Chapter 9 Decision Making and Creativity You have to make good choices

Chapter 9 Study Questions What is involved in the decision-making process? What are the alternative decision-making models? What are key decision-making traps and issues? What can be done to stimulate creativity in decision making? Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? The process of choosing a course of action for dealing with a problem or opportunity. In our personal lives, at work, within teams, and in management in general, a continuing stream of information, data, problems, and opportunities fuel decision making. Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? Steps in Decision Making Recognize and define the problem Identify and analyze alternative courses of action. Choose a preferred course of action Implement the preferred course of action Lack-of-participation error – occurs when important people are excluded from the decision-making process. Evaluate the results and follow-up as necessary. Rational decision model Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? Define Problem Caution: Not too broad or narrow Caution: focus on problem, not symptom Caution: ID the right problem Analyze Alter-natives Determine exact information needed ID effect on stakeholders Make a Choice Consider time, cost, impact, and ethics Who makes the decision? (team or leader) Take Action Ensure that all affected parties have have input Necessary to secure ‘buy in’ from all Evaluate Results Have desired outcomes been attained? Has team performance been effective? Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? Ethics The philosophical study of morality or standards regarding good character and conduct. Moral problem One that poses major ethical consequences for the decision maker or for others. When we apply ethical reasoning to decisions made by individuals and teams in organizations, the focus is on moral problems and dilemmas that are associated with the decision-making process. It is possible to address a personal, management, or business problem and not properly consider any moral problems that might be associated with it. A preferred approach is to carefully examine the consequences of each alternative for all decision stakeholders, and make choices that minimize negative impact and maximize respect for everyone’s rights. Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? Moral dilemma Decision maker faces two or more ethically uncomfortable alternatives. Either alternative is potentially beneficial and harmful. Because moral dilemmas can be difficult to resolve, ethical reasoning helps ensure that the decisions will be made with rigor and thoughtful consideration. Indeed, a willingness to pause to examine the ethics of a proposed decision may well result in a better decision, preservation of respect and reputation for one’s self and the organization, and prevention of costly litigation and even jail. Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? Define problem Carefully review for ethical dilemmas Analyze Alternatives Consider implications for stakeholders, common good Make a Choice Choose best ‘ends’ and right ‘means’ Double check Utility, rights, justice, caring; transparency, public scrutiny Take Action Assure consistency of intended and taken actions Evaluate Results Check actual ends and means vs. intended ends and means ethics Figure 9.1 The figure links the steps in the decision-making process with corresponding issues of ethical reasoning. The figure suggests, we are advocating that an ethical reasoning approach be followed when decisions are made and that this approach be linked with each step in the decision-making process. In other words, decision making is incomplete without ethical analysis. Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? Ethical double checks Criteria Utility – all stakeholders satisfied? Rights – are all rights and duties respected? Justice – is it consistent with cannons of justice? Caring – is it consistent with responsibility to care? The ethical double checks is a way of testing to make sure our decisions at least meet personal moral standards. The recommended ethics double-checks are accomplished by asking and answering two sets of questions—criteria questions and spotlight questions. Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? Ethical Double Checks Spotlight Questions How would I feel if my family found out about this decision? How would I feel if the decision was published? What would the person you know or know of who has the strongest character do in this situation? Spotlight questions basically expose a decision to public scrutiny and forces us to consider it in the context of full transparency. They are especially powerful when a person comes from a morally scrupulous family background or social structure and prospects for shame would be very upsetting. Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? Programmed decisions Made as standardized responses to recurring situations and routine problems. Nonprogrammed decisions Specifically crafted or tailored to fit a unique situation. Crisis decision – unexpected problem threatens major harm and disaster if not resolved quickly and appropriately. Programmed decisions implement alternatives that are known to be appropriate for situations that occur somewhat frequently. Examples might include teams that review compensation or human resource policies for equity and justice, or those that manage recurring projects. Higher-level management teams generally spend a greater proportion of their decision-making time on nonroutine problems, but teams at all levels face them as well. An example is a marketing team that has to respond to the introduction of a new product by a foreign competitor. Although past experience may help deal with this competitive threat, the immediate decision requires a creative solution based on the unique characteristics of the present market situation. Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? Decisions are made in the context of three general environments. Certainty Risk Uncertainty Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? A decision environment is certain When information is sufficient to predict the results of each alternative in advance of implementation. Certainty is an ideal condition for managerial problem solving and decision making. The challenge is simply to locate the alternative that offers the best or ideal solution. Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? A decision environment is risky When decision makers lack complete certainty regarding the outcomes of various courses of action, but they are aware of the probabilities associated with their occurrence. Probabilities can be assigned through objective statistical procedures or through personal intuition. For instance, managers can make statistical estimates of quality rejects in production runs, or a senior production manager can make similar estimates based on past experience. Risk is a common decision environment in today’s organizations. Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? A decision environment is uncertain When managers have so little information on hand that they cannot even assign probabilities to various alternatives and their possible outcomes. This is the most difficult of the three decision environments. Uncertainty forces decision makers to rely heavily on individual and group creativity to succeed in problem solving. It requires unique, novel, and often totally innovative alternatives to existing patterns of behavior. Responses to uncertainty are often heavily influenced by intuition, educated guesses, and hunches. Copyright © 2012 John Wiley & Sons, Inc.

What is involved in the decision-making process? Risk Management Involves anticipating risks and factoring them into decision making. The recent financial crisis has shown once again the fact that many decisions are made in risk and uncertain environments. It has also prompted renewed interest in risk management, something often associated with insurance and finance. We use the term in general management as well, focusing on anticipating risk in situations and factoring risk alternatives into the decision-making process. Copyright © 2012 John Wiley & Sons, Inc.

Figure 9.3 Decision making viewed from the classical and behavioral perspectives The classical decision model views people acting in a world of complete certainty, whereas the behavioral decision model accepts the notion of bounded rationality and suggests that people act only in terms of what they perceive about a given situation. Copyright © 2012 John Wiley & Sons, Inc.

What are the alternative decision-making models? Classical decision model assumes a manager: Acts rationally and in a fully informed manner. Faces a clearly defined problem. Knows all possible action alternatives and their consequences. Chooses the optimum solution that give the absolute best solution to the problem. This classical decision model fits the five-step decision-making process described earlier. It is an ideal situation of complete information where the decision maker moves through the steps one by one in a logical fashion. And it nicely lends itself to various forms of quantitative decision analysis as well as to computer-based applications. Copyright © 2012 John Wiley & Sons, Inc.

What are the alternative decision-making models? Behavior decision model Suggests that people act only in terms of their perceptions, which are frequently imperfect. Satisficing decisions Decision makers choose the first alternative that appears to give an acceptable or satisfactory resolution of the problem. Behavioral scientists recognize that the human mind is a wonderful creation, capable of infinite achievements. But they also recognize that human beings have cognitive limitations—literally limits on what we are able to know at any point in time—that restrict our information-processing capabilities. The result is that information deficiencies and overloads compromise the ability of decision makers to achieve complete certainty and otherwise operate according to the classical model. They end up acting with bounded rationality in which things are interpreted and made sense of as perceptions and only within the context of the situation. They engage in decision making “within the box” of a simplified view of a more complex reality. Copyright © 2012 John Wiley & Sons, Inc.

What are the alternative decision-making models? Teams engage in two cognitive processes: Intuitive Problem approach that is flexible and spontaneous. A key element of decision-making under risky and uncertainty conditions. Systematic Problem approach utilizing a rational, analytic thinking. We expect teams engaged in systematic thinking to make a plan before taking action, and to search for information and proceed with problem solving in a fact-based and step-by-step fashion. We think of intuition as the ability to know or recognize quickly and readily the possibilities of a given situation. Its presence adds personality and spontaneity to decision making and, as a result, also offers the potential for creativity and innovation. Especially in conditions of risk and uncertainty, decisions in organizations rely on impressions; people involved in them are more likely to synthesize than to analyze data as they search for the “big picture” in order to redefine problems and link problems with a variety of solutions. Things have to be done fast, a variety of things have to be done, and the people doing all this are frequently interrupted. When there isn’t a lot of time to think, plan, or make decisions systematically, we should be confident in tapping our own or a team’s intuitive skills. Copyright © 2012 John Wiley & Sons, Inc.

What are key decision-making traps and issues? Judgmental heuristics Simplifying strategies or shortcuts used to make decisions. Make it easier to deal with uncertainty and limited information common to problem situations. Judgment, or the use of one’s intellect, is important in all aspects of decision making. When we question the ethics of a decision, for example, we are questioning the judgment of the person making it. Research shows that people are prone to mistakes using biases that often interfere with the quality of decision making. Copyright © 2012 John Wiley & Sons, Inc.

What are key decision making traps and issues? Availability heuristic Involves assessing a current event based on past occurrences that are easily available in one’s memory. Representativeness heuristic Involves assessing the likelihood that an event will occur based on its similarity to one’s stereotypes of similar occurrences Availability heuristic: An example is the product development specialist who decides not to launch a new product because of her recent failure with another product offering. In this case, the existence of a past product failure has negatively, and perhaps inappropriately, biased her judgment regarding how best to handle the new product. Representativeness heuristic: An example is the team leader who selects a new member, not because of any special qualities of the person, but only because the individual comes from a department known to have produced high performers in the past. In this case, the individual’s current place of employment—not his or her job qualifications—is the basis for the selection decision. Copyright © 2012 John Wiley & Sons, Inc.

What are key decision making traps and issues? Anchoring and adjustment heuristic Involves assessing an event by taking an initial value from historical precedent or an outside source and then incrementally adjusting this value to make a current assessment. An example is the executive who makes salary increase recommendations for key personnel by simply adjusting their current base salaries by a percentage amount. In this case, the existing base salary becomes an “anchor” that drives subsequent salary increases. In some situations this anchor may be inappropriate, such as in the case of an individual whose market value has become substantially higher than is reflected by the base salary plus increment approach. Copyright © 2012 John Wiley & Sons, Inc.

What are key decision making traps and issues? Decision Bias Confirmation error – only seeking cues in a situation that support a preexisting opinion. Hindsight error– overestimate the degree to which an event that has already taken place could have been predicted . Framing error - tendency to evaluate and resolve a problem in the context in which it is perceived – either positive or negative. Copyright © 2012 John Wiley & Sons, Inc.

What are the key decision-making traps and issues? In choosing problems to address, try the following checklist: What really matters? Might the problem resolve itself? Is this my or our problem? Will time spent make a difference? Not only do decision makers have to be on guard against errors caused by heuristics and biases, but they also have to manage the decision-making process itself by making the right decisions in the right way at the right. One of the first issues is whether to actually address a decision situation. Most people are too busy and have too many valuable things to do with their time to personally make decisions on every problem or opportunity that comes their way. The effective manager and team leader knows when to delegate decisions to others, how to set priorities, and when to abstain from acting altogether. When faced with the dilemma of whether or not to deal with a specific problem, asking and answering the four questions can sometimes help. Copyright © 2012 John Wiley & Sons, Inc.

What are the key decision-making traps and issues? Authority decisions Manager or team leader uses information that he or she possesses and decides what to do without involving others. Copyright © 2012 John Wiley & Sons, Inc.

What are the key decision-making traps and issues? Consultative decisions Manager or team leader solicits input from other people and then, based on this information, the decision maker arrives at a final choice. Copyright © 2012 John Wiley & Sons, Inc.

What are the key decision-making traps and issues? Team decisions Group members work together to make the final choice. True group decisions can be made by both consulting with others and allowing them to help make the final choice. Copyright © 2012 John Wiley & Sons, Inc.

Figure 9-4 Vroom-Jago Decision -Making Model Decision tree developed for managers by Vroom, Yetton, and Jago. It provides a framework that managers can refer to. Authority decisions: Variant 1  manager solves the problem or makes the decision alone, using information available at that time. Variant 2  manager obtains the necessary information from team members then decides on the problem’s solution. The team members provide the necessary information from team members and then decides on the problem’s solution. Team members provide the necessary information but do not generate or evaluate alternatives. Consultative decisions: Variant 1  manager shares the problem with team members individually, getting their ideas and suggestions without brining them all together. The manager then makes the final decision. Variant 2  manager shares the problem with team members, collectively obtaining their ideas and suggestions. The manager then makes a decisions. Team decisions: Classified as “G”, (team or consensus decision) – manager shares the problem with team members as a total group and engages them in consensus seeking to arrive at a final decision. Copyright © 2012 John Wiley & Sons, Inc.

What are the key decision-making traps and issues? Escalating commitment Continuation and renewed effort on a previously chosen course of action, even though it is not working. Avoid by: Setting limits on your involvement and commitment. Making your own decisions. Determining reasons for continuing a course of action. Considering costs of a course of action. Escalating commitments are a form of decision entrapment that leads people to do things that the facts of a situation do not justify. We should be proactive in spotting “failures” and more open to reversing decisions or dropping plans that do not appear to be working. But again, this is easier said than done. The tendency to escalate commitments often outweighs the willingness to disengage from them. Decision makers may rationalize negative feedback as a temporary condition, protect their egos by not admitting that the original decision was a mistake, or characterize any negative results as a “learning experience” that can be overcome with added future effort. Copyright © 2012 John Wiley & Sons, Inc.

What can be done to stimulate creativity in decision-making? Involves the generation of a novel idea or unique approach to solving performance problems or exploiting performance opportunities. In a dynamic environment full of novel and challenging problems as well as vague but intriguing opportunities, creativity in crafting decisions often determines how well people, teams, and organizations do in response to complex challenges. Copyright © 2012 John Wiley & Sons, Inc.

Figure 9.5: Individual and Team Creativity Drivers Copyright © 2012 John Wiley & Sons, Inc.

What can be done to stimulate creativity in decision-making? Personal creativity drivers Task expertise Task motivation Creativity skill set Copyright © 2012 John Wiley & Sons, Inc.

What can be done to stimulate creativity in decision-making? Team creativity drivers Decision techniques Creative membership External support Some of the other techniques used when teams are trying to become more creative in decision making include: • Associative play—making up and telling stories, engaging in art projects, and building toy models that come to mind when dealing with a problem. • Cross pollination—switching members among teams to gain insights from diverse interests, backgrounds, and experiences when working on problems. • Analogies and metaphors—using analogies and metaphors to describe a problem and open pathways to creative thinking. Copyright © 2012 John Wiley & Sons, Inc.

In your experience An interesting site with simulations and training on creative techniques and ways to enhance your own individual creativity. Brainstorming.co.uk Copyright © 2012 John Wiley & Sons, Inc.