Management Chapter 7: Decision Making and Creativity

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Questions and Answers

What is a characteristic of programmed decision making?

It involves routine and follows established rules. (correct)

It is applicable only in complex scenarios.

It prioritizes innovation and creativity.

It relies on heuristics and subjective judgment.

What differentiates nonprogrammed decisions from programmed decisions?

Nonprogrammed decisions are complex and uncertain. (correct)

Nonprogrammed decisions are always correct.

Nonprogrammed decisions are typically easy to make.

Nonprogrammed decisions rely on established guidelines.

Which step should managers take first in the decision-making process?

Evaluate alternatives.

Implement the decision.

Identify the problem. (correct)

Monitor the results.

What is a potential disadvantage of group decision making?

Possible groupthink leading to poor decisions. Signup and view all the answers

How can cognitive biases affect managerial decision making?

They can lead to poor and biased decisions. Signup and view all the answers

In the context of decision making, what is the role of organizational learning?

To improve future decision making. Signup and view all the answers

Which of the following describes entrepreneurs in contrast to intrapreneurs?

Entrepreneurs operate independently outside of existing organizations. Signup and view all the answers

What should managers consider when responding to threats?

Increasing organizational performance. Signup and view all the answers

What is the goal of a learning organization?

To maximize organizational learning Signup and view all the answers

What is creativity primarily associated with in decision making?

Developing original ideas and alternative actions Signup and view all the answers

Which creative thinking method involves group members individually writing down ideas before ranking them?

Nominal Group Technique Signup and view all the answers

What is a disadvantage of brainstorming sessions according to the content?

Production blocking reduces productivity Signup and view all the answers

What distinguishes the Delphi technique from other decision-making methods?

Responses are gathered in writing without face-to-face interaction. Signup and view all the answers

What describes social entrepreneurs in contrast to traditional entrepreneurs?

They address social problems through innovative solutions. Signup and view all the answers

Which of the following is NOT a characteristic of a learning organization?

Rigid adherence to established norms Signup and view all the answers

What is a common characteristic of brainstorming sessions?

They encourage debate and generation of many alternatives. Signup and view all the answers

What is characterized by routine decision making with established rules?

Programmed decisions Signup and view all the answers

What is an example of a nonprogrammed decision?

Responding to an unforeseen market opportunity Signup and view all the answers

Which of the following best describes intuitive decision making?

Leads to on-the-spot decisions based on gut feelings Signup and view all the answers

What is the classical model of decision making based on?

Identifying and evaluating all alternatives Signup and view all the answers

What does the term 'optimum decision' refer to?

The most appropriate decision based on desirable outcomes Signup and view all the answers

The administrative model of decision making emphasizes which of the following?

Inherent uncertainty and risk in decisions Signup and view all the answers

What does satisficing mean in decision making?

Accepting a satisfactory solution instead of the optimum one Signup and view all the answers

Which concept explains the limits of rationality in decision making?

Bounded rationality Signup and view all the answers

What does bounded rationality refer to in decision making?

Cognitive limitations that affect decision making Signup and view all the answers

Which of the following describes ambiguity in information?

Information that can be understood in multiple ways Signup and view all the answers

What is satisficing in the context of decision-making?

Choosing a response that is satisfactory rather than optimal Signup and view all the answers

What defines risk in decision making?

The probability of possible outcomes occurring Signup and view all the answers

Which factor does NOT contribute to incomplete information?

Overconfidence in decision-making Signup and view all the answers

What is the purpose of the feedback procedure in decision making?

To compare actual outcomes against expectations Signup and view all the answers

Which of the following best describes heuristics in decision making?

Simplified rules that help in making decisions Signup and view all the answers

What typically results from systematic errors in decision making?

Repeated poor decision-making processes Signup and view all the answers

What is confirmation bias?

Making decisions based on strong existing beliefs despite contradicting evidence. Signup and view all the answers

What is the primary disadvantage of group decision making?

Fostering groupthink among members. Signup and view all the answers

Which of the following describes the illusion of control?

Believing one can influence events more than is actually possible. Signup and view all the answers

Escalating commitment refers to which of the following?

The willingness to invest more in a failing project. Signup and view all the answers

How does group decision making compare to individual decision making?

Group decisions are less likely to suffer from biases. Signup and view all the answers

Which factor can undermine group decision making?

Different interests and preferences among members. Signup and view all the answers

What is the goal of organizational learning?

To improve understanding and management of the organization. Signup and view all the answers

What is groupthink?

A pattern of biased decision making prioritizing agreement over accuracy. Signup and view all the answers

What is the role of an intrapreneur within an organization?

To seek opportunities for product development and improvements. Signup and view all the answers

Which characteristic is NOT commonly associated with entrepreneurs?

External locus of control Signup and view all the answers

How do intrapreneurs differ from traditional managers?

Intrapreneurs are focused on innovation and product development. Signup and view all the answers

What is a skunkworks group?

A group of intrapreneurs separated from standard operations to focus on new product development. Signup and view all the answers

What is the primary challenge for founding entrepreneurs in managing their ventures?

They may lack patience, skills, and experience in management roles. Signup and view all the answers

What is a product champion?

A manager who supports a product from idea to customer. Signup and view all the answers

Which of the following innovations is attributed to Xerox PARC?

The laser printer Signup and view all the answers

Which statement accurately reflects the distinction between entrepreneurship and management?

Entrepreneurship involves innovation, while management oversees operations. Signup and view all the answers

Study Notes

Chapter 7: Decision Making, Learning, Creativity, and Entrepreneurship

This chapter focuses on decision-making, learning, creativity, and entrepreneurship in a managerial context.
Learning objectives include understanding managerial decision-making, differentiating between programmed and nonprogrammed decisions, and understanding the complexities of non-programmed decisions.
Managers should follow six steps for effective decision making: recognize the need for a decision, generate alternatives, assess alternatives, choose among alternatives, implement the chosen alternative, and learn from feedback.
Cognitive biases can lead to poor decision-making, so managers should be aware of these biases.
Programmed decisions involve routine, automatic choices based on established rules or guidelines. An example is a manufacturing supervisor hiring new workers when existing workers' overtime exceeds 10%.
Nonprogrammed decisions address unusual, unpredictable opportunities and threats. There are no pre-established rules, as the situation is uncertain and requires managers to gather information.
Intuition is based on feelings, beliefs, and quick hunches that lead to immediate decisions, requiring little effort.
Reasoned judgment requires careful consideration, information gathering, generating alternatives, and evaluating them.

The Classical Model

This model assumes decision-makers have the power to evaluate all possible options and their consequences and make a rational choice.
The classical model seeks to reach the optimal decision.

The Administrative Model

This approach acknowledges that decision-making is often uncertain, risky, and that managers frequently settle for satisfactory solutions over optimal ones.
It's based on three key ideas: bounded rationality, incomplete information, and satisficing.
Bounded rationality refers to cognitive limits that constrain a person's ability to process and act on information.
Incomplete information arises from uncertainty, ambiguity, risk, and time constraints.
Satisficing involves looking for satisfactory solutions rather than searching for the ideal one.

Causes of Incomplete Information

Risk is the probability that specific outcomes will occur from a course of action. A 90% new drug failure rate in biotechnology is an example.
Uncertainty occurs when probabilities cannot be determined or when future outcomes are unknown. Apple's Newton PDA is one example.
Ambiguous information is information that can be interpreted in multiple ways, often conflicting.

Time Constraints and Information Costs

Time and/or financial constraints may limit the gathering of complete information and evaluation of all alternatives.

Satisficing

Choosing an adequate solution to a problem or opportunity without seeking the best possible solution.

Six Steps in Decision Making

Recognize the need for a decision
Generate alternatives
Assess alternatives
Choose among alternatives
Implement the chosen alternative
Learn from feedback

General Criteria for Evaluating Possible Courses of Action

Legal considerations
Ethical analysis
Economic implications
Practical feasibility

Feedback Procedure

Comparing actual results against expected outcomes to learn from a decision.
Examining why expectations were not met.
Developing guidelines for future decision-making.

Cognitive Biases and Decision Making

Heuristics are rules of thumb that simplify decision-making.
Systematic errors, or biases are errors made repeatedly which cause poor decision making. This section describes several common examples of such errors including confirmation bias, representativeness bias, illusion of control, and escalating commitment.

Group Decision Making

Group decision-making can be superior to individual decision-making, allowing for diverse perspectives and expertise.
Groupthink describes when a group strives for consensus over logical decision making, which can be potentially flawed.
Techniques like brainstorming, nominal group technique, and Delphi technique can enhance group creativity.

Learning Organization

A learning organization is one that maximizes an individual's and group’s ability to think and behave creatively, thereby enhancing organizational learning.

Creativity

A decision maker's ability to discover original and novel ideas potentially leading to new solutions. Techniques for generating creativity are presented in this chapter.

Senge's Principles for Creating a Learning Organization

Developing personal mastery
Building shared visions
Encouraging systems thinking
Building complex mental models
Promoting team learning

Entrepreneurship

Entrepreneurs are individuals who capitalize on opportunities and mobilize resources to create new products or services.
Social entrepreneurs address social issues and needs.
Intrapreneurs are individuals inside an organization who identify opportunities for new products or services. Often described as "internal entrepreneurs."
Key entrepreneur characteristics include; open-mindedness, internal locus of control, high self-esteem, and high need for achievement.
Entrepreneurship is distinct from management, which involves the challenging aspects of implementing new ventures or products.
Examples of intrapreneurial strategies like product champion and skunkworks are described.
The text describes the Xerox Palo Alto Research Center (PARC) as an example of an organization built on innovative, intrapreneurial efforts.

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Description

This chapter delves into the intricacies of decision making, learning, creativity, and entrepreneurship within management. It outlines key concepts such as programmed and nonprogrammed decisions, the six steps of effective decision-making, and the impact of cognitive biases. A must-read for aspiring managers looking to enhance their decision-making skills.