Creative Problem Solving and Decision Making Chapter 4 Creative Problem Solving and Decision Making PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business and Economics. All rights reserved.

Problem Problem Solving Decision Making The Relationship among Objectives, Problem Solving, and Decision Making Problem Exists whenever objectives are not being met. What is happening vs. what is wanted to happen Problem Solving The process of taking corrective action to meet objectives. Decision Making The process of selecting an alternative course of action that will solve a problem. First decision is whether to take corrective action. Copyright © 2006 Thomson Business and Economics. All rights reserved.

The Decision-Making Model A six-step process that when properly utilized increases chances of success in decision making and problem solving. Exhibit 4–1 Copyright © 2006 Thomson Business and Economics. All rights reserved.

Copyright © 2006 Thomson Business and Economics. All rights reserved.

Decision-Making Styles Reflexive Style Makes quick decisions without taking the time to get all the information that may be needed and without considering all the alternatives. Reflective Style Takes plenty of time to make decisions, gathering considerable information and analyzing several alternatives. Consistent Style Tends to make decisions without either rushing or wasting time. Copyright © 2006 Thomson Business and Economics. All rights reserved.

Decision Making in the Global Village U.S.-based decision-making styles are different from the decision-making styles in other cultures due to differences in: Time orientation The use participative decision making Orientation toward problem solving rather than acceptance of the status quo Copyright © 2006 Thomson Business and Economics. All rights reserved.

Decision Structure Programmed Decisions Nonprogrammed Decisions Recurring or routine situations in which the decision maker should use decision rules or organizational policies and procedures to make the decision. Nonprogrammed Decisions Significant and nonrecurring and nonroutine situations in which the decision maker should use the decision-making model. Copyright © 2006 Thomson Business and Economics. All rights reserved.

Decision Structure Continuum Nonprogrammed Decision: Significant, nonrecurring, and nonroutine (Longer period of time to make decisions) Programmed Decision: Nonsignificant, recurring, and routine (Shorter period of time to make decisions) Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–2

Decision-Making Conditions Certainty Each alternative’s outcome is known in advance. Risk Probabilities can be assigned to each outcome. Uncertainty Lack of information or knowledge makes the outcome of each alternative unpredictable such that no probabilities can be determined. Copyright © 2006 Thomson Business and Economics. All rights reserved.

Copyright © 2006 Thomson Business and Economics. All rights reserved.

Decision-Making Models Rational Model (Classical Model) The decision maker attempts to use optimizing, selecting the best possible alternative. The Bounded Rationality Model The decision maker uses satisficing, selecting the first alternative that meets the minimal criteria for solving the problem. Copyright © 2006 Thomson Business and Economics. All rights reserved.

Continuum of Decision-Making Conditions Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–3

Potential Advantages and Disadvantages of Using Group Decision Making Better-quality decisions More information, alternatives, creativity, and innovation Better understanding of the decision Greater commitment to the decision Improved morale and motivation Good training Potential Disadvantages Wasted time and slower Satisficing Domination and goal displacement Conformity and groupthink Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–4

Continua for Classifying a Problem Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–5

Continua for Classifying a Problem (cont’d) Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–5 cont’d

Define the Problem Distinguish Symptoms from the Cause of the Problem List the observable and describable occurrences (symptoms) that indicate a problem exists. Determine the cause of the problem. Removing the cause should cause the symptoms to disappear or cease. Symptom: Customer dissatisfaction Cause: Poorly trained employees Solution: Implement customer relations training program for employees Copyright © 2006 Thomson Business and Economics. All rights reserved.

Set Objectives and Criteria Setting Objectives Involves establishing clear objectives that will make for better decisions. Objectives state what the decisions should accomplish in solving a problem or taking advantage of an opportunity. Setting Criteria Involves setting standards that an alternative must meet to be selected as the decision that will accomplish the objective. Copyright © 2006 Thomson Business and Economics. All rights reserved.

Generate Creative Alternatives Innovation The implementation of a new idea Product innovation (new things) Process innovation (new way of doing things) Creativity A way of thinking that generates new ideas The Creative Process Preparation Incubation and illumination Evaluation Copyright © 2006 Thomson Business and Economics. All rights reserved.

Stages in the Creative Process Become familiar with the problem; generate as many solutions as possible. Take some time before working on the problem again to gain additional insight. Before implementing the solution, evaluate the alternative to be sure it is practical. Exhibit 4–6 Copyright © 2006 Thomson Business and Economics. All rights reserved.

Group Decision-Making Techniques That Foster Creativity Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–7

Generating Creative Alternatives Brainstorming The process of suggesting many possible alternatives without evaluation. Synectics The process of generating novel alternatives through role playing and fantasizing. Nominal Grouping The process of generating and evaluating alternatives using a structured voting method that includes listing, recording, clarification, ranking, discussion, and voting to select an alternative. Copyright © 2006 Thomson Business and Economics. All rights reserved.

Generating Creative Alternatives (cont’d) Consensus Mapping (Ringi) The process of developing group agreement on a solution to a problem. Delphi Technique The process of using a series of confidential questionnaires to refine a solution. Copyright © 2006 Thomson Business and Economics. All rights reserved.

Responses That Kill Creativity “It can’t be done.” “We’ve never done it.” “Has anyone else tried it?” “It won’t work in our department (company/industry).” “It costs too much.” “It isn’t in the budget.” “Let’s form a committee.” Copyright © 2006 Thomson Business and Economics. All rights reserved.

Copyright © 2006 Thomson Business and Economics. All rights reserved.

Decision Tree Exhibit 4–8 Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–8

Analyzing the Feasibility of Alternatives Quantitative Techniques Break-even analysis Capital budgeting Payback Discounted cash flow Linear programming Queuing theory Probability theory Copyright © 2006 Thomson Business and Economics. All rights reserved.

Copyright © 2006 Thomson Business and Economics. All rights reserved.

The Kepner-Tregoe Method Assess each alternative with regard to the “must” criteria. Rate the importance of each “want” criterion on a scale of 1 to 10 (10 being the most important). Determine how well each alternative meets the “want” criterion. Compute the weighted score (WS) for each alternative on each criterion. Select the alternative with the highest total weighted score. Copyright © 2006 Thomson Business and Economics. All rights reserved.

The Kepner-Tregoe Method for Analyzing Alternatives Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–9

Cost-Benefit (Pros and Cons) Analysis Cost-Benefit Analysis A technique for comparing the cost and benefit of each alternative course of action using subjective intuition and judgment along with math. Continuum of Analysis Techniques: Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–10

Plan, Implement, and Control Develop a plan of action and a schedule of implementation. Implement the Plan Communicate and delegate for direct action. Control Use checkpoints to determine whether the alternative is solving the problem. Avoid escalation of commitment to a bad alternative. Copyright © 2006 Thomson Business and Economics. All rights reserved.

Participative Decision-Making: Time-Driven Model The model is a decision tree that works like a funnel. Define the problem statement; then move from left to right and answer each question by responding either high (H) or low (L), skipping decisions that are not appropriate to the situation and avoiding crossing any horizontal lines. The last column indicates the appropriate leadership decision-making style for that situation. Source: Adapted from Victor H. Vroom, “Leadership and the Decision-Making Process,” Organizational Dynamics 28 (4), p. 87. Copyright © 2000 with permission from Elsevier. Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–11a

Participative Decision-Making: Development-Driven Model The model is a decision tree that works like a funnel. Define the problem statement; then move from left to right and answer each question by responding either high (H) or low (L), skipping decisions that are not appropriate to the situation and avoiding crossing any horizontal lines. The last column indicates the appropriate leadership decision-making style for that situation. Source: Adapted from Victor H. Vroom, “Leadership and the Decision-Making Process,” Organizational Dynamics 28 (4), p. 87. Copyright © 2000 with permission from Elsevier. Copyright © 2006 Thomson Business and Economics. All rights reserved. Exhibit 4–11b

Time-Driven versus Development-Driven Model Making effective decisions through maximum development of group members Making effective decisions with minimum cost Focus Emphasizes group development Emphasizes timely decision making Value Has a long-term horizon, as group development takes time. Has a short-term time horizon Orientation Copyright © 2006 Thomson Business and Economics. All rights reserved.

Copyright © 2006 Thomson Business and Economics. All rights reserved.

Creative Problem Solving and Decision Making Chapter 4 Back Up Creative Problem Solving and Decision Making PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business and Economics. All rights reserved.

Learning Outcomes After studying this chapter, you should be able to: Explain the relationship among objectives, problem solving, and decision making. Explain the relationship among the management functions, decision making, and problem solving. List the six steps in the decision-making model. Describe the differences between programmed and nonprogrammed decisions and among the conditions of certainty, uncertainty, and risk. Describe when to use the rational decision-making model versus the bounded rationality model and group versus individual decision making. Copyright © 2006 Thomson Business and Economics. All rights reserved.

Learning Outcomes (cont’d) State the difference between an objective and “must” and “want” criteria. State the difference between innovation and creativity. List and explain the three stages in the creative process. Describe the differences among quantitative techniques, the Kepner-Tregoe method, and cost-benefit analysis for analyzing and selecting an alternative. Copyright © 2006 Thomson Business and Economics. All rights reserved.

Learning Outcomes (cont’d) Define the following key terms: problem innovation problem solving creativity decision making creative process decision making model devil’s advocate programmed decisions brainstorming nonprogrammed decisions synectics decision-making conditions nominal grouping criteria consensus mapping participative decision-making model Copyright © 2006 Thomson Business and Economics. All rights reserved.

Ideas on Management at Nike Which young NBA athlete did Nike sign to a large endorsement contract? What was the contract’s price tag? How did Nike classify and define the problem or opportunity in making the decision to sign this player? What objectives does Nike meet through its star endorsements? What product is Nike currently marketing under this athlete’s name? How does Nike demonstrate creativity and innovation? Which techniques could Nike use to analyze the alternatives in the contract decision? Does the amount of the contract given to the young athlete pose a serious financial risk to Nike? What unethical and socially irresponsible labor practices have critics accused Nike of in recent years? Which decision style from Vroom’s participative decision-making model should Nike have used to make the decision to sign the athlete to a contract? Copyright © 2006 Thomson Business and Economics. All rights reserved.

Problem Solving and Decision Making The Relationship among the Management Functions, Decision Making, and Problem Solving Managers need to make proficient decisions while performing the functions of management. Copyright © 2006 Thomson Business and Economics. All rights reserved.