1. 1. Copyright 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Decision Making, Learning, Creativity, and Entrepreneurship Chapter Five
2. 2. 5-2 Farmers
3. 3. 5-3 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
4. 4. 5-4 Decision Making Programmed Decision 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 Little ambiguity involved
5. 5. 5-5 Decision Making Non-Programmed Decisions Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats.
6. 6. 5-6 Question? What are feelings, beliefs, and hunches that come readily to mind and require little effort? A. Reasoned Judgment B. Intuition C. Wild Guess D. Scientific Deduction
7. 7. 5-7 Decision Making 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 decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives
8. 8. 5-8 The Classical Model Classical Model of Decision Making 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
9. 9. 5-9 The Classical Model of Decision Making Figure 5.1
10. 10. 5-10 The Administrative Model Administrative Model of Decision Making 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 Bounded rationality, incomplete information
11. 11. 5-11 Why Information Is Incomplete Figure 5.2
12. 12. 5-12 Causes of Incomplete Information Risk The degree of probability that the possible outcomes of a particular course of action will occur Uncertainty the probabilities of alternative outcomes cannot be determined and future outcomes are unknown
13. 13. 5-13 Causes of Incomplete Information Ambiguous Information Information that can be interpreted in multiple and often conflicting ways. Figure 5.3 Young Woman or Old Woman
14. 14. 5-14 Causes of Incomplete Information Time constraints and information costs managers have neither the time nor money to search for all possible alternatives and evaluate potential consequences
15. 15. 5-15 Causes of Incomplete Information Satisficing Searching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decision Managers search for and choose acceptable, or satisfactory, ways to respond to problems and opportunities rather than trying to make the optimal decision
16. 16. 5-16 Six Steps in Decision Making Figure 5.4
17. 17. 5-17 Discussion Question Which is the most important step in the decision making process? A. Recognize the need for a decision B. Generate Alternatives C. Assess Alternatives D. Choose among Alternatives E. Implement the Chosen Alternative F. Learn from Feedback
18. 18. 5-18 Decision Making Steps Step 1. Recognize Need for a Decision Sparked by an event such as environment changes. Managers must first realize that a decision must be made.
19. 19. 5-19 Decision Making Steps Step 2. Generate Alternatives Managers must develop feasible alternative courses of action If good alternatives are missed, the resulting decision is poor It is hard to develop creative alternatives, so managers need to look for new ideas
20. 20. 5-20 Decision Making Steps Step 3. Assess Alternatives What are the advantages and disadvantages of each alternative? Managers should specify criteria, then evaluate.
21. 21. 5-21 Figure 5.5 General Criteria for Evaluating Possible Courses of Action
22. 22. 5-22 Decision Making Steps Step 4. Choose Among Alternatives Rank the various alternatives and make a decision Tendency is for managers to ignore critical information, even when available
23. 23. 5-23 Decision Making Steps Step 5. Implement Chosen Alternative Managers must now carry out the alternative Often a decision is made and not implemented
24. 24. 5-24 Decision Making Steps Step 6. Learn From Feedback Compare what happened to what was expected to happen Explore why any expectations for the decision were not met Derive guidelines that will help in future decision making
25. 25. 5-25 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
26. 26. 5-26 Group Decision Making 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
27. 27. 5-27 Group Decision Making Devils Advocacy Critical analysis of a preferred alternative, made in response to challenges raised by a group member who, playing the role of devils advocate, defends unpopular or opposing alternatives for the sake of argument.
28. 28. 5-28 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.
29. 29. 5-29 Senges Principles for Creating a Learning Organization Figure 5.6
30. 30. 5-30 Question? What is a decision makers ability to discover original and novel ideas that lead to feasible alternative courses of action? A. Risk B. Decision-making C. Creativity D. Inventiveness
31. 31. 5-31 Organizational Learning and Creativity Creativity A decision makers ability to discover original and novel ideas that lead to feasible alternative courses of action
32. 32. 5-32 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. When all are listed, then the pros and cons of each are discussed and a short list created.
33. 33. 5-33 Building Group Creativity Production blocking Loss of productivity in brainstorming sessions due to the unstructured nature of brainstorming 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
34. 34. 5-34 Building Group Creativity 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
35. 35. 5-35 Entrepreneurship and Creativity Entrepreneurs an individual who notices opportunities and decides how to mobilize the resources necessary to produce new and improved goods and services Social entrepreneurs An individual who pursues initiatives and opportunities and mobilizes resources to address social problems and needs in order to improve society and wellbeing through creative solutions.
36. 36. 5-36 Entrepreneurship and Creativity Intrapreneur a manager, scientist, or researcher who works inside an organization and notices opportunities to develop new or improved products and better ways to make them
37. 37. 5-37 Entrepreneurship and Creativity Entrepreneurship Mobilization of resources to take advantage of an opportunity to provide customers with new and improved goods and services
38. 38. 5-38 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 who is deliberately separated from normal operations to encourage them to devote all their attention to developing new products
39. 39. 5-39 Decisions, Decisions, Decisions
40. 40. 5-40 Video: Decisions, Decisions How important are emotions in making decisions? You are a shareholder. At the most recent shareholders meeting the CEO explained his decision-making process as one where he closely follows Jonah Lehrers suggestion to just go for it. Do you have more confidence or less confidence in your company leadership.