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

Because learning changes everything. ® Chapter 7 Decision Making, Learning, Creativity, and Entrepreneurship © 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the pr...

Because learning changes everything. ® Chapter 7 Decision Making, Learning, Creativity, and Entrepreneurship © 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill.  Learning Objectives 1 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 managers should take to make the best decisions, and explain how cognitive biases can lead managers to make poor decisions. © McGraw Hill 2  Learning Objectives 2 3. Identify the advantages and disadvantages of group decision making, and describe techniques that can improve it. 4. Explain the role that organizational learning and creativity play in helping managers to improve their decisions. 5. Describe how managers can encourage and promote entrepreneurship to create a learning organization, and differentiate between entrepreneurs and intrapreneurs. © McGraw Hill 3  The Nature of Managerial Decision Making 1 Decision making: The process by which managers respond to opportunities and threats that confront them by analyzing options and making determinations about specific organizational goals and courses of action. © McGraw Hill 4  The Nature of Managerial Decision Making 2 Decisions in response to opportunities: This occurs when managers respond to ways to improve organizational performance to benefit customers, employees, and other stakeholder groups. Decisions in response to threats: Events inside or outside the organization are adversely affecting organizational performance, and managers seek ways to increase performance. © McGraw Hill 5  Decision Making 1 Programmed decision: Programmed decision involves routine, virtually automatic decision making that follows established rules or guidelines. Decisions have been made so many times in the past that managers have developed rules or guidelines to be applied when certain situations inevitably occur. Manufacturing supervisor hires new workers when existing workers’ overtime increases by more than 10 percent. © McGraw Hill 6  Decision Making 2 Nonprogrammed decisions: Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats. No rules because the situation is unexpected or uncertain and managers lack the information they would need to develop rules to respond to it. © McGraw Hill 7  Decision Making 3 Intuition: Feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering, and result in on-the-spot decisions. Reasoned judgment: Decision that requires time and effort and results from careful information gathering, generation of alternatives, and evaluation of alternatives. © McGraw Hill 8  The Classical Model 1 Classical model of decision making: A prescriptive approach to decision making based on the assumption that the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action. © McGraw Hill 9  The Classical Model 2 Optimum decision: The most appropriate decision in light of what managers believe to be the most desirable consequences for their organization. © McGraw Hill 10  Figure 7.1 The Classical Model of Decision Making Access the text alternative for slide images. © McGraw Hill 11  The Administrative Model 1 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 3 important concepts: bounded rationality, incomplete information, and satisficing. © McGraw Hill 12  The Administrative Model 2 Bounded rationality: Cognitive limitations that constrain one’s ability to interpret, process, and act on information. Incomplete information: Because of risk and uncertainty, ambiguity, and time constraints. © McGraw Hill 13  Figure 7.2 Why Information Is Incomplete © McGraw Hill 14  Causes of Incomplete Information 1 Risk: The degree of probability that the possible outcomes of a particular course of action will occur. 90% new drug failure rate in biotechnology industry. Uncertainty: Probabilities of alternative outcomes cannot be determined and future outcomes unknown. Apple’s Newton PDA. © McGraw Hill 15  Causes of Incomplete Information 2 Ambiguous information: Information that can be interpreted in multiple and often conflicting ways. Young woman or old woman? © McGraw Hill 16  Causes of Incomplete Information 3 Time constraints and information costs: No time or money to search for all possible alternatives and evaluate potential consequences. Satisficing: Searching for and choosing a satisfactory response to problems and opportunities rather than trying to make the best decision. © McGraw Hill 17  Figure 7.4 Six Steps in Decision Making Access the text alternative for slide images. © McGraw Hill 18  Figure 7.5 General Criteria for Evaluating Possible Courses of Action © McGraw Hill 19  Feedback Procedure 1. Compare what actually happened to what was expected to happen as a result of the decision. 2. Explore why any expectations for the decision were not met. 3. Derive guidelines that will help in future decision making. © McGraw Hill 20  Cognitive Biases and Decision Making Heuristics: Rules of thumb that simplify the process of making decisions. Systematic errors: Errors that people make over and over and that result in poor decision making. © McGraw Hill 21  Figure 7.6 Sources of Cognitive Bias at the Individual and Group Levels © McGraw Hill 22  Sources of Cognitive Biases 1 Confirmation Bias: The tendency to make decisions based on strong existing beliefs even when evidence suggests those beliefs may be wrong. Representativeness: A cognitive bias resulting from the tendency to generalize inappropriately from a small sample or from a single vivid event or episode. © McGraw Hill 23  Sources of Cognitive Biases 2 Illusion of control: The tendency to overestimate one’s own ability to control activities and events. Top managers. Escalating commitment: A source of cognitive bias resulting from the tendency to commit additional resources to a project even if evidence shows that the project is failing. © McGraw Hill 24  Group Decision Making 1 Superior to individual decision making. Choices less likely to fall victim to bias. Able to draw on combined skills of group members. Improve ability to generate feasible alternative. © McGraw Hill 25  Group Decision Making 2 Potential disadvantages: 1. Can take much longer for groups than individuals to make decisions. 2. Can be difficult to get two or more managers to agree because of different interests and preferences. 3. Can be undermined by biases. © McGraw Hill 26  Group Decision Making 3 Groupthink: 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 27  Figure 7.7 Devil’s Advocacy and Dialectical Inquiry Access the text alternative for slide images. © McGraw Hill 28  Organizational Learning and Creativity 1 Organizational learning: Managers seek to improve an employee’s desire and ability to understand and manage the organization and its task environment. Learning organization: A learning organization is one 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 29  Organizational Learning and Creativity 2 Creativity A decision maker’s ability to discover original and novel ideas that lead to feasible alternative courses of action. Get off email and lose the desk! Think outside the box! © McGraw Hill 30  Figure 7.8 Senge’s Principles for Creating a Learning Organization Access the text alternative for slide images. © McGraw Hill 31  Promoting Group Creativity 1 Brainstorming: Managers meet face-to-face to generate and debate many alternatives. Production blocking: There might be a loss of productivity in brainstorming sessions due to the unstructured nature of brainstorming. © McGraw Hill 32  Promoting Group Creativity 2 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. Useful when an issue is controversial and when different managers might be expected to champion different courses of action. © McGraw Hill 33  Promoting Group Creativity 3 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 34  Entrepreneurship 1 Entrepreneurs: Individuals who notice opportunities and decide how to mobilize the resources necessary to produce new and improved goods and services. Social entrepreneurs: Individuals who pursue initiatives and opportunities and mobilize resources to address social problems and needs in order to improve society and well-being through creative solutions. © McGraw Hill 35  Entrepreneurship 2 Intrapreneurs: Managers, scientists, or researchers who work inside an organization and notice opportunities to develop new or improved products and better ways to make them. © McGraw Hill 36  Characteristics of Entrepreneurs Open to experience. They are original thinkers and take risks. Internal locus of control. They take responsibility for their own actions. High self-esteem. They feel competent and capable. High need for achievement. They set high goals and enjoy working toward them. © McGraw Hill 37  Entrepreneurship and Management Frequently, a founding entrepreneur lacks the skills, patience, and experience to engage in the difficult and challenging work of management. Entrepreneurship is not the same as management. © McGraw Hill 38  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 of intrapreneurs who are deliberately separated from the normal operation of an organization to encourage them to devote all their attention to developing new products. © McGraw Hill 39  Example: Xerox PARC The Palo Alto Research Center is a Xerox research and development division. Many innovations, such as the laser printer, personal workstation, WYSIWYG printing, and GUI came out of PARC. © McGraw Hill 40  End of Main Content Because learning changes everything. ® www.mheducation.com © 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill.