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

2. Decision Making, Creativity, and Involvement at Chrysler Corp.
Fiat and Chrysler CEO Sergio Marchionne encourages better decision making, involvement, and creativity to revitalize Chrysler Corp.
Fiat and Chrysler CEO Sergio Marchionne encourages better
decision making, involvement, and creativity to revitalize Chrysler
Corp.

3. Decision Making Defined
The conscious process of making choices among one or more alternatives with the intention of moving toward some desired state of affairs.
Decision making is the conscious process of making choices among
alternatives with the intention of moving toward some desired state
of affairs

4. Rational Choice Paradigm
Rational choice paradigm -- effective decision makers identify, select, and apply the best possible alternative
Two main elements of rational choice
Subjective expected utility – determines choice with highest value (maximization)
Decision making process – systematic stages of decision making
Rational choice paradigm – the view in decision making that people
should, and typically do, use logic and all available information to
choose the alternative with the highest value
Key elements:
• Subjective expected utility – the probability (expectation) of
satisfaction (utility) resulting from choosing a specific alternative in a
decision – used to determine choice that maximizes
• Decision making process – follows the systematic process and
application of stages of decision making

5. Rational Choice Decision-making Process
2. Choose the best decision process
The rational choice paradigm assumes that decision makers follow
the systematic process illustrated
1. Identify problem/opportunity (symptom vs. problem)
• Problem – gap between “what is” and “what ought to be”
• Opportunity-- deviation between current expectations and
potentially better situation(s) not previously expected
• Symptom – indicators and outcomes of fundamental root causes
2. Choose the best decision process
• Programmed decisions – follow standard operating procedures i.e.
they have been resolved in the past
• Nonprogrammed decisions – require all steps in the decision model
because the problems are new, complex, or ill-defined
3. Develop alternative solutions – search for ready-made solutions first,
then develop/modify custom-made solution
4. Choose the best alternative – alternative with the highest subjective
expected utility
5. Implement the selected alternative – assumed to occur easily
6. Evaluate decision outcomes – determines whether the gap between
“what is” and “what ought to be” has narrowed
Subjective expected utility

6. Problem Identification Challenges
Problems/opportunities are constructed from ambiguous information, not “given” to us
Influenced by cognitive and emotional biases
Five problem identification challenges
Stakeholder framing
Mental models
Decisive leadership
Solution-focused problems
Perceptual defense
Problems and opportunities are not announced or pre-defined –
they are conclusions formed from ambiguous and conflicting
information
• People are influenced by both logic and emotions – emotions may
even dominate the decision making process
Five Problem Identification Challenges:
• Stakeholder framing – stakeholders have vested interests and filter
information going to corporate decision makers
• Mental models – frame the problem through preconceived mental
models which may blind us from seeing unique problems or
opportunities
• Decisive leadership – problems or opportunities are announced too
quickly before logically assessing the situation
• Solution-focused problems – defining problems as solutions e.g.
people who feel uncomfortable with ambiguity are particularly prone
to this challenge
• Perceptual defense – blocking out bad news as a coping mechanism
(fail to see information that threatens self-concept)

7. Identifying Problems Effectively
Be aware of perceptual and diagnostic limitations
Fight against pressure to look decisive
Maintain “divine discontent” (aversion to complacency)
Discuss the situation with colleagues -- see different perspectives
1. Be aware of perceptual and diagnostic limitations
2. Resist temptation of looking decisive when more thoughtful
examination of the situation should occur
3. Create a norm of divine discontent – avoid being satisfied with the
status quo and adopt an aversion to complacency
4. Discuss the situation with colleagues to discover blind spots and see
different perspectives

8. Making Choices: Rational vs OB Observations
Rational Choice Paradigm Assumptions
Observations from Organizational Behavior
Goals are clear, compatible, and agreed upon
Goals are ambiguous, conflicting, and lack agreement
People are able to calculate all alternatives and their outcomes
People have limited information processing abilities
Bounded rationality – people process limited and imperfect
information and rarely select the best choice
Problems with goals
• Rational – goals are clear, compatible, and agreed-upon
• OB – goals are ambiguous, conflicting, lack full support
Problems with information processing
• Rational – people can process all information about all alternatives
and their outcomes
• OB – people have limited information processing abilities
Problems with evaluation timing
• Rational – choices evaluated simultaneously
• OB – choices evaluated sequentially
People evaluate all alternatives simultaneously
People evaluate alternatives sequentially
more

9. Making Choices: Rational vs OB Observations (con’t)
Rational Choice Paradigm Assumptions
Observations from Organizational Behavior
People use absolute standards to evaluate alternatives
People evaluate alternatives against an implicit favorite
People make choices using factual information
People make choices using perceptually distorted information
Problems with evaluation standards
• Rational – people use absolute standards to evaluate alternatives
• OB – people evaluate against an implicit favorite
Problems with information quality
• Rational – choices are made using factual information
• OB – choices are made using distorted information
Problems with decision objective
• Rational – people maximize i.e. choose alternative with the highest
payoff (subjective expected utility)
• OB – people satisfice i.e. select “good enough” alternative
People choose the alternative with the highest payoff (SEU)
People choose the alternative that is good enough (satisfice)

10. Biased Decision Heuristics
People have built-in decision heuristics that bias evaluation of alternatives
Anchoring and adjustment – initial information (e.g., opening bid) influences evaluation of subsequent information
Availability heuristic – we estimate probabilities by how easy we can recall the event, even though other factors influence ease of recall
Representativeness heuristic -- we estimate probabilities by how much they are similar to something else (e.g. stereotypes) even when better info about probabilities is available
People have built-in decision heuristics that bias evaluation of
alternatives
1. Anchoring and adjustment heuristic – we are influenced by an initial
anchor point (e.g. initial offer price, initial opinion) and do no
sufficiently move away from that point as new information is provided
2. Availability heuristic – the tendency to estimate the probability of
something occurring by how easily we can recall those events i.e. we
easily remember emotional events (e.g. shark attack) so we
overestimate how often these emotional events occur
3. Representative heuristic – the tendency to pay more attention to
whether something resembles (is representative of) something else
than on more precise statistics about its probability
• e.g. you know that 20% of your students are in engineering and
80% are business majors, however, if one students looks like a
stereotype of an engineering student we tend to believe the person
is in engineering even though there is greater probability that he/
she is a business major

11. Paralyzed by Choice
Decision makers are less likely to make any decision at all as the number of options increases
Occurs even when there are clear benefits of selecting any alternative (such as joining a company pension plan).
Evidence of human information processing limitations
Studies have found that people like to have choices but when
exposed to many alternatives they become cognitive misers by
engaging in satisficing
• When presented with many choices, people often choose the least
cognitively challenging alternative – no decision at all
• Occurs even when there are clear benefits of selecting any
alternative (such as joining a company retirement plan)
• Provides evidence of human information processing limitations –
increasing risk of choice overload
Courtesy of Microsoft

12. Emotions and Making Choices
Emotions form preferences before we consciously evaluate those choices
Moods and emotions influence how well we follow the decision process
We ‘listen in’ on our emotions and use that information to make choices
Emotions affect the evaluation of alternatives in 3 ways:
• Emotions Form Early Preferences – emotional marker process
determines our preferences for each alternative before we
consciously think about those alternatives
• Emotions Change the Decision Evaluation Process – moods and
emotions influence the process of evaluating alternatives e.g. we
may pay more attention to details when in a negative mood
• Emotions Serve as Information When We Evaluate Alternatives – we
‘listen in’ on our emotions to gain guidance when making choices
(similar to having a temporary improvement in emotional
intelligence)

13. Intuitive Decision Making
Ability to know when a problem or opportunity exists and select the best course of action without conscious reasoning
Intuition as emotional experience
Gut feelings are emotional signals
Not all emotional signals are intuition
Intuition as rapid nonconscious analysis
Uses action scripts
Intuition – ability to know when a problem or opportunity exists
and to select the best course of action without conscious reasoning
Intuition is an emotional experience
• Gut feelings are emotional signals
• Not all emotional signals are intuition
Intuition as rapid unconscious analysis
• Uses action scripts – programmed decision routines that shorten the
decision making process

14. Making Choices more Effectively
Systematically evaluate alternatives against relevant factors
Be aware of effects of emotions on decision preferences and evaluation process
Scenario planning
• Systematically evaluate alternatives against relevant factors
• Remember that decisions are influenced by both emotional and
rational processes
• Use scenario planning – a disciplined method for imagining possible
futures

15. Problems with Decision Evaluation
Confirmation bias
Inflate quality of the selected option; forget or downplay rejected alternatives
Caused by need to maintain a positive self- concept
Escalation of commitment
Repeating or further investing in an apparently bad decision
Caused by self-justification, prospect theory effect, perceptual blinders, closing costs
Confirmation bias
• Tendency to inflate quality of the selected option; forget or
downplay rejected alternatives
• Gives people an excessively optimistic evaluation of their decisions
• Results from need to maintain a positive self-concept
Escalation of Commitment
• Tendency to repeat an apparently bad decision or allocate more
resources to a failing course of action
• Self-justification – impression management technique to
demonstrate the importance of a decision by continuing to invest in it
• Prospect theory effect – natural tendency to experience stronger
negative emotions when losing something of value than the positive
emotions when gaining something of equal value
• Perceptual blinders – decision makers nonconsciously screen out or
explain away negative information to protect self-esteem
• Closing costs – the financial, reputational and other costs of
terminating a failing project is a powerful incentive to continue
investing in the decision

16. Evaluating Decisions More Effectively
Separate decision choosers from evaluators
Establish a preset level to abandon the project
Find sources of systematic and clear feedback
Involve several people in the evaluation process
1. Separate decision choosers from decision evaluators – minimizes selfjustification
effect
2. Stop loss – publicly establish a preset level at which the decision is
abandoned or re-evaluated
3. Find sources of systematic and clear feedback
4. Involve several people in the decision – may notice problems sooner
than when someone is working alone

17. Tangible Creativity
Alex Beim, founder and chief creative technologist of Tangible Interaction Design in Vancouver, relies on creative thinking to invent enticing interactive displays, such as the zygotes at the Vancouver Olympics.
Alex Beim, founder and chief creative technologist of Tangible
Interaction Design in Vancouver, relies on creative thinking to
invent enticing interactive displays, such as the zygotes at the
Vancouver Olympics.

18. Creativity Defined
Developing an original idea that makes a socially recognized contribution
Applies to all aspects of the decision process – problems, alternatives, solutions
Creativity – developing an original idea that makes a socially
recognized contribution
• Creativity identifies problems, alternatives, solutions
• Part of all aspects of the decision process – problems, alternatives,
solutions

19. Creative Process Model
Verification
Illumination
Incubation
1. Preparation
• Investigating the problem or opportunity in many ways e.g.
developing knowledge and possibly skills about the object of
attention
2. Incubation
• Period of reflective thought i.e. put the problem aside but maintain
low level of awareness
• Assists divergent thinking – reframing a problem in a unique way
and generating different approaches to the issue
• Contrasts with convergent thinking – calculating the conventionally
accepted “right answer” to a logical problem
3. Illumination
• The experience of suddenly becoming aware of a unique idea i.e.
brief bits of inspiration/insight
4. Verification
• Logical evaluation, experimentation, and further creative insight
Preparation

20. Characteristics of Creative People
Cognitive and practical intelligence
Persistence
Subject knowledge/experience
Independent imagination
Independent imagination includes:
Higher openness to experience personality
Lower need for affiliation motivation
Higher self- direction/stimulation values
Characteristics of Creative People
Cognitive and practical intelligence
• Above-average cognitive intelligence to synthesize information,
analyze, and apply ideas
• Practical intelligence – the capacity to evaluate the potential
usefulness of ideas
Persistence
• Higher need for achievement, strong motivation from the task itself,
and moderate or high degree of self-esteem
Knowledge and experience
• Expertise/subject matter knowledge – caution is that mental models
may become more rigid
Independent imagination (cluster of personality traits and values)
• Independent imagination i.e. high openness to experience,
moderately low need for affiliation, strong values around selfdirection
and stimulation

21. Creative Work Environments
Learning orientation
Encourage experimentation
Tolerate mistakes
Intrinsically motivating work
Task significance, autonomy, feedback
Open communication and sufficient resources
Unclear/complex effects of team competition and time pressure on creativity
Learning orientation
• Encourage experimentation
• Tolerate mistakes as part of the creative process
Intrinsically motivating work
• Motivation from the job itself e.g. task significance, autonomy,
aligned with the employee’s competencies
Open communication and sufficient resources
• Includes degree of job security
• Providing nontraditional workspaces e.g. unique building design
Note: It isn’t clear how much pressure should be exerted on employees
to produce creative ideas or the effect of co-worker support/co-worker
competition

22. Creative Activities Review abandoned projects
• Explore issue with other people
Redefine the Problem
• Storytelling
• Artistic activities
• Morphological analysis
Associative
Play
• Diverse teams
• Information sessions
Internal tradeshows
Cross- Pollination
Redefine the problem
• Look at abandoned projects—might be seen in new ways
• Ask people unfamiliar with issue to explore the problem
Associative play
• Impromptu storytelling and acting
• Artistic activities
• Morphological analysis – listing different dimensions of a system and
the elements of each dimension and then looking at each
combination
Cross-Pollination
• People from different parts of the organization exchange ideas or
are brought into the team
• Informal social interaction

23. Employee Involvement at Yabulu
Employee involvement was a key factor in skyrocketing productivity at the Yabulu nickel and cobalt refinery in northern Queensland, Australia. “We have given power to the people, and it is working,” says refinery general manager Trefor Flood (in photo).
Employee involvement was a key factor in skyrocketing productivity
at the Yabulu nickel and cobalt refinery in northern Queensland,
Australia. “We have given power to the people, and it is working,”
says refinery general manager Trefor Flood (in photo).

24. Employee Involvement Defined
The degree to which employees influence how their work is organized and carried out
Various levels and forms of involvement
The degree to which employees influence how their work is
organized and carried out
Different levels and forms of involvement (lowest to highest)
1. Decide alone
2. Receive information from individuals
3. Consult with individuals
4. Consult with the team
5. Facilitate the team’s decision

25. Employee Involvement Model
Potential Involvement Outcomes
Better problem identification
Synergy produces more/better solutions
Better at selecting the best choice
Higher decision commitment
Employee Involvement
Contingencies
of Involvement
Employee involvement produces several potential beneficial
outcomes, but only under specific circumstances. The benefits
include:
1. Better problem identification
• Recognizing problems more quickly and defining them more
accurately
2. Synergy produces more/better solutions
• Team members create synergy by pooling their knowledge to form
new alternatives
3. Better at picking the best choice
• Decision is reviewed by people with diverse perspectives and a
broader representation of values
4. Higher decision commitment
• Increases sense of personal responsibility for decision’s success and
representation of interests

26. Contingencies of Involvement
Higher employee involvement is better when:
Decision Structure
Problem is new & complex (i.e nonprogrammed decision)
Knowledge Source
Employees have relevant knowledge beyond leader
Decision Commitment
Employees would lack commitment unless involved
Optimal level of employee involvement depends on the situation.
Higher employee involvement is better when:
1. Decision structure
• Problem is new and/or complex i.e. nonprogrammed decision
2. Source of decision knowledge
• The leader lacks knowledge and employees have information
3. Decision commitment
• Employees are unlikely to accept a decision made without their
involvement
4. Risk of conflict
• Employee norms support the organization’s goals
• Employees are likely to agree on the solution
Risk of Conflict
Norms support firm’s goals
Employee agreement likely

27. Decision Making and Creativity
The following exhibit on subjective expected utility (SEU) is not presented in the book

28. Subjective Expected Utility
Estimating the best possible alternative (maximization)
Expected -- probability of an outcome occurring
e.g., Chance that outcome 3 will occur is 90% if choice ‘A’ is chosen, 30% if choice ‘B’ is chosen
Utility -- Value or happiness produced by each option from value of expected outcomes
Choice ‘B’ has higher utility (value) than choice ‘A’
Choice ‘B’ expected utility is (.8x7)+(.2x-2)+(.3x1)=6.4
Outcome 1 (+7)
Choice A .2 .5
Outcome 2 (-2) .9
Outcome 3 (+1)
Choice B .8
Outcome 1 (+7)
Subjective expected utility: estimating the best possible alternative
(maximization)
• Depends on probabilities of outcomes and value (valence) of those
outcomes
Expected – probability of an outcome occurring
• As illustrated: Chance that outcome 3 will occur is 90% if choice ‘A’
is chosen, 30% if choice ‘B’ is chosen
• e.g., 90% probability that applicant ‘A’ will quit within one year; only
30% chance that applicant ‘B’ will quit within one year
Utility – value or happiness produced by each option from value of
expected outcomes
• As illustrated: you believe Choice ‘B’ has higher utility (i.e., will
produce greater happiness) than will Choice ‘A’
Choice ‘B’ expected utility is
(.8x7)+(.2 x -2)+(.3x1)= 6.4
Choice ‘A’ expected utility is
(.2x7)+(.5 x -2)+(.9x1)= 1.3
Note: Value (valence) of outcomes remain the same for both
choices e.g. you value good wireless reception (positive outcome) to the
same degree no matter which tablet (iPad, etc.) you are considering
buying .2
Outcome 2 (-2) .3
Outcome 3 (+1)
Probability of outcome occurring
Utility (expected happiness)

29. Solutions to Creativity Brainbusters
This PowerPoint file includes a set of slides showing solutions to the
creativity brainbusters activity

30. Double Circle Problem

31. Nine Dot Problem

32. Nine Dot Problem Revisited

33. Word Search
FCIRVEEALTETITVEERS

34. One Hour to Burn Completely
Burning Ropes
After first rope burned
i.e. 30 min.
One Hour to Burn Completely