1. Creative Problem Solving and Decision Making
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2. 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, problem solving, and decision making.
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.
State the difference between an objective and “must” and “want” criteria.
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3. Learning Outcomes (cont’d)
After studying this chapter, you should be able to:
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.
Define the key terms listed at the end of the chapter.
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4. IDEAS ON MANAGEMENT at Nike
What type of decision did Nike make to sign a large endorsement contract with young, then-unproven NBA basketball player LeBron James in 2003?
What objectives does Nike meet through its star athlete endorsements?
How does Nike demonstrate creativity and innovation?
Does the amount of contracts given to young, unproven athletes pose a serious financial risk to Nike? Which techniques could Nike use to analyze the alternatives in contract decisions?
Of what unethical and socially irresponsible labor practices have critics accused Nike?
What sustainable business practices does Nike use?
Which version of Vroom’s participative decision-making model should Nike have used to make the decision to sign young, unproven athletes to contracts?
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5. The Relationship among Objectives, Problem Solving, and Decision Making
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 a course of action that will solve a problem.
First decision: whether or not to take corrective action.
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6. 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.
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7. 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.
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8. Exhibit 3–1 ● The Decision-Making Model
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10. 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 of participative decision making
Orientation toward problem solving rather than acceptance of the status quo
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11. Classify and Define the Problem
Decision Structure
Programmed Decisions
Arise in recurring or routine situations, for which the decision maker should use decision rules or organizational policies and procedures to make the decision.
Nonprogrammed Decisions
Arise in significant and nonrecurring and nonroutine situations, for which the decision maker should use the decision-making model.
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12. Exhibit 3–2 ● Decision Structure Continuum
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13. 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.
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14. Exhibit 3–3 ● Continuum of Decision-Making Conditions
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16. Decision-Making Models
Rational Model (Classical Model)
The decision maker attempts to use optimizing— selecting the best possible alternative.
Bounded Rationality Model
The decision maker uses satisficing—selecting the first alternative that meets the minimal criteria for solving the problem.
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17. Exhibit 3–4 ● Potential Advantages and Disadvantages of Using Group Decision Making
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18. 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
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19. Exhibit 3–5 ● Continua for Classifying a Problem
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20. 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.
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21. Join the Discussion Ethics & Social Responsibility
Avoiding Taxes
Although it is legal, is it ethical for AT&T, Wal-Mart, and other corporations to take advantage of tax loopholes to save money?
If you became CEO of one of these corporations, would you continue to take advantage of the tax loopholes? Why or why not?
What is the government’s role and responsibility regarding tax loopholes?
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22. 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
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23. Exhibit 3–6 ● Stages in the Creative Process
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24. 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.
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25. 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.
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26. Exhibit 3–7 ● Group Decision-Making Techniques That Foster Creativity and Innovation
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27. 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.”
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29. Exhibit 3–8 ● Decision Tree
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30. Analyze Alternatives and Select the Most Feasible
Quantitative Techniques
Break-even analysis
Capital budgeting
Payback
Average rate of return
Discounted cash flow
Linear programming
Queuing theory
Probability theory
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32. 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 is 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.
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33. Exhibit 3–9 ● The Kepner-Tregoe Method for Analyzing Alternatives
*Indicates importance [on a scale of 10 (high) to 1 (low)] assigned to each criterion as a weight.
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34. 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.
Pros and Cons Analysis
A technique for identifying the advantages, which can be considered the benefits, and the disadvantages, which can be considered the costs, of each alternative.
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35. Exhibit 3–10 ● Continuum of Analysis Techniques
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36. Join the Discussion Ethics & Social Responsibility
Selling Stocks
Is it ethical for the company to pay a higher commission on some stocks?
Is it ethical for you to recommend a stock that you don’t believe is the best stock even though you will earn a higher commission if you do?
What would you do if you didn’t sell the stock and your boss had a meeting with you to encourage you to sell the stock?
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37. Plan, Implement the Decision, 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.
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38. Vroom’s Participative Decision-Making Model
Developed by Victor Vroom
A tool that managers can use to answer questions while improving decision-making effectiveness.
Does not take the place of the decision-making model; it tells you when to use a group and what level of participation you should use with the decision- making model.
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39. Participation Decision Styles
Decide
Consult Group
Facilitate
Delegate
Consult Individuals
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40. Questions that Determine the Appropriate Participative Decision Style
Decision Significance
Leader Expertise
Group Support for Objectives
Group Expertise
Team Competence
Likelihood of Commitment
Importance of Commitment
Diagnostic Variables
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41. Exhibit 3–11 ● Participative Decision-Making 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.
Time-Driven Model
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42. Development-Driven Model
Exhibit 3–11 ● Participative Decision-Making Model (cont’d)
Development-Driven Model
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43. 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
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45. KEY TERMS brainstorming consensus mapping creative process creativity
criteria
decision making
decision-making conditions
decision-making model
devil’s advocate approach
innovation
nominal grouping
nonprogrammed decisions
participative decision- making model
problem
problem solving
programmed decisions
synectics
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