Decision Making, Learning, Creativity, and Entrepreneurship* *(related to Glass Ceiling ) Chapter Five Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

5-2 Learning Objectives LO1 Understand the nature of managerial decision making, differentiate between programmed and nonprogrammed decisions, and explain why nonprogrammed decision making is a complex, uncertain process. LO2 Describe the six steps that managers should take to make the best decisions LO3 Identify the advantages and disadvantages of group decision making, and describe techniques that can improve it

5-3 Learning Objectives LO4 Explain the role that organizational learning and creativity play in helping managers to improve their decisions. LO5 Describe how managers can encourage and promote entrepreneurship to create a learning organization, and differentiate between entrepreneurs and intrapreneurs

5-4 The Nature of Managerial Decision Making Decision Making – The process by which managers respond to opportunities and threats by analyzing options, and making determinations about organizational goals and courses of action

5-5 Decision Making 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

5-6 Decision Making Non-Programmed Decisions – Non-routine decision making that occurs in response to unusual, unpredictable opportunities and threats. – “Battlefield” Decisions

5-7 Question? What are feelings, beliefs, and hunches that come readily to mind and require little effort? A.Reasoned Judgment B.Intuition C.Wild Guess D.Scientific Deduction

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 5-8

5-9 1-The Classical Model Classical Model of Decision Making – A prescriptive approach to decision making that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action

The Classical Model of Decision Making Figure

The Administrative Model Administrative Model of Decision Making (James March and Herbert Simon) – An approach to decision making that explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions – This model is based on 3 concepts: 1. Bounded rationality 2. Incomplete information 3. “Satisficing”

5-12 Bounded Rationality – Limitations that constrain one’s ability to interpret process and act on information

5-13 Causes of Incomplete Information Risk – The degree of probability that the possible outcomes of a particular course of action will occur (or may not occur) Uncertainty and Time Constraints – The probabilities of alternative outcomes cannot be determined and future outcomes are unknown

Why Information Is Incomplete Figure

Causes of Incomplete Information Ambiguous Information – Information that can be interpreted in multiple and often conflicting ways. Figure 5.3 Young Woman or Old Woman 5-15

5-16 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

5-17 Satisficing Satisficing – Searching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decision – Managers explore a limited number of options and choose an acceptable decision rather than the optimum decision

5-18 Decision Making Question: –What exactly is Decision Making? Answer: –Choosing among two or more alternatives.

Six Steps in Decision Making Figure

Steps in Decision Making 1. Define the situation 2. Describe and collect needed information 3. Develop alternatives 4. Develop agreement among those involved 5. Decide which alternative is best 6. Do what is indicated 7. Determine if the decision was good and follow up

5-21 Compare & Contrast 1. Define the situation 2. Describe and collect needed information 3. Develop alternatives 4. Develop agreement among those involved 5. Decide which alternative is best 6. Do what is indicated 7. Determine if the decision was good and follow up 1.Recognize the need for a decision 2. Generate Alternatives 3. Assess Alternatives 4. Choose Among Alternatives 5. Implement the choice 6. Learn from feedback

5-22 Discussion Question? Which is the most important step in the decision making process? (depends on the situation) A.Recognize the need for a decision B.Generate Alternatives C.Assess Alternatives D.Choose among Alternatives E.Implement the Chosen Alternative F.Learn from Feedback

5-23 Decision Making Steps Step 1. Recognize Need for a Decision Sparked by an event such as environmental changes. Managers must first realize that a decision must be made.

5-24 Decision Making Steps Step 2. Generate Alternatives Managers must develop feasible alternative courses of action – If good alternatives are missed, then the resulting decision is poor – It is hard to develop creative alternatives, so managers need to look for new ideas

5-25 Decision Making Steps Step 3. Evaluate Alternatives What are the advantages and disadvantages of each alternative? Managers should specify criteria, then evaluate.

Figure 5.5 General Criteria for Evaluating Possible Courses of Action 5-26

5-27 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

5-28 Decision Making Steps Step 5. Implement Chosen Alternative Managers must now carry out the alternative Often a decision is made and not implemented

5-29 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

Group Decision Making Superior to individual making Choices less likely to fall victim to bias Able to draw on combined skills of group members Improve ability to generate feasible alternatives Allows managers to process more information Managers affected by decisions agree to cooperate 5-30

5-31 Group Decision Making Groupthink – A pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision

5-32 Group Decision Making Devil’s Advocacy – Critical analysis of a preferred alternative to ascertain its strengths and weaknesses before it is implemented

5-33 Organizational Learning and Creativity Organizational Learning – The process through which managers seek to improve a employee’s desire and ability to understand and manage the organization and its task environment so as to raise effectiveness

Peter Senge’s Principles for Creating a Learning Organization Figure

5-35 Question? What is a decision maker’s ability to discover original and novel ideas that lead to feasible alternative courses of action? A.Risk B.Decision-making C.Creativity D.Inventiveness

Organizational Learning and Creativity Creativity – A decision maker’s ability to discover original and novel ideas that lead to feasible alternative courses of action Innovation – The implementation of creative ideas in an organization. 5-36

5-37 Building 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.

5-38 Building Group Creativity Production blocking – Loss of productivity in brainstorming sessions due to the unstructured nature of brainstorming Nominal Group Technique – A decision-making technique in which group members write down ideas and solutions, read their suggestions to the whole group, and discuss and then rank the alternatives

5-39 Building Group Creativity Delphi Technique – A decision-making technique in which group members do not meet face-to-face but respond in writing to questions posed by the group leader

5-40 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 Social entrepreneurs – Individuals who pursue initiatives and opportunities to address social problems and needs in order to improve society and well-being

5-41 Entrepreneurship and Creativity 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 – Post-it notes were invented by 3M's Art Fry, using an adhesive developed by a colleague, Spencer Silver

Entrepreneurship and Creativity Entrepreneurship – Mobilization of resources to take advantage of an opportunity to provide customers with new and improved goods and services 5-42

Intrapreneurship and Creativity Product champion – A manager who takes “ownership” of a project and provides the leadership and vision that take a product from the idea stage to the final customer Skunkworks – A group deliberately separated from normal operations to encourage them to devote all their attention to developing new products 5-43

Intrapreneurship and Creativity 5-44