1. 5-1 Ch.5 Decision-Making, Learning, Creativity & Entrepreneurship 1. Review Lecture Slides 2. Review Lecture Notes & Chapter out-of-class 3. Complete and discuss ‘Joseph & the Company Party’ Case in class 4. Review and discuss De Witt Jones ‘Everyday Creativity’ and its association with business leadership (shown in class) 5. See leadership forms slide deck and discussion 6. Introduce & play Creative Whack Pack card games

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

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

4. The Nature of Managerial Decision Making Decision making: Process by which managers respond to opportunities and threats by analyzing options, and making determinations about specific organizational goals and courses of action

5. 5-5 Scan & SWOT The combination of an Environmental Scan and a S.W.O.T. Analysis is called SITUATION ANALYSIS Scans & SWOTS are targeted i.e. don’t scan the broader external environment “willy-nilly” – ask ‘how external factors and forces in the environment beyond the company impact specific challenges (opportunities or situations) Equally S.W.O.T.S are also typically narrowed to areas of business strategy under consideration e.g. a new product launch, JV, market segmentation etc. pricing, channel distribution

6. 5-6 Environmental scanning provides relevant information about external business environment Changes in the marketing environment are a source of opportunities and threats to be exploited and/or managed Environmental scanning is process of continually acquiring information on events occurring outside the organization to identify and interpret potential trends Environmental trends typically arise from five sources: social, economic, technological, competitive, and regulatory forces An environmental scan may uncover and explain trends that affect business in the future ES information must be carefully directed & included in SWOT or Situation Analysis. Timely, focused information is an important business function and source of value creation, profitability & competiveness

7. 5-7 Organizational Structure and Environmental Scan

8. 5-8 e.g. Ben & Jerry’s SWOT Next two slides show four cells internal versus external factors (the rows) and favorable versus unfavorable factors (the columns) to summarize strengths, weaknesses, opportunities, and threats: SWOT Analysis:  Build on a strength: Find distribution efficiencies with Unilever’s existing ice cream brands  Correct a weakness: Recruit experienced managers from other consumer products firms to help stimulate growth  Exploit an opportunity: Develop a new line of low-fat frozen yogurts to respond to consumer health concerns  Avoid a disaster-laden threat: Focus on less risky international markets, such as Canada and Mexico

9. 5-9 Four alternative market-product strategies for Ben & Jerry’s to expand sales revenues using diversification analysis

10. 5-10 Ben & Jerry’s SWOT analysis that serves as the basis for management actions regarding growth

11. 5-11 Summary of factors that affect an organization’s decision program

12. 5-12 The Diverse Forces Influencing Business Activities Other people, groups & forces interact w/ business to shape its activities: a.The organization itself, whose mission and objectives determine what business it is in and what goals it seeks b.Management is responsible for establishing these goals & corporate strategy to satisfy them c.The marketing department works w/ other departments to develop products and facilitate relationships with customers, shareholders, suppliers, & other organizations Environmental forces shape an organization’s activities & include social/cultural technological, economic, competitive, ecological and ethical/regulatory forces a. i.e. business is affected by and impacts society and culture b. The organization must strike a continual balance among competing interests of customers, suppliers, channel partners, employees, & shareholders

13. Decision Making Programmed decision: Routine, virtually automatic decision making that follows established rules or guidelines Managers have made these decisions many times before Define rules or guidelines to follow based on experience with past decisions Little ambiguity involved

14. Decision Making Non-programmed decisions: Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats In the absence of decision rules managers may rely on their intuition

15. Decision Making Intuition Feelings, beliefs, and hunches that come readily to mind Require little effort and information gathering Result in on-the-spot decisions Reasoned judgment Decisions that take time and effort Result from careful information gathering, generation of alternatives, and evaluation of alternatives

16. The Classical Model of Decision Making Prescriptive model that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action Optimum decision: Most appropriate decision in light of what managers believe to be the most desirable consequences for the organization

17. The Classical Model of Decision Making

18. The Administrative Model of Decision Making 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 Bounded rationality, incomplete information

19. Figure 5.2 - Why Information Is Incomplete

20. Causes of Incomplete Information Risk: Degree of probability that the possible outcomes of a particular course of action will occur Uncertainty: When the probabilities of alternative outcomes cannot be determined and future outcomes are unknown Ambiguous information: Information that can be interpreted in multiple and conflicting ways

21. 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 Satisficing: Searching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decision

22. Figure 5.4 - Six Steps in Decision Making

23. Decision Making Steps Step 1 - Recognize need for a decision Sparked by stimuli such as changes in the organizational environment Managers who actively pursue opportunities to use these competencies create the need to make decisions

24. Decision Making Steps Step 2 - Generate alternatives Managers must develop feasible alternative courses of action Failure to properly generate and consider different alternatives sometimes leads to bad decisions It is hard to develop creative alternative solutions

25. Decision Making Steps Step 3 - Assess alternatives Key to a good assessment of the alternatives Define the opportunity or threat exactly Specify the criteria that should influence the selection of alternatives

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

27. Decision Making Steps Step 4 - Choose among alternatives Rank the various alternatives and make a decision There is a tendency for managers to ignore critical information, even when available

28. Decision Making Steps Step 5 - Implement chosen alternative Managers must now implement the selected course of action Implementing the chosen course of action would require making subsequent decisions Managers should take up the responsibility for making the follow-up decisions necessary to achieve the goal

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

30. Group Decision Making Superior to individual decision making Choices less likely to fall victim to bias Able to draw on combined skills, competencies, and accumulated knowledge of group members Improve ability to generate feasible alternatives and make good decisions Allows managers to process more information Probability of the decision being implemented successfully increases

31. Group Decision Making Groupthink Pattern of faulty and biased decision making that occurs in groups Members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision Devil’s advocacy: Critical analysis of a preferred alternative to ascertain its strengths and weaknesses before it is implemented

32. Diversity Among Decision Makers Promoting diversity improves group decision making Bringing together managers of both genders from various ethnic, national, and functional backgrounds broadens the range of life experiences and opinions

33. Organizational Learning and Creativity Organizational learning: Process through which managers seek to improve a employee’s desire and ability to understand and manage the organization and its task environment Creativity: Decision maker’s ability to discover original and novel ideas that lead to feasible alternative courses of action Innovation: Implementation of creative ideas in an organization

34. Figure 5.6 - Senge’s Principles for Creating a Learning Organization

35. Promoting Individual Creativity Creativity results when employees have an opportunity to experiment, to take risks, and to make mistakes and learn from them Creativity can be fostered by giving constructive feedback and rewarding employees who come up with creative ideas

36. Promoting Group Creativity Brainstorming One manager describes in broad outline the problem the group is to address Group members share their ideas and generate alternatives Each alternative is described, and one member records the alternatives on a flip chart Group members are encouraged to be as innovative and radical as possible When all are listed, the pros and cons of each are discussed and a short list created

37. Promoting Group Creativity Production blocking: Loss of productivity in brainstorming sessions due to the unstructured nature of brainstorming Nominal group technique: 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

38. Promoting Group Creativity Delphi technique: Decision-making technique in which group members do not meet face-to-face but respond in writing to questions posed by the group leader

39. 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

40. 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

41. Characteristics of Entrepreneurs High on the personality trait of "openness to experience" Are daring and willing to take risks Have an internal locus of control Possess a high level of self-esteem Have a high need for achievement Have a strong desire to perform challenging tasks and meet high personal standards of excellence

42. Entrepreneurship and Management Entrepreneurship Noticing an opportunity to satisfy a customer need and then deciding how to find and use resources to make a product that satisfies that need Management Encompasses all the decisions involved in planning, organizing, leading, and controlling resources

43. Intrapreneurship and Organizational Learning Intensity of competition from agile and small companies has driven large, established organizations to promote intrapreneurship 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 who is deliberately separated from normal operations to encourage them to devote all their attention to developing new products

44. Rewards for Innovation Organizations must reward intrapreneurs equitably if they wish to prevent them from leaving and becoming outside entrepreneurs

45. 5-45 Case Work and Activities 1. Ethics scenarios and ethical reasoning/decision- making 2. Joseph and the Company Party – Ethics, decision- making and leadership case (MK) 3. De Witt Jones ‘Everyday Creativity’ video and discussion 4. Creative Whack Pack – Card Games (teams) Decision-Making, Creativity, Business Challenges and Management