Chapter 05 Decision Making, Learning, Creativity, and Entrepreneurship McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives Understand the nature of managerial decision making, differentiate between programmed and nonprogrammed decisions, and explain why nonprogrammed 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 5-2

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 5-3

The Nature of Managerial Decision Making Decision making: Managers respond to threats and opportunities by analyzing options, and making determinations about organizational goals and courses of action Programmed decisions: Routine, virtually automatic decision making that follows established rules or guidelines Non-programmed decisions: Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats 5-4

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 judgments: Decisions that require time and effort and result from careful information gathering, generation of alternatives, and evaluation of alternatives 5-5

The Classical Model of Decision Making 5-6

The Administrative Model of Decision Making Explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions Bounded rationality Incomplete information Satisficing: Searching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decision 5-7

Figure Why Information Is Incomplete 5-8

Figure Six Steps in Decision Making 5-9

Figure General Criteria for Evaluating Possible Courses of Action 5-10

Group Decision Making Groupthink: Faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information Devil’s advocacy: Critical analysis of a preferred alternative to ascertain its strengths and weaknesses before it is implemented 5-11

Promoting Group Creativity Employees should be able to experiment, take risks, and make mistakes and learn from them Brainstorming: A problem-solving technique in which managers meet face-to-face to generate and debate a wide variety of alternatives from which to make a decision Production blocking: Loss of productivity in brainstorming sessions due to the unstructured nature of brainstorming 5-12

Promoting Group Creativity Delphi technique: Group members do not meet face-to-face but respond in writing to questions posed by the group leader Nominal group technique: Group members write down ideas and solutions, read their suggestions to the whole group, and discuss and then rank the alternatives 5-13

Entrepreneurship and Creativity Social entrepreneurs: Individuals who pursue initiatives and opportunities to address social problems and needs in order to improve society and well-being 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 5-14

Intrapreneurship and Organizational Learning 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 5-15