Essentials of Contemporary Management Chapter 5 PDF

Because learning changes everything. ® Chapter 5 Decision Making, Learning, and Creativity © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Learning Objectives 1. Understand the nature of manageri...

Because learning changes everything. ® Chapter 5 Decision Making, Learning, and Creativity © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Learning Objectives 1. Understand the nature of managerial decision making, differentiate between programmed and nonprogrammed decisions, and explain why nonprogrammed decision making is a complex, uncertain process. 2. Describe the six steps that managers should take to make the best decisions. 3. Explain how cognitive biases can lead managers to make poor decisions. 4. Identify the advantages and disadvantages of group decision making and describe techniques that can improve it. 5. Explain the role that organizational learning and creativity play in helping managers to improve their decisions. © McGraw Hill LLC. 2  The Nature of Managerial Decision Making Decision Making: The process by which managers respond to opportunities and threats by analyzing options and making determinations about specific organizational goals and courses of action. © McGraw Hill LLC. 3  Programmed Decision Making Routine, virtually automatic decision making that follows established rules or guidelines. Managers have made the same decision many times before. There are rules or guidelines to follow based on experience with past decisions. © McGraw Hill LLC. 4  Nonprogrammed Decisions Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats. Developing a new technology. Starting a new business. Entering a new market. © McGraw Hill LLC. 5  Topics for Discussion: Programmed versus Nonprogrammed What are the main differences between programmed decision making and nonprogrammed decision making? [LO5–1] © McGraw Hill LLC. 6  Decision Making Intuition: Reasoned Judgment: Feelings, beliefs, and Decisions that take time hunches that come readily and effort to make and to mind, require little effort result from careful and information gathering information gathering, and result in on–the–spot generation of alternatives, decisions. and evaluation of alternatives. © McGraw Hill LLC. 7  The Classical Model Classical Decision–Making Optimum Decision: Model: The most appropriate A prescriptive model of decision in light of what decision making that managers believe to be assumes the decision the most desirable maker can identify and consequences for the evaluate all possible organization. alternatives and their consequences and rationally choose the most appropriate course of action. © McGraw Hill LLC. 8  The Classical Model of Decision Making Figure 5.1 Access the text alternative for these images © McGraw Hill LLC. 9  The Administrative Model 1 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. © McGraw Hill LLC. 10  Topics for Discussion: Administrative Model In what ways do the classical and administrative models of decision making help managers appreciate the complexities involved in real–world decision making? [LO5–1] © McGraw Hill LLC. 11  The Administrative Model 2 Bounded Rationality: Incomplete Information: Cognitive limitations that Happens because the full constrain one’s ability to range of decision–making interpret, process, and act alternative is unknowable on information. in most situations and the consequences are uncertain. © McGraw Hill LLC. 12  Why Information Is Incomplete Figure 5.2 © McGraw Hill LLC. 13  Causes of Incomplete Information 1 Risk: Uncertainty: The degree of probability The probabilities of that the possible outcomes alternative outcomes of a particular course of cannot be determined and action will occur. future outcomes are unknown. © McGraw Hill LLC. 14  Causes of Incomplete Information 2 Figure 5.3 Young Woman or Old Woman? Ambiguous Information: Information that can be interpreted in multiple and often conflicting ways. © McGraw Hill LLC. 15  Causes of Incomplete Information 3 Time Constraints and Information Costs: Managers have neither the time nor money to search for all possible alternatives and evaluate potential consequences. © McGraw Hill LLC. 16  Causes of Incomplete Information 4 Satisficing: Managers search for and choose acceptable, or satisfactory, ways to respond to problems and opportunities rather than trying to make the optimal decision. © McGraw Hill LLC. 17  Topics for Discussion: Avoiding bad decisions Why do capable managers sometimes make bad decisions? What can individual managers do to improve their decision– making skills? [LO5–1, 5–2] © McGraw Hill LLC. 18  Steps in the Decision-Making Process Figure 5.4 Access the text alternative for these images © McGraw Hill LLC. 19  General Criteria for Evaluating Possible Courses of Action Figure 5.5. Is the possible course of action. © McGraw Hill LLC. 20  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. © McGraw Hill LLC. 21  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 © McGraw Hill LLC. 22  Group Decision Making 1 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. © McGraw Hill LLC. 23  Group Decision Making 2 Groupthink: A pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision. © McGraw Hill LLC. 24  Topics for Discussion: Groupthink In what kinds of groups is groupthink most likely to be a problem? When is it least likely to be a problem? What steps can group members take to ward off groupthink? [LO5–3] © McGraw Hill LLC. 25  Group Decision Making 3 Devil’s Advocacy: Critical analysis of a preferred alternative, made in response to challenges raised by a group member who, playing the role of devil’s advocate, defends unpopular or opposing alternatives for the sake of argument. © McGraw Hill LLC. 26  Group Decision Making 4 Diversity among Decision Makers: Diverse groups are often less prone to groupthink because group members already differ from each other and thus are less subject to pressures for uniformity. © McGraw Hill LLC. 27  Organizational Learning and Creativity 1 Organizational Learning: The process through which managers seek to improve employees’ desire and ability to understand and manage the organization and its task environment. © McGraw Hill LLC. 28  Topics for Discussion: Organizational Learning What is organizational learning, and how can managers promote it? [LO5–4] © McGraw Hill LLC. 29  Organizational Learning and Creativity 2 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. © McGraw Hill LLC. 30  Senge’s Principles for Creating a Learning Organization Figure 5.7 Access the text alternative for these images © McGraw Hill LLC. 31  Organizational Learning and Creativity 3 Creativity: A decision maker’s ability to discover original and novel ideas that lead to feasible alternative courses of action. © McGraw Hill LLC. 32  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. © McGraw Hill LLC. 33  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. © McGraw Hill LLC. 34  Building Group Creativity 1 Production Blocking: Nominal Group Technique: Loss of productivity in A decision–making brainstorming sessions technique in which group due to the unstructured members write down nature of brainstorming. ideas and solutions, read their suggestions to the whole group, and discuss and then rank the alternatives. © McGraw Hill LLC. 35  Building Group Creativity 2 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. © McGraw Hill LLC. 36  Intrapreneurship and Organizational Learning Product Champion: Skunkworks: A manager who takes A group that is deliberately “ownership” of a project separated from normal and provides the operations to encourage leadership and vision that members to devote all take a product from the their attention to idea stage to the final developing new products. customer. © McGraw Hill LLC. 37  Be The Manager What are you going to do? © McGraw Hill LLC. 38  Because learning changes everything. ® www.mheducation.com © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.