MGM3101 Chapter 5 Decision Making, Learning, and Creativity PDF

Decision Making, Learning, and Creativity CHAPTER 5 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 step...

Decision Making, Learning, and Creativity CHAPTER 5 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 that managers should take to make the best decisions. Explain how cognitive biases can lead managers to make poor decisions. Identify the advantages and disadvantages of group decision making and describe techniques that can improve it. Explain the role that organizational learning and creativity play in helping managers to improve their decisions. The Nature of Managerial Decision Making Decision Making 1 The process by which managers respond to opportunities and threats by analyzing options and making determinations about specific organizational goals and courses of action. 2 Response to opportunity Decision making in response to opportunities when managers search a ways to improve organizational performance to benefit customers, employees, and other stakeholder Response to threats 3 Decision making in response to threats when events inside or outside the organizations adversely affect organizational performance, and managers search for ways to increase performance  Programmed and Non programmed Decision Making Programmed Nonprogrammed Decision Routine, virtually automatic Decisions Nonroutine decision making that decision making that follows occurs in response to unusual, established rules or guidelines. unpredictable opportunities and Managers have made the threats. same decision many times Developing a new before. technology. There are rules or guidelines Starting a new business. to follow based on experience Entering a new market. with past decisions. Nonprogrammed Decisions Intuitio n Feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering and result in on– the–spot decisions. Reasoned Judgment Decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives. The Classical Model Classical Decision–Making Model A prescriptive model of decision making that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action. Optimum The most appropriate decision in light Decision of what managers believe to be the most desirable consequences for the organization. The Administrative Model An approach to decision making that explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions. Based on three important concepts: Bounded rationality Incomplete information Satisficing The Administrative Model Bounded Rationality Cognitive limitations that constrain one’s ability to interpret, process, and act on information. Incomplete Information Happens because the full range of decision–making alternative is unknowable in most situations and the consequences are uncertain.  The Administrative Model INTEGRITY 1 INCOMPLETE INFORMATIO 2 TRUST N 3 ACCOUNTABILITY Why Information Is Incomplete Figure 5.2  Causes of Incomplete Information Risk Uncertainty Ambiguous Information The degree of The probabilities of Information that can probability that the alternative outcomes be interpreted in possible outcomes of a cannot be determined multiple and often particular course of and future outcomes are conflicting ways. action will occur. unknown.  Causes of Incomplete Information Time Constraints and Satisficing Information Costs Managers search for and choose Managers have neither the acceptable, or satisfactory, time nor money to search ways to respond to problems for all possible alternatives and opportunities rather than and evaluate potential trying to make the optimal consequences. decision. Steps in the Decision-Making Process Access the text alternative for these imag es  General Criteria for Evaluating Possible Courses of Action Is the possible course of action.  Learn from Feedback 1.Compare what happened to what was expected to happen. 2.Explore why any expectations for the decision were not met. 3.Derive guidelines that will help in future decision making.  Cognitive Biases and Decision Making Heuristics Rules based on an individual’s experience that simplify the process of decision making. Systematic errors Errors that people make over and over again that result in poor decision making. Access the text alternative for these images Group Decision Making Superior to individual making. Choices less likely to fall victim to bias. Able to draw on combined skills of group members. Improve ability to generate feasible alternatives. Allows managers to process more information. Managers affected by decisions agree to cooperate.  Group Decision Making Groupthink Devil’s Advocacy Diversity among Decision Makers A pattern of faulty and Critical analysis of a biased decision making Diverse groups are often preferred alternative, made that occurs in groups less prone to groupthink in response to challenges whose members strive for because group members raised by a group member agreement among already differ from each who, playing the role of themselves at the expense other and thus are less devil’s advocate, defends of accurately assessing subject to pressures for unpopular or opposing information relevant to a uniformity. alternatives for the sake of decision. argument.  Organizational Learning and Creativity Organizational Learning The process through which managers seek to improve employees’ desire and ability to understand and manage the organization and its task environment. Learning Organization An organization in which managers try to maximize the ability of individuals and groups to think and behave creatively and thus maximize the potential for organizational learning to take place.  Creating a Learning Organization Senge’s Principles for Creating a Learning Organization Access the text alternative for these images  Promoting Individual Creativity Certain conditions enhance individual creativity. Opportunity and freedom to generate new ideas. Opportunity to experiment and learn from mistakes. No punishment for ideas that seem outlandish. Constructive feedback. Promoting Group Creativity Brainstorming Managers meet face–to–face to generate and debate many alternatives. Group members are not allowed to evaluate alternatives until all alternatives are listed. Group member are encouraged to be as innovative and radical as possible. When all alternatives are listed, the pros and cons of each are discussed and a short list created. Production Blocking Loss of productivity in brainstorming sessions due to the unstructured nature of brainstorming. Promoting Group Creativity Nominal Group Technique A decision–making technique in which group members write down ideas and solutions, read their suggestions to the whole group, and discuss and then rank the alternatives. Delphi Technique A decision–making technique in which group members do not meet face–to–face but respond in writing to questions posed by the group leader.  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 that is deliberately separated from normal operations to encourage members to devote all their attention to developing new products. Accessibility Content: Text Alternatives for Images The Classic Model of Decision Making - Text Alternative Return to parent-slide containing images. The following steps are presented in the graphic: 1. List all the alternative courses of action possible and the consequences of the different alternatives, which assumes all information about alternatives is available to managers. 2. Rank each alternative from least preferred to most preferred according to personal preferences, which assumes managers possess the mental facility to process this information. 3. Select the alternative that leads to desired future consequences, which assumes that managers know when future course of action is best for the organization. Return to parent-slide containing images. Steps in the Decision-Making Process - Text Alternative Return to parent-slide containing images. The graphics shows steps in the decision-making process. 1. recognize the need for a decision, 2. generate alternatives, 3. assess alternatives, 4. choose among alternatives, 5. implement the chosen alternative, and 6. learn from feedback. Return to parent-slide containing images. Cognitive Biases and Decision Making - Text Alternative Return to parent-slide containing images. The figure shows the cognitive biases and decision making. The cognitive biases consists of the following: confirmation; representativeness; illusion of control; escalating commitment. Return to parent-slide containing images. Senge’s Principles for Creating a Learning Organization - Text Alternative Senge's principles are 1, develop personal mastery. 2, build complex, challenging mental models. 3, promote team learning. 4, build shared vision. 5, encourage systems thinking. Return to parent-slide containing images.