Ch 7: Decision Making And Creativity

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DECISION MAKING

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The conscious process of making choices among alternatives with the intention of moving toward some desired state of affairs

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RATIONAL CHOICE PARADIGM

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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, or subjected expected utility

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TWO MAIN ELEMENTS OF RATIONAL CHOICE PARADIGM:

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1. Subjective expected utility

2. Decision making process--systematic stages of decision making

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SUBJECTED EXPECTED UTILITY

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The probability (expectation) of satisfaction (utility) resulting from choosing a specific alternative in a decision

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KEY POINT OF SUBJECTED EXPECTED UTILITY

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All decisions rely to some degree on:

1. the expected value of the outcomes (utility)

2. the probability of those good or bad outcomes occurring (expectancy)

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PROBLEM

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A deviation between the current and the desired situation--the gap between 'what is' and 'what ought to be'

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OPPORTUNITY

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A deviation between current expectations and a potentially better situation that was not previously expected

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RATIONAL CHOICE DECISION-MAKING PROCESS

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1. Identify the problem

2. Choose the best decision process

3. Discover or develop possible choices

4. Select the choice with the highest value--subjective expected utility; maximization

5. Implement the selected choice

6. Evaluate the selected choice

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PROGRAMMED DECISIONS

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follow standard operating procedures; they have been resolved in the past so the optimal solution has already been identified and documented; part of step 2 in the rational choice decision making process

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NONPROGRAMMED DECISIONS

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Require all steps in the decision model because the problems are new, complex, or ill-defined

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PROBLEMS WITH THE RATIONAL CHOICE PARADIGM

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Impossible to apply in reality;

1. Assumes that people are efficient and logical information-processing machines, but realistically people have difficulty recognizing problems

2. focuses on logical thinking and ignores the fact that emotions also influence the decision making process

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5 PROBLEM IDENTIFICATION CHALLENGES

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1. Stakeholder Framing

2. Mental Models

3. Decisive Leadership

4. Solution-Focused Problems

5. Perceptual Defense

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STAKEHOLDER FRAMING

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Stakeholders filter information to amplify or suppress the seriousness of the situation, which highlights or hides specific problems and opportunities

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MENTAL MODELS

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If an idea doesn't fit the existing mental model of how things should work, then it is quickly dismissed as unworkable or undesirable; leads to missed opportunities and mistaken problems

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DECISIVE LEADERSHIP

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Eager to look effective and decisive, many leaders quickly announce problems or opportunities before having a chance to logically assess the situation

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SOLUTION-FOCUSED PROBLEMS

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"When the only tool you have is a hammer, all problems begin to resemble nails." The familiarity of past solutions makes the current problem less ambiguous or uncertain

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PERCEPTUAL DEFENSES

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People sometimes block out bad news as a coping mechanism. Their brain refuses to see information that threatens their self-concept

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IDENTIFYING PROBLEMS EFFECTIVELY

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1. Be aware of perceptual and diagnostic limitations

2. Fight against pressure to look decisive

3. Maintain "divine discontent" (aversion to complacency)

4. Discuss the situation with colleagues--see different perspectives

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BOUNDED RATIONALITY

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The view that people are bounded in their decision-making capabilities, including access to limited information, limited information processing, and tendency toward satisficing rather than maximizing when making choices

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MAKING CHOICES: RATIONAL VS OB OBSERVATION

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Rational Choice Paradigm Assumptions are Ideal, while the observations from Organization Behavior is much different in reality

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IDEAL: GOALS ARE CLEAR, COMPATIBLE, AND AGREED UPON

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Reality: Goals are ambiguous, conflicting, and lack agreement

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IDEAL: PEOPLE ARE ABLE TO CALCULATE ALL ALTERNATIVES AND THEIR OUTCOMES

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Reality: People have limited information processing abilities

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IDEAL: PEOPLE EVALUATE ALL ALTERNATIVES SIMULTANEOUSLY

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Reality: People evaluate alternatives sequentially

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IDEAL: PEOPLE USE ABSOLUTE STANDARDS TO EVALUATE ALTERNATIVES

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Reality: People evaluate alternatives against an implicit favorite

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IDEAL: PEOPLE MAKE CHOICES USING FACTUAL INFORMATION; USE COMPLETE OBJECTIVITY

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Reality: People make choices using perceptually distorted information; emotions cause subjectivity

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IDEAL: PEOPLE CHOOSE THE ALTERNATIVE WITH THE HIGHEST PAYOFF (SUBJECTED EXPECTED UTILITY, SEU)

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Reality: People choose the alternative that is good enough (satisfice)

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IMPLICIT FAVORITE

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A preferred alternative that the decision maker uses repeatedly as a comparison with other choices

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BIASED DECISION HEURISTICS

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People have built-in decision heuristics that automatically distort either the probability of outcomes or the value of those outcomes

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3 BIASED DECISION HEURISTICS

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1. Anchoring and adjustment heuristic

2. Availability heuristic

3. Representativeness heuristic

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ANCHORING AND ADJUSTMENT HEURISTIC

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States that we are influenced by an initial anchor point and do not sufficiently move away from that point as new information is provided; e.g., initial offer price, initial opinion of someone, etc.

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AVAILABILITY HEURISTIC

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The tendency to estimate the probability of something occurring by how easily we can recall those events. e.g., we easily remember emotional events (like shark attacks), so we overestimate how often these traumatic events occur

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REPRESENTATIVENESS HEURISTIC

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States that we pay more attention to whether something resembles something else than on more precise statistics about its probability

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CLUSTERING ILLUSION

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Another form of the representativeness heuristic; the tendency to see patterns from a small sample of events when those events are, in fact, random

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PARALYZED BY CHOICE

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Decision makers are less likely to make any decision at all as the number of options increases; occurs when there are clear benefits of selecting any alternative

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PARALYZED BY CHOICE IS EVIDENCE OF

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Human information processing limitations

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EMOTIONS AND MAKING CHOICES

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Emotions affect the evaluation of alternatives in 3 ways:

1. Emotions form preferences before we consciously evaluate those choices

2. Moods and emotions influence how well we follow the decision process

3. We 'listen in' on our emotions and use that information to make choices

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INTUITIVE DECISION MAKING

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Ability to know when a problem or opportunity exists and select the best course of action without conscious reasoning; this enhances our decision making process

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INTUITION AS EMOTIONAL EXPERIENCE

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All gut feelings are emotional signals, but not all emotional signals arr intuition; intuition involves rapidly comparing our observations with deeply held patterns learned through experience

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INTUITION ALSO RELIES ON:

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Action scripts

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ACTION SCRIPTS

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Programmed decision routines that speed up our responses to pattern matches or mismatches. Effectively shorten the decision-making process by jumping from problem identification to selection of a solution

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MAKING CHOICES MORE EFFECTIVELY

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1. Systematically evaluate alternatives against relevant factors

2. Be aware of effects of emotions on decision preferences and evaluation process

3. Scenario planning

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SCENARIO PLANNING

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A systematic process of thinking about alternative futures and what the organization should do to anticipate and react to those environments

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PROBLEMS WITH DECISION EVALUATION

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1. Confirmation Bias

2. Escalation of Commitment

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CONFIRMATION BIAS

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Also known as post-decisional justification; unwitting selectivity in the acquisition and use of evidence; inflate quality of the selected option; forget or downplay rejected alternatives; this is caused by need to maintain a positive self-concept

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ESCALATION OF COMMITMENT

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The tendency to repeat an apparently bad decision or allocate more resources to a failing course of action

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CAUSES OF ESCALATING COMMITMENT

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1. Self-justification

2. Prospect theory effect

3. Perceptual blinders

4. Closing costs

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SELF-JUSTIFICATION EFFECT

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To demonstrate the importance of a decision by continuing to invest in it

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PROSPECT THEORY EFFECT

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The tendency to experience stronger negative emotions when losing something of value than the positive emotions experienced when gaining something of equal value

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PERCEPTUAL BLINDERS

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Nonconsciously screen out or explain away negative information to protect self-esteem

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CLOSING COSTS

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Terminating a project may have financial penalties and loss of goodwill with partner organizations

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EVALUATING DECISIONS MORE EFFECTIVELY

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1. Separate decision choosers from evaluators

2. Establish a preset level to abandon the project

3. Find sources of systematic and clear feedback

4. Involve several people in the evaluation process

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CREATIVITY

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The development of original ideas that make a socially recognized contribution; applies to all aspects of the decision process--problems, alternatives, solutions

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CREATIVE PROCESS MODEL

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1. Preparation

2. Incubation

3. Illumination

4. Verification

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PREPARATION

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1. Understand the problem or opportunity

2. Investigate information that seems relevant to the issue

*gathering ideas; the more info the better the creativity

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INCUBATION

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1. Period of reflective thought

2. Nonconscious or low-level awareness, not direct attention to the issue

3. Active divergent thinking process

*Mulling over ideas and info

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DIVERGENT THINKING

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Reframing a problem in a unique way and generating different approaches to the issue

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ILLUMINATION

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1. Sudden awareness of a novel, although vague and incomplete, idea entering one's consciousness

2. May include an initial period of "fringe" awareness

*lightbulb, aha! moment

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VERIFICATION

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1. Detailed logical and experimental evaluation of the illuminated idea

2. Further creative thinking

*Yes, your aha! moment is going to work!

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CHARACTERISTICS OF CREATIVE PEOPLE

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1. Cognitive and Practical Intelligence

2. Persistance

3. Knowledge and Experience

4. Independent Imagination

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COGNITIVE AND PRACTICAL INTELLIGENCE

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Ability to evaluate potential usefulness of ideas and to synthesize, analyze, and apply ideas

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PERSISTANCE

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1. High need for achievement

2. Strong task motivation

3. Moderately high self-esteem and optimism

*important for not giving up, because most ideas don't work

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KNOWLEDGE AND EXPERIENCE

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1. Prerequisite knowledge and experience (absorptive capacity)

2. Not locked into a fixed knowledge mindset

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INDEPENDENT IMAGINATION

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1. High openness to experience

2. Moderately low need for affiliation motivation

3. Strong self-direction/stimulation values

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ORGANIZATIONAL CONDITIONS SUPPORTING CREATIVITY

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1. Learning orientation

2. Intrinsically motivating work; (task significance, autonomy, feedback)

3. Open communication and sufficient resources

4. Unclear/complex effects of team competition and time pressure on creativity

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LEARNING ORIENTATION

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Leaders encourage experimentation and tolerate mistakes

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CREATIVE ACTIVITIES

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1. Redefine the problem

2. Associative play

3. Cross-pollination

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REDEFINE THE PROBLEM

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1. Review abandoned projects

2. Explore issue with other people

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ASSOCIATIVE PLAY

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1. Storytelling

2. Artistic activities

3. Morphological analysis

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MORPHOLOGICAL ANALYSIS

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Listing different dimensions of a system and the elements of each dimension and then looking at each combination; this encourages people to carefully examine combinations that initially seem nonsensical

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CROSS-POLLINATION

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When people from different areas of the organization exchange ideas or when new people are brought into an existing team

1. Diverse teams

2. Information sessions

3. Internal trade shows

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EMPLOYEE INVOLVEMENT

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The degree to which employees influence how their work is organized and carried out; there are various levels and forms

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MAIN LEVELS OF INVOLVEMENT INCLUDE:

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1. Decide alone

2. Receive information from individuals

3. Consult individuals

4. Consult with a team

5. Facilitate the team's decision

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POTENTIAL INVOLVEMENT OUTCOMES

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1. Better problem identification

2. Synergy produces more/better solutions

3. Better at selecting the best choice

4. Higher decision commitment

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CONTINGENCIES OF INVOLVEMENT; HIGHER EMPLOYEE INVOLVEMENT IS BETTER WHEN:

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1. Decision structure: problem is new and complex

2. Knowledge source: employees have relevant knowledge beyond leader

3. Decision commitment: Employees would lack commitment unless involved

4. Risk of Conflict: Norms support firm's goals, and employee agreement likely