  Intuition  feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering and result in on-the-spot decisions  Reasoned judgment  decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives

5-6 Why Information Is Incomplete

5-7 Causes of Incomplete Information  Risk  The degree of probability that the possible outcomes of a particular course of action will occur  Uncertainty  the probabilities of alternative outcomes cannot be determined and future outcomes are unknown

5-8 Causes of Incomplete Information  Ambiguous information  Information that can be interpreted in multiple and often conflicting ways Young Woman or Old Woman

5-9 Causes of Incomplete Information  Time constraints and information costs  managers have neither the time nor money to search for all possible alternatives and evaluate potential consequences

5-10 Six Steps in Decision Making

5-11 Decision Making Steps Step 1. Recognize Need for a Decision  Sparked by an event such as environment changes.  Managers must first realize that a decision must be made.

5-12 Decision Making Steps Step 2. Generate Alternatives  Managers must develop feasible alternative courses of action  If good alternatives are missed, the resulting decision is poor  It is hard to develop creative alternatives, so managers need to look for new ideas

5-13 Decision Making Steps Step 3. Assess Alternatives  What are the advantages and disadvantages of each alternative?  Managers should specify criteria, then evaluate.

5-14 Decision Making Steps Step 4. Choose Among Alternatives  Rank the various alternatives and make a decision  Tendency is for managers to ignore critical information, even when available

5-15 Decision Making Steps Step 5. Implement Chosen Alternative  Managers must now carry out the alternative  Often a decision is made and not implemented

5-16 Decision Making Steps Step 6. Learn From Feedback  Compare what happened to what was expected to happen  Explore why any expectations for the decision were not met  Derive guidelines that will help in future decision making

5-17 Creativity  Creativity  A decision maker’s ability to discover original and novel ideas that lead to feasible alternative courses of action  Ways to promote individual creativity  Provide opportunities and freedom to generate new ideas  Provide constructive feedback  Promote the importance of looking for alternative solutions  Recognize and reward creativity

5-18 Promoting Group Creativity  Brainstorming  Managers meet face-to-face to generate and debate many alternatives.  Group members are not allowed to evaluate alternatives until all alternatives are listed.  When all are listed, then the pros and cons of each are discussed and a short list created.

5-19 Entrepreneurship and Creativity  Entrepreneurs  an individual who notices opportunities and decides how to mobilize the resources necessary to produce new and improved goods and services  Mobilization of resources to take advantage of an opportunity to provide customers with new and improved goods and services  Intrapreneur  a manager, scientist, or researcher who works inside an organization and notices opportunities to develop new or improved products and better ways to make them

5-20 Organizational Culture  Organizational Culture  Shared set of beliefs, expectations, values, norms, and work routines that influence how members of an organization relate to one another and cooperate to achieve organizational goals  Strong culture: Members share an INTENSE COMMITMENT to cultural values, beliefs and use them to achieve their goals.  Weak culture: Members are not strongly committed to shared values and beliefs.  Generally strong culture is relatively difficult to be changed and is less responsive to flexibility and diversity

5-21 Organizational Culture  Attraction-Selection-Attrition Framework  A model that explains how personality may influence organizational culture.  Founders of firms tend to hire employees whose personalities that are similar to their own  Employees who do not fit in tend to leave the organization over time

5-22 Factors that Maintain and Transmit Organizational Culture Organizational culture is maintained and transmitted to members through the values of the founder, the process of socialization, ceremonies and rites, and stories and languages.

5-23 Factors that Maintain and Transmit Organizational Culture  Organizational socialization  process by which newcomer’s learn an organization’s values and norms and acquire the work behaviors necessary to perform jobs effectively  Ceremonies and rites  Process of developing organizational formal events that recognize incidents of importance to the organization

5-24 Factors that Maintain and Transmit Organizational Culture  Founders’ values  Have important and long lasting effects to the development of organizational culture  Have a substantial influence on the values, norms and standards of behavior that develop over time within the organization.  Founders’ values also affect the selection of appropriate staff who can maintain and develop similar culture.

5-25 Factors that Maintain and Transmit Organizational Culture  Stories and Languages  Stories about organizational heroes and villains and their actions provide important clues about values and norms.  Stories can reveal the kinds of behaviors that are valued by the organization and the kinds of practices that are frowned on.  Languages used in organization, such as slang or jargon, are organization-specific words and phrases, which also provides important clues about norms and values.  Organizational languages also encompasses how people dress, the office they occupy, the cars they drive and the degree of formality they use when they address one another.