s15 making decisions

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Chapter 11

Making Decisions

LEARNING OBJECTIVES

After reading this chapter, you should be able to do the following:

1. Understand what is involved in decision making.2. Compare and contrast different decision-making models.3. Compare and contrast individual and group decision making.4. Understand potential decision-making traps and how to avoid them.5. Understand the pros and cons of different decision-making aids.6. Engage in ethical decision making.7. Understand cross-cultural differences in decision making.

515

11.1 Decision-Making Culture: The Case of Google

Chapter 11 Making Decisions

516

Figure 11.1

Source: http://en.wikipedia.org/wiki/File:Googleplex_Welcome_Sign.jpg by Ardo191.

Google (NASDAQ: GOOG) is one of the best-known and most admired companies around the world, so much sothat googling is the term many use to refer to searching information on the Web. What started out as astudent project by two Stanford University graduatesLarry Page and Sergey Brinin 1996, Google became themost frequently used Web search engine on the Internet with 1 billion searches per day in 2009, as well as otherinnovative applications such as Gmail, Google Earth, Google Maps, and Picasa. Google grew from 10 employeesworking in a garage in Palo Alto to 10,000 employees operating around the world by 2009. What is the formulabehind this success?

Google strives to operate based on solid principles that may be traced back to its founders. In a world crowdedwith search engines, they were probably the first company that put users first. Their mission statementsummarizes their commitment to end-user needs: To organize the worlds information and to make ituniversally accessible and useful. While other companies were focused on marketing their sites and increasingadvertising revenues, Google stripped the search page of all distractions and presented users with a blank pageconsisting only of a company logo and a search box. Google resisted pop-up advertising, because the companyfelt that it was annoying to end-users. They insisted that all their advertisements would be clearly marked assponsored links. This emphasis on improving user experience and always putting it before making moremoney in the short term seems to have been critical to their success.

Keeping their employees happy is also a value they take to heart. Google created a unique work environmentthat attracts, motivates, and retains the best players in the field. Google was ranked as the number 1 Best Placeto Work For by Fortune magazine in 2007 and number 4 in 2010. This is not surprising if one looks closer to howGoogle treats employees. On their Mountain View, California, campus called the Googleplex, employees aretreated to free gourmet food options including sushi bars and espresso stations. In fact, many employeescomplain that once they started working for Google, they tend to gain 10 to 15 pounds! Employees have access togyms, shower facilities, video games, on-site child care, and doctors. Google provides 4 months of paternal leave


11.1 Decision-Making Culture: The Case of Google 517

with 75% of full pay and offers $500 for take-out meals for families with a newborn. These perks create a placewhere employees feel that they are treated well and their needs are taken care of. Moreover, they contribute tothe feeling that they are working at a unique and cool place that is different from everywhere else they mayhave worked.

In addition, Google encourages employee risk taking and innovation. How is this done? When a vice president incharge of the companys advertising system made a mistake costing the company millions of dollars andapologized for the mistake, she was commended by Larry Page, who congratulated her for making the mistakeand noting that he would rather run a company where they are moving quickly and doing too much, as opposedto being too cautious and doing too little. This attitude toward acting fast and accepting the cost of resultingmistakes as a natural consequence of working on the cutting edge may explain why the company is performingmuch ahead of competitors such as Microsoft and Yahoo! One of the current challenges for Google is to expandto new fields outside of their Web search engine business. To promote new ideas, Google encourages allengineers to spend 20% of their time working on their own ideas.

Googles culture is reflected in their decision making as well. Decisions at Google are made in teams. Even thecompany management is in the hands of a triad: Larry Page and Sergey Brin hired Eric Schmidt to act as the CEOof the company, and they are reportedly leading the company by consensus. In other words, this is not acompany where decisions are made by the senior person in charge and then implemented top down. It iscommon for several small teams to attack each problem and for employees to try to influence each other usingrational persuasion and data. Gut feeling has little impact on how decisions are made. In some meetings, peoplereportedly are not allowed to say I think but instead must say the data suggest. To facilitate teamwork,employees work in open office environments where private offices are assigned only to a select few. Even Kai-FuLee, the famous employee whose defection from Microsoft was the target of a lawsuit, did not get his own officeand shared a cubicle with two other employees.

How do they maintain these unique values? In a company emphasizing hiring the smartest people, it is verylikely that they will attract big egos that may be difficult to work with. Google realizes that its strength comesfrom its small company values that emphasize risk taking, agility, and cooperation. Therefore, they take theirhiring process very seriously. Hiring is extremely competitive and getting to work at Google is not unlikeapplying to a college. Candidates may be asked to write essays about how they will perform their future jobs.Recently, they targeted potential new employees using billboards featuring brain teasers directing potentialcandidates to a Web site where they were subjected to more brain teasers. Each candidate may be interviewed byas many as eight people on several occasions. Through this scrutiny, they are trying to select Googleyemployees who will share the companys values, perform at high levels, and be liked by others within thecompany.

Will this culture survive in the long run? It may be too early to tell, given that the company was only founded in1998. The founders emphasized that their initial public offering (IPO) would not change their culture and they



would not introduce more rules or change the way things are done in Google to please Wall Street. But can apublic corporation really act like a start-up? Can a global giant facing scrutiny on issues including privacy,copyright, and censorship maintain its culture rooted in its days in a Palo Alto garage? Larry Page is quoted assaying, We have a mantra: dont be evil, which is to do the best things we know how for our users, for ourcustomers, for everyone. So I think if we were known for that, it would be a wonderful thing.

Case written by [citation redacted per publisher request]. Based on information from Elgin, B., Hof, R. D., &Greene, J. (2005, August 8). Revenge of the nerdsagain. BusinessWeek. Retrieved April 30, 2010, fromhttp://www.businessweek.com/technology/content/jul2005/tc20050728 _5127_tc024.htm; Hardy, Q. (2005,November 14). Google thinks small. Forbes, 176(10); Lashinky, A. (2006, October 2). Chaos by design. Fortune,154(7); Mangalindan, M. (2004, March 29). The grownup at Google: How Eric Schmidt imposed bettermanagement tactics but didnt stifle search giant. Wall Street Journal, p. B1; Lohr, S. (2005, December 5). AtGoogle, cube culture has new rules. New York Times. Retrieved April 30, 2010, from http://www.nytimes.com/2005/12/05/technology/05google.html; Schoeneman, D. (2006, December 31). Can Google come out to play? NewYork Times. Retrieved April 30, 2010, from http://www.nytimes.com/2006/12/31/fashion/31google.html;Warner, M. (2004, June). What your company can learn from Google. Business 2.0, 5(5).

DISCUSSION QUESTIONS

1. Do you think Googles decision-making culture will help or hurt Googlein the long run?

2. What are the factors responsible for the specific culture that exists inGoogle?

3. What type of decision-making approach has Google taken? Do you thinkthis will remain the same over time? Why or why not?

4. Do you see any challenges Google may face in the future because of itsemphasis on risk taking?



11.2 Understanding Decision Making

LEARNING OBJECTIVES

1. Define decision making.2. Understand different types of decisions.

Decision making1 refers to making choices among alternative courses ofactionwhich may also include inaction. While it can be argued that managementis decision making, half of the decisions made by managers within organizationsultimately fail.Ireland, R. D., & Miller, C. C. (2004). Decision making and firmsuccess. Academy of Management Executive, 18, 812; Nutt, P. C. (2002). Why decisionsfail. San Francisco: Berrett-Koehler; Nutt, P. C. (1999). Surprising but true: Half thedecisions in organizations fail. Academy of Management Executive, 13, 7590.Therefore, increasing effectiveness in decision making is an important part ofmaximizing your effectiveness at work. This chapter will help you understand howto make decisions alone or in a group while avoiding common decision-makingpitfalls.

Individuals throughout organizations use the information they gather to make awide range of decisions. These decisions may affect the lives of others and changethe course of an organization. For example, the decisions made by executives andconsulting firms for Enron ultimately resulted in a $60 billion loss for investors,thousands of employees without jobs, and the loss of all employee retirement funds.But Sherron Watkins, a former Enron employee and now-famous whistleblower,uncovered the accounting problems and tried to enact change. Similarly, thedecision made by firms to trade in mortgage-backed securities is having negativeconsequences for the entire economy in the United States. All parties involved insuch outcomes made a decision, and everyone is now living with the consequencesof those decisions.

1. Making choices amongalternative courses of action,including inaction.


520

Figure 11.2

It is important to remember that decisions have consequences.

The New Yorker Collection. 2002. Leo Cullum from cartoonbank.com. All rights reserved.

Types of Decisions

Most discussions of decision making assume that only senior executives makedecisions or that only senior executives decisions matter. This is a dangerousmistake.

- Peter Drucker

Despite the far-reaching nature of the decisions in the previous example, not alldecisions have major consequences or even require a lot of thought. For example,before you come to class, you make simple and habitual decisions such as what towear, what to eat, and which route to take as you go to and from home and school.You probably do not spend much time on these mundane decisions. These types ofstraightforward decisions are termed programmed decisions2, or decisions that

2. Decisions that occur frequentlyenough that we develop anautomated response to them.


11.2 Understanding Decision Making 521

Figure 11.3

In order to ensure consistencyaround the globe such as at thisSt. Petersburg, Russia, location,McDonalds Corporation trainsall restaurant managers atHamburger University wherethey take the equivalent to 2years of college courses and learnhow to make decisions on the job.The curriculum is taught in 28languages.

Source:http://upload.wikimedia.org/wikipedia/commons/a/a2/McDonalds_in_St_Petersburg_2004.JPG.

occur frequently enough that we develop an automated response to them. Theautomated response we use to make these decisions is called the decision rule3. Forexample, many restaurants face customer complaints as a routine part of doingbusiness. Because complaints are a recurring problem, responding to them maybecome a programmed decision. The restaurant might enact a policy stating thatevery time they receive a valid customer complaint, the customer should receive afree dessert, which represents a decision rule.

On the other hand, unique and important decisionsrequire conscious thinking, information gathering, andcareful consideration of alternatives. These are callednonprogrammed decisions4. For example, in 2005McDonalds Corporation became aware of the need torespond to growing customer concerns regarding theunhealthy aspects (high in fat and calories) of the foodthey sell. This is a nonprogrammed decision, because forseveral decades, customers of fast-food restaurantswere more concerned with the taste and price of thefood, rather than its healthiness. In response to thisproblem, McDonalds decided to offer healthieralternatives such as the choice to substitute French friesin Happy Meals with apple slices and in 2007 theybanned the use of trans fat at their restaurants.

A crisis situation also constitutes a nonprogrammeddecision for companies. For example, the leadership ofNutrorim was facing a tough decision. They hadrecently introduced a new product, ChargeUp withLipitrene, an improved version of their popular sportsdrink powder, ChargeUp. At some point, a phone callcame from a state health department to inform them of11 cases of gastrointestinal distress that might berelated to their product, which led to a decision to recallChargeUp. The decision was made without aninvestigation of the information. While this decisionwas conservative, it was made without a process that weighed the information. Twoweeks later it became clear that the reported health problems were unrelated toNutrorims product. In fact, all the cases were traced back to a contaminated healthclub juice bar. However, the damage to the brand and to the balance sheets wasalready done. This unfortunate decision caused Nutrorim to rethink the waydecisions were made when under pressure. The company now gathers informationto make informed choices even when time is of the essence.Garvin, D. A. (2006,January). All the wrong moves. Harvard Business Review, 84, 1823.

3. Automated response toproblems that occur routinely.

4. Unique, nonroutine, andimportant. These decisionsrequire conscious thinking,information gathering, andcareful consideration ofalternatives.



Decisions can be classified into three categories based on the level at which theyoccur. Strategic decisions5 set the course of an organization. Tactical decisions6are decisions about how things will get done. Finally, operational decisions7 referto decisions that employees make each day to make the organization run. Forexample, think about the restaurant that routinely offers a free dessert when acustomer complaint is received. The owner of the restaurant made a strategicdecision to have great customer service. The manager of the restaurantimplemented the free dessert policy as a way to handle customer complaints, whichis a tactical decision. Finally, the servers at the restaurant are making individualdecisions each day by evaluating whether each customer complaint received islegitimate and warrants a free dessert.

Figure 11.4 Examples of Decisions Commonly Made Within Organizations

In this chapter we are going to discuss different decision-making models designedto understand and evaluate the effectiveness of nonprogrammed decisions. We willcover four decision-making approaches, starting with the rational decision-makingmodel, moving to the bounded rationality decision-making model, the intuitivedecision-making model, and ending with the creative decision-making model.

5. Decisions that are made to setthe course of an organization.

6. Decisions about how things willget done.

7. Decisions employees makeeach day to make theorganization function.



Making Rational Decisions

The rational decision-making model8 describes a series of steps that decisionmakers should consider if their goal is to maximize the quality of their outcomes. Inother words, if you want to make sure that you make the best choice, going throughthe formal steps of the rational decision-making model may make sense.

Lets imagine that your old, clunky car has broken down, and you have enoughmoney saved for a substantial down payment on a new car. It will be the first majorpurchase of your life, and you want to make the right choice. The first step,therefore, has already been completedwe know that you want to buy a new car.Next, in step 2, youll need to decide which factors are important to you. How manypassengers do you want to accommodate? How important is fuel economy to you? Issafety a major concern? You only have a certain amount of money saved, and youdont want to take on too much debt, so price range is an important factor as well. Ifyou know you want to have room for at least five adults, get at least 20 miles pergallon, drive a car with a strong safety rating, not spend more than $22,000 on thepurchase, and like how it looks, you have identified the decision criteria9. All thepotential options for purchasing your car will be evaluated against these criteria.Before we can move too much further, you need to decide how important eachfactor is to your decision in step 3. If each is equally important, then there is noneed to weigh them, but if you know that price and mpg are key factors, you mightweigh them heavily and keep the other criteria with medium importance. Step 4requires you to generate all alternatives10 about your options. Then, in step 5, youneed to use this information to evaluate each alternative against the criteria youhave established. You choose the best alternative (step 6), and then you would goout and buy your new car (step 7).

Of course, the outcome of this decision will influence the next decision made. Thatis where step 8 comes in. For example, if you purchase a car and have nothing butproblems with it, you will be less likely to consider the same make and model whenpurchasing a car the next time.

8. A series of steps that decisionmakers should consider if theirgoal is to maximize theiroutcome and make the bestchoice.

9. A set of parameters againstwhich all of the potentialoptions in decision making willbe evaluated.

10. Other possible solutions to aproblem in a decision-makingprocess.



Figure 11.5 Steps in the Rational Decision-Making Model

While decision makers can get off track during any of these steps, research showsthat searching for alternatives in the fourth step can be the most challenging andoften leads to failure. In fact, one researcher found that no alternative generationoccurred in 85% of the decisions he studied.Nutt, P. C. (1994). Types oforganizational decision processes. Administrative Science Quarterly, 29, 414550.Conversely, successful managers know what they want at the outset of the decision-making process, set objectives for others to respond to, carry out an unrestrictedsearch for solutions, get key people to participate, and avoid using their power topush their perspective.Nutt, P. C. (1998). Surprising but true: Half the decisions inorganizations fail. Academy of Management Executive, 13, 7590.

The rational decision-making model has important lessons for decision makers.First, when making a decision, you may want to make sure that you establish yourdecision criteria before you search for alternatives. This would prevent you fromliking one option too much and setting your criteria accordingly. For example, letssay you started browsing cars online before you generated your decision criteria.You may come across a car that you feel reflects your sense of style and you developan emotional bond with the car. Then, because of your love for the particular car,you may say to yourself that the fuel economy of the car and the innovative braking



system are the most important criteria. After purchasing it, you may realize thatthe car is too small for your friends to ride in the back seat, which was somethingyou should have thought about. Setting criteria before you search for alternativesmay prevent you from making such mistakes. Another advantage of the rationalmodel is that it urges decision makers to generate all alternatives instead of only afew. By generating a large number of alternatives that cover a wide range ofpossibilities, you are unlikely to make a more effective decision that does notrequire sacrificing one criterion for the sake of another.

Despite all its benefits, you may have noticed that this decision-making modelinvolves a number of unrealistic assumptions as well. It assumes that peoplecompletely understand the decision to be made, that they know all their availablechoices, that they have no perceptual biases, and that they want to make optimaldecisions. Nobel Prize winning economist Herbert Simon observed that while therational decision-making model may be a helpful device in aiding decision makerswhen working through problems, it doesnt represent how decisions are frequentlymade within organizations. In fact, Simon argued that it didnt even come close.

Think about how you make important decisions in your life. It is likely that yourarely sit down and complete all 8 of the steps in the rational decision-makingmodel. For example, this model proposed that we should search for all possiblealternatives before making a decision, but that process is time consuming, andindividuals are often under time pressure to make decisions. Moreover, even if wehad access to all the information that was available, it could be challenging tocompare the pros and cons of each alternative and rank them according to ourpreferences. Anyone who has recently purchased a new laptop computer or cellphone can attest to the challenge of sorting through the different strengths andlimitations of each brand and model and arriving at the solution that best meetsparticular needs. In fact, the availability of too much information can lead toanalysis paralysis11, in which more and more time is spent on gatheringinformation and thinking about it, but no decisions actually get made. A seniorexecutive at Hewlett-Packard Development Company LP admits that his companysuffered from this spiral of analyzing things for too long to the point where datagathering led to not making decisions, instead of us making decisions.Zell, D. M.,Glassman, A. M., & Duron, S. A. (2007). Strategic management in turbulent times:The short and glorious history of accelerated decision making at Hewlett-Packard.Organizational Dynamics, 36, 93104. Moreover, you may not always be interested inreaching an optimal decision. For example, if you are looking to purchase a house,you may be willing and able to invest a great deal of time and energy to find yourdream house, but if you are only looking for an apartment to rent for the academicyear, you may be willing to take the first one that meets your criteria of being clean,close to campus, and within your price range.

11. A decision-making process inwhich more and more time isspent on gathering informationand thinking about it, but nodecisions actually get made.



Making Good Enough Decisions

The bounded rationality model12 of decision making recognizes the limitations ofour decision-making processes. According to this model, individuals knowinglylimit their options to a manageable set and choose the first acceptable alternativewithout conducting an exhaustive search for alternatives. An important part of thebounded rationality approach is the tendency to satisfice13 (a term coined byHerbert Simon from satisfy and suffice), which refers to accepting the firstalternative that meets your minimum criteria. For example, many college graduatesdo not conduct a national or international search for potential job openings.Instead, they focus their search on a limited geographic area, and they tend toaccept the first offer in their chosen area, even if it may not be the ideal jobsituation. Satisficing is similar to rational decision making. The main difference isthat rather than choosing the best option and maximizing the potential outcome,the decision maker saves cognitive time and effort by accepting the first alternativethat meets the minimum threshold.

Making Intuitive Decisions

The intuitive decision-making model14 has emerged as an alternative to otherdecision making processes. This model refers to arriving at decisions withoutconscious reasoning. A total of 89% of managers surveyed admitted to usingintuition to make decisions at least sometimes and 59% said they used intuitionoften.Burke, L. A., & Miller, M. K. (1999). Taking the mystery out of intuitivedecision making. Academy of Management Executive, 13, 9198. Managers makedecisions under challenging circumstances, including time pressures, constraints, agreat deal of uncertainty, changing conditions, and highly visible and high-stakesoutcomes. Thus, it makes sense that they would not have the time to use therational decision-making model. Yet when CEOs, financial analysts, and health careworkers are asked about the critical decisions they make, seldom do they attributesuccess to luck. To an outside observer, it may seem like they are making guesses asto the course of action to take, but it turns out that experts systematically makedecisions using a different model than was earlier suspected. Research on life-or-death decisions made by fire chiefs, pilots, and nurses finds that experts do notchoose among a list of well thought out alternatives. They dont decide between twoor three options and choose the best one. Instead, they consider only one option ata time. The intuitive decision-making model argues that in a given situation,experts making decisions scan the environment for cues to recognizepatterns.Breen, B. (2000, August). Whats your intuition? Fast Company, 290; Klein, G.(2003). Intuition at work. New York: Doubleday; Salas, E., & Klein, G. (2001). Linkingexpertise and naturalistic decision making. Mahwah, NJ: Lawrence Erlbaum Associates.Once a pattern is recognized, they can play a potential course of action through toits outcome based on their prior experience. Thanks to training, experience, andknowledge, these decision makers have an idea of how well a given solution may

12. According to this model,individuals knowingly limittheir options to a manageableset and choose the firstacceptable alternative withoutconducting an exhaustivesearch for alternatives.

13. To accept the first alternativethat meets minimum criteria.

14. Arriving at decisions withoutconscious reasoning. Themodel argues that in a givensituation, experts makingdecisions scan theenvironment for cues torecognize patterns.



work. If they run through the mental model and find that the solution will notwork, they alter the solution before setting it into action. If it still is not deemed aworkable solution, it is discarded as an option, and a new idea is tested until aworkable solution is found. Once a viable course of action is identified, the decisionmaker puts the solution into motion. The key point is that only one choice isconsidered at a time. Novices are not able to make effective decisions this way,because they do not have enough prior experience to draw upon.

Making Creative Decisions

In addition to the rational decision making, bounded rationality, and intuitivedecision-making models, creative decision making is a vital part of being aneffective decision maker. Creativity15 is the generation of new, imaginative ideas.With the flattening of organizations and intense competition among companies,individuals and organizations are driven to be creative in decisions ranging fromcutting costs to generating new ways of doing business. Please note that, whilecreativity is the first step in the innovation process, creativity and innovation arenot the same thing. Innovation begins with creative ideas, but it also involvesrealistic planning and follow-through. Innovations such as 3Ms Clearview WindowTinting grow out of a creative decision-making process about what may or may notwork to solve real-world problems.

The five steps to creative decision making are similar to the previous decision-making models in some keys ways. All the models include problem identification,which is the step in which the need for problem solving becomes apparent. If youdo not recognize that you have a problem, it is impossible to solve it. Immersion isthe step in which the decision maker consciously thinks about the problem andgathers information. A key to success in creative decision making is having oracquiring expertise in the area being studied. Then, incubation occurs. Duringincubation, the individual sets the problem aside and does not think about it for awhile. At this time, the brain is actually working on the problem unconsciously.Then comes illumination, or the insight moment when the solution to the problembecomes apparent to the person, sometimes when it is least expected. This suddeninsight is the eureka moment, similar to what happened to the ancient Greekinventor Archimedes, who found a solution to the problem he was working on whiletaking a bath. Finally, the verification and application stage happens when thedecision maker consciously verifies the feasibility of the solution and implementsthe decision.

15. The generation of new ideasthat are original, fluent, andflexible.



Figure 11.6 The Creative Decision-Making Process

A NASA scientist describes his decision-making process leading to a creativeoutcome as follows: He had been trying to figure out a better way to de-ice planes tomake the process faster and safer. After recognizing the problem, he immersedhimself in the literature to understand all the options, and he worked on theproblem for months trying to figure out a solution. It was not until he was sittingoutside a McDonalds restaurant with his grandchildren that it dawned on him. Thegolden arches of the M of the McDonalds logo inspired his solutionhe woulddesign the de-icer as a series of Ms.In person interview conducted by author TalyaBauer at Ames Research Center, Mountain View, CA, 1990. This represented theillumination stage. After he tested and verified his creative solution, he was donewith that problem, except to reflect on the outcome and process.

How Do You Know If Your Decision-Making Process Is Creative?

Researchers focus on three factors to evaluate the level of creativity in the decision-making process. Fluency16 refers to the number of ideas a person is able togenerate. Flexibility17 refers to how different the ideas are from one another. If youare able to generate several distinct solutions to a problem, your decision-makingprocess is high on flexibility. Originality18 refers to how unique a persons ideasare. You might say that Reed Hastings, founder and CEO of Netflix Inc. is a prettycreative person. His decision-making process shows at least two elements ofcreativity. We do not know exactly how many ideas he had over the course of hiscareer, but his ideas are fairly different from each other. After teaching math inAfrica with the Peace Corps, Hastings was accepted at Stanford, where he earned amasters degree in computer science. Soon after starting work at a softwarecompany, he invented a successful debugging tool, which led to his founding of thecomputer troubleshooting company Pure Software LLC in 1991. After a merger andthe subsequent sale of the resulting company in 1997, Hastings founded Netflix,which revolutionized the DVD rental business with online rentals delivered throughthe mail with no late fees. In 2007, Hastings was elected to Microsofts board ofdirectors. As you can see, his ideas are high in originality and flexibility.Conlin, M.(2007, September 14). Netflix: Recruiting and retaining the best talent. Business WeekOnline. Retrieved March 1, 2008, from http://www.businessweek.com/managing/content/sep2007/ca20070913_564868.htm?campaign_id=rss_null.

16. The number of ideas a personis able to generate.

17. How different the ideas arefrom each other. If individualsare able to generate severalunique solutions to a problem,they are high on flexibility.

18. How unique a persons ideasare.



Figure 11.7 Dimensions of Creativity

Some experts have proposed that creativity occurs as an interaction among threefactors: peoples personality traits (openness to experience, risk taking), theirattributes (expertise, imagination, motivation), and the situational context(encouragement from others, time pressure, physical structures).Amabile, T. M.(1988). A model of creativity and innovation in organizations. In B. M. Staw & L. L.Cummings (Eds.), Research in organizational behavior, vol. 10 (pp. 123167) Greenwich,CT: JAI Press; Amabile, T. M., Conti, R., Coon, H., Lazenby, J., & Herron, M. (1996).Assessing the work environment for creativity. Academy of Management Journal, 39,11541184; Ford, C. M., & Gioia, D. A. (2000). Factors influencing creativity in thedomain of managerial decision making. Journal of Management, 26, 705732; Tierney,P., Farmer, S. M., & Graen, G. B. (1999). An examination of leadership and employeecreativity: The relevance of traits and relationships. Personnel Psychology, 52,591620; Woodman, R. W., Sawyer, J. E., & Griffin, R. W. (1993). Toward a theory oforganizational creativity. Academy of Management Review, 18, 293321. For example,research shows that individuals who are open to experience, less conscientious,more self-accepting, and more impulsive tend to be more creative.Feist, G. J. (1998).A meta-analysis of personality in scientific and artistic creativity. Personality andSocial Psychology Review, 2, 290309.



OB Toolbox: Ideas for Enhancing OrganizationalCreativity

Team Composition

Diversify your team to give them more inputs to build on andmore opportunities to create functional conflict while avoidingpersonal conflict.

Change group membership to stimulate new ideas and newinteraction patterns.

Leaderless teams can allow teams freedom to create withouttrying to please anyone up front.

Team Process

Engage in brainstorming to generate ideas. Remember to set ahigh goal for the number of ideas the group should come upwith, encourage wild ideas, and take brainwriting breaks.

Use the nominal group technique (see Tools and Techniques forMaking Better Decisions below) in person or electronically toavoid some common group process pitfalls. Consideranonymous feedback as well.

Use analogies to envision problems and solutions.

Leadership

Challenge teams so that they are engaged but not overwhelmed. Let people decide how to achieve goals, rather than telling them

what goals to achieve. Support and celebrate creativity even when it leads to a mistake.

Be sure to set up processes to learn from mistakes as well. Role model creative behavior.

Culture

Institute organizational memory so that individuals do not spendtime on routine tasks.

Build a physical space conducive to creativity that is playful andhumorousthis is a place where ideas can thrive.

Incorporate creative behavior into the performance appraisalprocess.



Sources: Adapted from ideas in Amabile, T. M. (1998). How to kill creativity.Harvard Business Review, 76, 7687; Gundry, L. K., Kickul, J. R., & Prather, C. W.(1994). Building the creative organization. Organizational Dynamics, 22, 2237;Keith, N., & Frese, M. (2008). Effectiveness of error management training: Ameta-analysis. Journal of Applied Psychology, 93, 5969. Pearsall, M. J., Ellis, A. P. J.,& Evans, J. M. (2008). Unlocking the effects of gender faultlines on teamcreativity: Is activation the key? Journal of Applied Psychology, 93, 225234.Thompson, L. (2003). Improving the creativity of organizational work groups.Academy of Management Executive, 17, 96109.

There are many techniques available that enhance and improve creativity. LinusPauling, the Nobel Prize winner who popularized the idea that vitamin C could helpstrengthen the immune system, said, The best way to have a good idea is to have alot of ideas.Quote retrieved May 1, 2008, from http://www.whatquote.com/quotes/linus-pauling/250801-the-best-way-to-have.htm. One popular method ofgenerating ideas is to use brainstorming. Brainstorming19 is a group process ofgenerating ideas that follow a set of guidelines, including no criticism of ideasduring the brainstorming process, the idea that no suggestion is too crazy, andbuilding on other ideas (piggybacking). Research shows that the quantity of ideasactually leads to better idea quality in the end, so setting high idea quotas20, inwhich the group must reach a set number of ideas before they are done, isrecommended to avoid process loss and maximize the effectiveness ofbrainstorming. Another unique aspect of brainstorming is that since the variety ofbackgrounds and approaches give the group more to draw upon, the more peopleare included in the process, the better the decision outcome will be. A variation ofbrainstorming is wildstorming21, in which the group focuses on ideas that areimpossible and then imagines what would need to happen to make thempossible.Scott, G., Leritz, L. E., & Mumford, M. D. (2004). The effectiveness ofcreativity training: A quantitative review. Creativity Research Journal, 16, 361388.

19. A process of generating ideasthat follows a set of guidelines,including not criticizing ideasduring the process, the ideathat no suggestion is too crazy,and building on other ideas(piggybacking).

20. A set number of ideas a groupmust reach before they aredone with brainstorming.

21. A variation of brainstorming inwhich the group focuses onideas that are impossible andthen imagines what wouldneed to happen to make thempossible.



Figure 11.8

Which decision-making model should I use?

KEY TAKEAWAY

Decision making is choosing among alternative courses of action, includinginaction. There are different types of decisions ranging from automatic,programmed decisions to more intensive nonprogrammed decisions.Structured decision-making processes include rational, bounded rationality,intuitive, and creative decision making. Each of these can be useful,depending on the circumstances and the problem that needs to be solved.



EXERCISES

1. What do you see as the main difference between a successful and anunsuccessful decision? How much does luck versus skill have to do withit? How much time needs to pass to know if a decision is successful ornot?

2. Research has shown that over half of the decisions made withinorganizations fail. Does this surprise you? Why or why not?

3. Have you used the rational decision-making model to make a decision?What was the context? How well did the model work?

4. Share an example of a decision in which you used satisficing. Were youhappy with the outcome? Why or why not? When would you be mostlikely to engage in satisficing?

5. Do you think intuition is respected as a decision-making style? Do youthink it should be? Why or why not?



11.3 Faulty Decision Making

LEARNING OBJECTIVES

1. Understand overconfidence bias and how to avoid it.2. Understand hindsight bias and how to avoid it.3. Understand anchoring and how to avoid it.4. Understand framing bias and how to avoid it.5. Understand escalation of commitment and how to avoid it.

Avoiding Decision-Making Traps

No matter which model you use, it is important to know and avoid the decision-making traps that exist. Daniel Kahnemann (another Nobel Prize winner) and AmosTversky spent decades studying how people make decisions. They found thatindividuals are influenced by overconfidence bias, hindsight bias, anchoring bias,framing bias, and escalation of commitment.

Overconfidence bias22 occurs when individuals overestimate their ability topredict future events. Many people exhibit signs of overconfidence. For example,82% of the drivers surveyed feel they are in the top 30% of safe drivers, 86% ofstudents at the Harvard Business School say they are better looking than theirpeers, and doctors consistently overestimate their ability to detect problems.Tilson,W. (1999, September 20). The perils of investor overconfidence. Retrieved March 1,2008, from http://www.fool.com/BoringPort/1999/BoringPort990920.htm. Muchlike friends that are 100% sure they can pick the winners of this weeks footballgames despite evidence to the contrary, these individuals are suffering fromoverconfidence bias. Similarly, in 2008, the French bank Socit Gnrale lost over$7 billion as a result of the rogue actions of a single trader. Jrme Kerviel, a juniortrader in the bank, had extensive knowledge of the banks control mechanisms andused this knowledge to beat the system. Interestingly, he did not make any moneyfrom these transactions himself, and his sole motive was to be successful. Hesecretly started making risky moves while hiding the evidence. He made a lot ofprofit for the company early on and became overly confident in his abilities to makeeven more. In his defense, he was merely able to say that he got carried away.Therogue rebuttal. (2008, February 9). Economist, 386, 82. People who purchase lotterytickets as a way to make money are probably suffering from overconfidence bias. Itis three times more likely for a person driving 10 miles to buy a lottery ticket to bekilled in a car accident than to win the jackpot.Orkin, M. (1991). Can you win? Thereal odds for casino gambling, sports betting and lotteries. New York: W. H. Freeman.

22. What occurs when individualsoverestimate their ability topredict future events.


535

Figure 11.9

Source: [citation redacted perpublisher request]. Reprinted bypermission.

Further, research shows that overconfidence leads to less successfulnegotiations.Neale, M. A., & Bazerman, M. H. (1985). The effects of framing andnegotiator overconfidence on bargaining behaviors and outcomes. Academy ofManagement Journal, 28, 3449. To avoid this bias, take the time to stop and askyourself if you are being realistic in your judgments.

Hindsight bias23 is the opposite of overconfidence bias,as it occurs when looking backward in time andmistakes seem obvious after they have alreadyoccurred. In other words, after a surprising eventoccurred, many individuals are likely to think that theyalready knew the event was going to happen. This biasmay occur because they are selectively reconstructingthe events. Hindsight bias tends to become a problemwhen judging someone elses decisions. For example,lets say a company driver hears the engine makingunusual sounds before starting the morning routine.Being familiar with this car in particular, the driver mayconclude that the probability of a serious problem issmall and continues to drive the car. During the day, thecar malfunctions and stops miles away from the office.It would be easy to criticize the decision to continue todrive the car because in hindsight, the noises heard inthe morning would make us believe that the driver should have known somethingwas wrong and taken the car in for service. However, the driver in question mayhave heard similar sounds before with no consequences, so based on theinformation available at the time, continuing with the regular routine may havebeen a reasonable choice. Therefore, it is important for decision makers toremember this bias before passing judgments on other peoples actions.

Anchoring24 refers to the tendency for individuals to rely too heavily on a singlepiece of information. Job seekers often fall into this trap by focusing on a desiredsalary while ignoring other aspects of the job offer such as additional benefits, fitwith the job, and working environment. Similarly, but more dramatically, liveswere lost in the Great Bear Wilderness Disaster when the coroner, within 5 minutesof arriving at the accident scene, declared all five passengers of a small plane dead,which halted the search effort for potential survivors. The next day two survivorswho had been declared dead walked out of the forest. How could a mistake like thishave been made? One theory is that decision biases played a large role in thisserious error, and anchoring on the fact that the plane had been consumed byflames led the coroner to call off the search for any possible survivors.Becker, W. S.(2007). Missed opportunities: The Great Bear Wilderness Disaster. OrganizationalDynamics, 36, 363376.

23. The opposite of overconfidencebias, as it occurs when lookingbackward in time and mistakesseem obvious after they havealready occurred.

24. The tendency for individuals torely too heavily on a singlepiece of information.


11.3 Faulty Decision Making 536

Framing bias25 is another concern for decision makers. Framing bias refers to thetendency of decision makers to be influenced by the way that a situation or problemis presented. For example, when making a purchase, customers find it easier to letgo of a discount as opposed to accepting a surcharge, even though they both mightcost the person the same amount of money. Similarly, customers tend to prefer astatement such as 85% lean beef as opposed to 15% fat.Li, S., Sun, Y., & Wang, Y.(2007). 50% off or buy one get one free? Frame preference as a function ofconsumable nature in dairy products. Journal of Social Psychology, 147, 413421. It isimportant to be aware of this tendency, because depending on how a problem ispresented to us, we might choose an alternative that is disadvantageous simplybecause of the way it is framed.

Escalation of commitment26 occurs when individuals continue on a failing courseof action after information reveals it may be a poor path to follow. It is sometimescalled the sunken costs fallacy, because continuation is often based on the ideathat one has already invested in the course of action. For example, imagine a personwho purchases a used car, which turns out to need something repaired every fewweeks. An effective way of dealing with this situation might be to sell the carwithout incurring further losses, donate the car, or use it until it falls apart.However, many people would spend hours of their time and hundreds, eventhousands of dollars repairing the car in the hopes that they might recover theirinitial investment. Thus, rather than cutting their losses, they waste time andenergy while trying to justify their purchase of the car.

A classic example of escalation of commitment from the corporate world isMotorola Inc.s Iridium project. In the 1980s, phone coverage around the world wasweak. For example, it could take hours of dealing with a chain of telephoneoperators in several different countries to get a call through from Cleveland toCalcutta. There was a real need within the business community to improve phoneaccess around the world. Motorola envisioned solving this problem using 66 low-orbiting satellites, enabling users to place a direct call to any location around theworld. At the time of idea development, the project was technologically advanced,sophisticated, and made financial sense. Motorola spun off Iridium as a separatecompany in 1991. It took researchers a total of 15 years to develop the product fromidea to market release. However, in the 1990s, the landscape for cell phonetechnology was dramatically different from that in the 1980s, and the widespreadcell phone coverage around the world eliminated most of the projected customerbase for Iridium. Had they been paying attention to these developments, thedecision makers could have abandoned the project at some point in the early 1990s.Instead, they released the Iridium phone to the market in 1998. The phone cost$3,000, and it was literally the size of a brick. Moreover, it was not possible to usethe phone in moving cars or inside buildings. Not surprisingly, the launch was afailure, and Iridium filed for bankruptcy in 1999.Finkelstein, S., & Sanford, S. H.

25. The tendency of decisionmakers to be influenced by theway problems are presented.

26. When individuals continue ona failing course of action afterinformation reveals it may be apoor path to follow.



(2000, November). Learning from corporate mistakes: The rise and fall of Iridium.Organizational Dynamics, 29(2), 138148. In the end, the company was purchased for$25 million by a group of investors (whereas it cost the company $5 billion todevelop its product), scaled down its operations, and modified it for use by theDepartment of Defense to connect soldiers in remote areas not served by land linesor cell phones.

Why does escalation of commitment occur? There may be many reasons, but twoare particularly important. First, decision makers may not want to admit that theywere wrong. This may be because of personal pride or being afraid of theconsequences of such an admission. Second, decision makers may incorrectlybelieve that spending more time and energy might somehow help them recovertheir losses. Effective decision makers avoid escalation of commitment bydistinguishing between when persistence may actually pay off versus when it mightmean escalation of commitment. To avoid escalation of commitment, you mightconsider having strict turning back points. For example, you might determine upfront that you will not spend more than $500 trying to repair the car and will sell itwhen you reach that point. You might also consider assigning separate decisionmakers for the initial buying and subsequent selling decisions. Periodic evaluationsof an initially sound decision to see whether the decision still makes sense is alsoanother way of preventing escalation of commitment. This type of review becomesparticularly important in projects such as the Iridium phone, in which the initialdecision is not immediately implemented but instead needs to go through a lengthydevelopment process. In such cases, it becomes important to periodically assess thesoundness of the initial decision in the face of changing market conditions. Finally,creating an organizational climate in which individuals do not fear admitting thattheir initial decision no longer makes economic sense would go a long way inpreventing escalation of commitment, as it could lower the regret the decisionmaker may experience.Wong, K. F. E., & Kwong, J. Y. Y. (2007). The role ofanticipated regret in escalation of commitment. Journal of Applied Psychology, 92,545554.

Figure 11.10



Motorola released the Iridium phone to the market in 1998. The phone cost $3,000 and it was literally the size of abrick.

Source: http://upload.wikimedia.org/wikipedia/commons/b/b0/Iridium_phone.jpg.

So far we have focused on how individuals make decisions and how to avoiddecision traps. Next we shift our focus to the group level. There are manysimilarities as well as many differences between individual and group decisionmaking. There are many factors that influence group dynamics and also affect thegroup decision-making process. We will discuss some of them in the followingsection.

KEY TAKEAWAY

Understanding decision-making traps can help you avoid and manage them.Overconfidence bias can cause you to ignore obvious information. Hindsightbias can similarly cause a person to incorrectly believe in their ability topredict events. Anchoring and framing biases show the importance of theway problems or alternatives are presented in influencing ones decision.Escalation of commitment demonstrates how individuals desire to beconsistent or avoid admitting a mistake can cause them to continue to investin a decision that is no longer prudent.

EXERCISES

1. Describe a time when you fell into one of the decision-making traps.How did you come to realize that you had made a poor decision?

2. How can you avoid escalation of commitment?3. Share an example of anchoring.4. Which of the traps seems the most dangerous for decision makers and

why?



11.4 Decision Making in Groups

LEARNING OBJECTIVES

1. Understand the pros and cons of individual and group decision making.2. Learn to recognize the signs of groupthink.3. Recognize different tools and techniques for making better decisions.

When It Comes to Decision Making, Are Two Heads Better ThanOne?

The answer to this question depends on several factors. Group decision making hasthe advantage of drawing from the experiences and perspectives of a larger numberof individuals. Hence, a group may have the potential to be more creative and leadto more effective decisions. In fact, groups may sometimes achieve results beyondwhat they could have done as individuals. Groups may also make the task moreenjoyable for the members. Finally, when the decision is made by a group ratherthan a single individual, implementation of the decision will be easier, becausegroup members will be more invested in the decision. If the group is diverse, betterdecisions may be made, because different group members may have different ideasbased on their backgrounds and experiences. Research shows that for topmanagement teams, diverse groups that debate issues make decisions that are morecomprehensive and better for the bottom line.Simons, T., Pelled, L. H., & Smith, K.A. (1999). Making use of difference: Diversity, debate, decision comprehensivenessin top management teams. Academy of Management Journal, 42, 662673.

Despite its popularity within organizations, group decision making suffers from anumber of disadvantages. We know that groups rarely outperform their bestmember.Miner, F. C. (1984). Group versus individual decision making: Aninvestigation of performance measures, decision strategies, and process losses/gains. Organizational Behavior and Human Performance, 33, 112124. While groups havethe potential to arrive at an effective decision, they often suffer from process losses.For example, groups may suffer from coordination problems. Anyone who hasworked with a team of individuals on a project can attest to the difficulty ofcoordinating members work or even coordinating everyones presence in a teammeeting. Furthermore, groups can suffer from groupthink. Finally, group decisionmaking takes more time compared to individual decision making, because allmembers need to discuss their thoughts regarding different alternatives.


540

Figure 11.12

Thus, whether an individual or a group decision is preferable will depend on thespecifics of the situation. For example, if there is an emergency and a decisionneeds to be made quickly, individual decision making might be preferred.Individual decision making may also be appropriate if the individual in question hasall the information needed to make the decision and if implementation problemsare not expected. On the other hand, if one person does not have all theinformation and skills needed to make a decision, if implementing the decision willbe difficult without the involvement of those who will be affected by the decision,and if time urgency is more modest, then decision making by a group may be moreeffective.

Figure 11.11 Advantages and Disadvantages of Different Levels of Decision Making

Groupthink

Have you ever been in a decision-making group that youfelt was heading in the wrong direction but you didntspeak up and say so? If so, you have already been avictim of groupthink. Groupthink27 is a tendency toavoid a critical evaluation of ideas the group favors.Iriving Janis, author of a book called Victims ofGroupthink, explained that groupthink is characterizedby eight symptoms:Janis, I. L. (1972). Victims ofgroupthink. New York: Houghton Mifflin.

27. A tendency to avoid a criticalevaluation of ideas the groupfavors.


11.4 Decision Making in Groups 541

In January 1986, the spaceshuttle Challenger exploded 73seconds after liftoff, killing allseven astronauts aboard. Thedecision to launch Challengerthat day, despite problems withmechanical components of thevehicle and unfavorable weatherconditions, is cited as an exampleof groupthink.Esser, J. K., &Lindoerfer, J. L. (1989).Groupthink and the space shuttleChallenger accident: Toward aquantitative case analysis.Journal of Behavioral DecisionMaking, 2, 167177; Moorhead, G.,Ference, R., & Neck, C. P. (1991).Group decision fiascoes continue:Space shuttle Challenger and arevised groupthink framework.Human Relations, 44, 539550.

Source: http://en.wikipedia.org/wiki/Image:Challenger_flight_51-l_crew.jpg.

1. Illusion of invulnerability is shared bymost or all of the group members, whichcreates excessive optimism and encouragesthem to take extreme risks.

2. Collective rationalizations occur, inwhich members downplay negativeinformation or warnings that might causethem to reconsider their assumptions.

3. An unquestioned belief in the groupsinherent morality occurs, which mayincline members to ignore ethical or moralconsequences of their actions.

4. Stereotyped views of outgroups are seenwhen groups discount rivals abilities tomake effective responses.

5. Direct pressure is exerted on anymembers who express strong argumentsagainst any of the groups stereotypes,illusions, or commitments.

6. Self-censorship occurs when members ofthe group minimize their own doubts andcounterarguments.

7. Illusions of unanimity occur, based onself-censorship and direct pressure on thegroup. The lack of dissent is viewed asunanimity.

8. The emergence of self-appointed mindguards happens when one ormore members protect the group from information that runs counterto the groups assumptions and course of action.



OB Toolbox: Recommendations for Avoiding Groupthink

Groups should do the following:

Discuss the symptoms of groupthink and how to avoid them. Assign a rotating devils advocate to every meeting. Invite experts or qualified colleagues who are not part of the

core decision-making group to attend meetings and getreactions from outsiders on a regular basis and share thesewith the group.

Encourage a culture of difference where different ideas arevalued.

Debate the ethical implications of the decisions and potentialsolutions being considered.

Individuals should do the following:

Monitor personal behavior for signs of groupthink and modifybehavior if needed.

Check for self-censorship. Carefully avoid mindguard behaviors. Avoid putting pressure on other group members to conform. Remind members of the ground rules for avoiding groupthink

if they get off track.

Group leaders should do the following:

Break the group into two subgroups from time to time. Have more than one group work on the same problem if time

and resources allow it. This makes sense for highly criticaldecisions.

Remain impartial and refrain from stating preferences at theoutset of decisions.

Set a tone of encouraging critical evaluations throughoutdeliberations.

Create an anonymous feedback channel through which allgroup members can contribute if desired.

Sources: Adapted and expanded from Janis, I. L. (1972). Victims of groupthink.New York: Houghton Mifflin; Whyte, G. (1991). Decision failures: Why theyoccur and how to prevent them. Academy of Management Executive, 5, 2331.



Figure 11.13

Communicating is a key aspect ofmaking decisions in a group. Inorder to generate potentialalternatives, brainstorming andcritical thinking are needed toavoid groupthink.

2010 JupiterimagesCorporation

Tools and Techniques for Making Better Decisions

Nominal Group Technique (NGT)28 was developed to help with group decisionmaking by ensuring that all members participate fully. NGT is not a technique to beused routinely at all meetings. Rather, it is used to structure group meetings whenmembers are grappling with problem solving or idea generation. It follows foursteps.Delbecq, A. L., Van de Ven, A. H., & Gustafson, D. H. (1975). Group techniques forprogram planning: A guide to nominal group and Delphi processes. Glenview, IL: ScottForesman. First, each member of the group begins by independently and silentlywriting down ideas. Second, the group goes in order around the room to gather allthe ideas that were generated. This process continues until all the ideas are shared.Third, a discussion takes place around each idea, and members ask for and giveclarification and make evaluative statements. Finally, group members vote for theirfavorite ideas by using ranking or rating techniques. Following the four-step NGThelps to ensure that all members participate fully, and it avoids group decision-making problems such as groupthink.

Delphi Technique29 is unique because it is a groupprocess using written responses to a series ofquestionnaires instead of physically bringingindividuals together to make a decision. The firstquestionnaire asks individuals to respond to a broadquestion such as stating the problem, outliningobjectives, or proposing solutions. Each subsequentquestionnaire is built from the information gathered inthe previous one. The process ends when the groupreaches a consensus. Facilitators can decide whether tokeep responses anonymous. This process is often usedto generate best practices from experts. For example,Purdue University Professor Michael Campion used thisprocess when he was editor of the research journalPersonnel Psychology and wanted to determine thequalities that distinguished a good research article.Using the Delphi technique, he was able to gatherresponses from hundreds of top researchers fromaround the world and distill them into a checklist ofcriteria that he could use to evaluate articles submittedto his journal, all without ever having to leave hisoffice.Campion, M. A. (1993). Article review checklist: A criterion checklist forreviewing research articles in applied psychology. Personnel Psychology, 46, 705718.

Majority rule30 refers to a decision-making rule in which each member of thegroup is given a single vote and the option receiving the greatest number of votes is

28. A technique designed to helpwith group decision making byensuring that all membersparticipate fully.

29. A group process that utilizeswritten responses to a series ofquestionnaires instead ofphysically bringing individualstogether to make a decision.

30. A decision-making rule inwhich each member of thegroup is given a single vote,and the option receiving thegreatest number of votes isselected.



selected. This technique has remained popular, perhaps due to its simplicity, speed,ease of use, and representational fairness. Research also supports majority rule asan effective decision-making technique.Hastie, R., & Kameda, T. (2005). The robustbeauty of majority rules in group decisions. Psychological Review, 112, 494508.However, those who did not vote in favor of the decision will be less likely tosupport it.

Consensus31 is another decision-making rule that groups may use when the goal isto gain support for an idea or plan of action. While consensus tends to require moretime, it may make sense when support is needed to enact the plan. The processworks by discussing the issues at hand, generating a proposal, calling for consensus,and discussing any concerns. If concerns still exist, the proposal is modified toaccommodate them. These steps are repeated until consensus is reached. Thus, thisdecision-making rule is inclusive, participatory, cooperative, and democratic.Research shows that consensus can lead to better accuracy,Roch, S. G. (2007). Whyconvene rater teams: An investigation of the benefits of anticipated discussion,consensus, and rater motivation. Organizational Behavior and Human DecisionProcesses, 104, 1429. and it helps members feel greater satisfaction withdecisions.Mohammed, S., & Ringseis, E. (2001). Cognitive diversity and consensus ingroup decision making: The role of inputs, processes, and outcomes. OrganizationalBehavior and Human Decision Processes, 85, 310335. However, groups take longer withthis approach, and if consensus cannot be reached, members tend to becomefrustrated.Peterson, R. (1999). Can you have too much of a good thing? The limits ofvoice for improving satisfaction with leaders. Personality and Social Psychology, 25,313324.

31. A decision-making rule thatgroups may use when the goalis to gain support for an idea orplan of action. This decision-making rule is inclusive,participatory, cooperative, anddemocratic.



OB Toolbox: Perform a Project Premortem

Doctors routinely perform postmortems to understand what went wrong with apatient who has died. The idea is for everyone to learn from the unfortunateoutcome so that future patients will not meet a similar fate. But what if youcould avoid a horrible outcome before it happened by proactively identifyingproject risks? Research has shown that the simple exercise of imagining whatcould go wrong with a given decision can increase peoples ability to correctlyidentify reasons for future successes or failures by 30%.Mitchell, D. J., Russo, J.,& Pennington, N. (1989). Back to the future: Temporal perspective in theexplanation of events. Journal of Behaviorial Decision Making, 2, 2538. Apremortem32 is a way to imagine what might go wrong and avoid it beforespending a cent or having to change course along the way. Gary Klein, anexpert on decision making in fast-paced, uncertain, complex, and criticalenvironments, recommends that decision makers follow a five-step process toincrease their chances of success.

1. A planning team comes up with an outline of a plan, such as thelaunching of a new product.

2. Either the existing group or a unique group is then told to imaginelooking into a crystal ball and seeing that the new product failedmiserably. They then write down all the reasons they can imaginethat might have led to this failure. Each team member shares itemsfrom their list until all the potential problems have beenidentified.

3. The list is reviewed for additional ideas.4. The issues are sorted into categories in the search for themes.5. The plan should then be revised to correct the flaws and avoid

these potential problems.

This technique allows groups to truly delve into what if scenarios. Forexample, in a premortem session at a Fortune 500 company, an executiveimagined that a potential billion-dollar environmental sustainability projectmight fail because the CEO had retired.

Sources: Breen, B. (2000, August). Whats your intuition? Fast Company, 290;Klein, G. (2007, September). Performing a project premortem. Harvard BusinessReview, 85, 1819; Klein, G. (2003). The power of intuition: How to use your gutfeelings to make better decisions at work. New York: Random House; Pliske, R.,32. A way to imagine what mightgo wrong and avoid it before

spending a cent or having tochange course along the way.



McCloskey, M., & Klein, G. (2001). Decision skills training: Facilitating learningfrom experience. In E. Salas & G. Klein (Eds.), Linking expertise and naturalisticdecision making (pp. 3753). Mahwah, NJ: Lawrence Erlbaum Associates.

Group Decision Support Systems (GDSS)33 are interactive computer-basedsystems that are able to combine communication and decision technologies to helpgroups make better decisions. Research shows that a GDSS can actually improve theoutput of groups collaborative work through higher information sharing.Lam, S. S.K., & Schaubroeck, J. (2000). Improving group decisions by better poolinginformation: A comparative advantage of group decision support systems. Journal ofApplied Psychology, 85, 565573. Organizations know that having effective knowledgemanagement systems34 to share information is important, and their spendingreflects this reality. Businesses invested $2.7 billion into new systems in 2002, andprojections were for this number to double every 5 years. As the popularity of thesesystems grows, they risk becoming counterproductive. Humans can only process somany ideas and information at one time. As virtual meetings grow larger, it isreasonable to assume that information overload can occur and good ideas will fallthrough the cracks, essentially recreating a problem that the GDSS was intended tosolve, which is to make sure every idea is heard. Another problem is the systempossibly becoming too complicated. If the systems evolve to a point ofuncomfortable complexity, it has recreated the problem. Those who understand theinterface will control the narrative of the discussion, while those who are less savvywill only be along for the ride.Nunamaker, J. F., Jr., Dennis, A. R., Valacich, J. S.,Vogel, D. R., & George, J. F. (1991, July). Electronic meetings to support group work.Communications of the ACM, 34(7), 4061. Lastly, many of these programs fail to takeinto account the factor of human psychology. These systems could make employeesmore reluctant to share information because of lack of control, lack of immediatefeedback, or the fear of online flames.

Decision trees35 are diagrams in which answers to yes or no questions lead decisionmakers to address additional questions until they reach the end of the tree.Decision trees are helpful in avoiding errors such as framing bias.Wright, G., &Goodwin, P. (2002). Eliminating a framing bias by using simple instructions tothink harder and respondents with managerial experience: Comment onbreaking the frame. Strategic Management Journal, 23, 10591067. Decision treestend to be helpful in guiding the decision maker to a predetermined alternative andensuring consistency of decision makingthat is, every time certain conditions arepresent, the decision maker will follow one course of action as opposed to others ifthe decision is made using a decision tree.

33. Interactive computer-basedsystems that are able tocombine communication anddecision technologies to helpgroups make better decisions.

34. Systems for managingknowledge in organizations,supporting creation, capture,storage, and dissemination ofinformation.

35. Diagrams where answers to yesor no questions lead decisionmakers to address additionalquestions until they reach theend of the tree.



Figure 11.14

Utilizing decision trees can improve investment decisions by optimizing them for maximum payoff. A decision treeconsists of three types of nodes. Decision nodes are commonly represented by squares. Chance nodes are representedby circles. End nodes are represented by triangles.

Source: http://upload.wikimedia.org/wikipedia/en/9/93/Investment_decision_Insight.png.

KEY TAKEAWAY

There are trade-offs between making decisions alone and within a group.Groups have a greater diversity of experiences and ideas than individuals,but they also have potential process losses such as groupthink. Groupthinkcan be avoided by recognizing the eight symptoms discussed. Finally, thereare a variety of tools and techniques available for helping to make moreeffective decisions in groups, including the nominal group technique, Delphitechnique, majority rule, consensus, GDSS, and decision trees.

EXERCISES

1. Do you prefer to make decisions in a group or alone? What are the mainreasons for your preference?

2. Have you been in a group that used the brainstorming technique? Was itan effective tool for coming up with creative ideas? Please shareexamples.

3. Have you been in a group that experienced groupthink? If so, how didyou deal with it?

4. Which of the decision-making tools discussed in this chapter (NGT,Delphi, and so on) have you used? How effective were they?



11.5 The Role of Ethics and National Culture

LEARNING OBJECTIVES

1. Consider the role of ethical behavior on decision making.2. Consider the role of national culture on decision making.

Ethics and Decision Making

Because many decisions involve an ethical component, one of the most importantconsiderations in management is whether the decisions you are making as anemployee or manager are ethical. Here are some basic questions you can askyourself to assess the ethics of a decision.Adapted from ideas contained in KennethBlanchard and Norman Vincent Peale (1988). The power of ethical management. NewYork: William Morrow.

Is this decision fair? Will I feel better or worse about myself after I make this decision? Does this decision break any organizational rules? Does this decision break any laws? How would I feel if this decision were broadcast on the news?

The current economic crisis in the United States and many other parts of the worldis a perfect example of legal yet unethical decisions resulting in disaster. Manyexperts agree that one of the driving forces behind the sliding economy was thelending practices of many banks (of which several no longer exist). In March of2008, a memo from JPMorgan Chase & Co. was leaked to an Oregon newspapercalled Zippy Cheats & Tricks (Zippy is Chases automated, computer-based loanapproval system). Although Chase executives firmly stated that the contents of thememo were not company policy, the contents clearly indicate some of thequestionable ethics involved with the risky loans now clogging the financial system.

In the memo, several steps were outlined to help a broker push a clients approvalthrough the system, including, In the income section of your 1003, make sure youinput all income in base income. DO NOT break it down by overtime, commissionsor bonus. NO GIFT FUNDS! If your borrower is getting a gift, add it to a bank accountalong with the rest of the assets. Be sure to remove any mention of gift funds on therest of your 1003. If you do not get Stated/Stated, try resubmitting with slightlyhigher income. Inch it up $500 to see if you can get the findings you want. Do the


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same for assets.Manning, J. (2008, March 27). Chase mortgage memo pushesCheats & Tricks. The Oregonian. Retrieved November 1, 2008, fromhttp://www.oregonlive.com/business/index.sff/2008/03/chase_memo_pushes_che.html.

While it is not possible to determine how widely circulated the memo was, thementality it captures was clearly present during the lending boom that precipitatedthe current meltdown. While some actions during this period were distinctly illegal,many people worked well within the law and simply made unethical decisions.Imagine a real estate agent that knows a potential buyers income. The buyer wantsto purchase a home priced at $400,000, and the agent knows the individual cannotafford to make payments on a mortgage of that size. Instead of advising the buyeraccordingly and losing a large commission, the agent finds a bank willing to lendmoney to an unqualified borrower, collects the commission for the sale, and moveson to the next client. It is clear how these types of unethical yet legal decisions canhave dramatic consequences.

Suppose you are the CEO of a small company that needs to cut operational costs orface bankruptcy. You have decided that you will not be issuing the yearly bonusthat employees have come to expect. The first thing you think about after comingto this decision is whether or not it is fair. It seems logical to you that since thealternative would be the failure of the company and everyones losing their jobs,not receiving a bonus is preferable to being out of work. Additionally, you will notbe collecting a bonus yourself, so that the decision will affect everyone equally.After deciding that the decision seems fair, you try to assess how you will feel aboutyourself after informing employees that there will not be a bonus this year.Although you do not like the idea of not being able to issue the yearly bonus, youare the CEO, and CEOs often have to make tough decisions. Since your ultimatepriority is to save the company from bankruptcy, you decide it is better to withholdbonuses rather than issuing them, knowing the company cannot afford it. Despitethe fact that bonuses have been issued every year since the company was founded,there are no organizational policies or laws requiring that employees receive abonus; it has simply been a company tradition. The last thing you think about ishow you would feel if your decision were broadcast on the news. Because of the direnature of the situation, and because the fate of the business is at stake, you feelconfident that this course of action is preferable to laying off loyal employees. Aslong as the facts of the situation were reported correctly, you feel the public wouldunderstand why the decision was made.

Decision Making Around the Globe

Decision-making styles and approaches tend to differ depending on the context,and one important contextual factor to keep in mind is the culture in which


11.5 The Role of Ethics and National Culture 550

decisions are being made. Research on Japanese and Dutch decision makers showthat while both cultures are consensus-oriented, Japanese managers tend to seekconsensus much more than Dutch managers.Noorderhaven, N. G. (2007).Comprehensiveness versus pragmatism: Consensus at the Japanese-Dutch interface.Journal of Management Studies, 44, 13491370. Additionally, American managers tendto value quick decision making, while Chinese managers are more reflective andtake their time to make important decisionsespecially when they involve somesort of potential conflict.

Another example of how decision-making styles may differ across cultures is thestyle used in Japan called nemawashi. Nemawashi refers to building consensuswithin a group before a decision is made. Japanese decision makers talk to partieswhose support is needed beforehand, explain the subject, address their concerns,and build their support. Using this method clearly takes time and may lead toslower decision making. However, because all parties important to the decision willgive their stamp of approval before the decision is made, this technique leads to aquicker implementation of the final decision once it is decided.

KEY TAKEAWAY

Asking yourself some key questions can help you determine if a decision youare considering is ethical. A decision being legal does not automaticallymake it ethical. Unethical decisions can lead to business failures for a varietyof reasons. Different cultures have different styles of decision making. Incountries with a collectivist orientation, a high value is placed on buildingconsensus. Some national cultures value quick decision making, whereasothers believe in taking time to arrive at a decision. Taking national cultureinto account is important in effective cross-cultural business interactions.

EXERCISES

1. How can you assess if you are making ethical decisions or not?2. Have you seen examples of ethical or unethical decisions being made?

Describe what you observed.3. Have you seen examples of national culture affecting decision making?4. What advice surrounding decision making would you give to someone

who will be managing a new division of a company in another culture?5. What can go wrong when cultural factors are ignored?


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11.6 Empowered Decision Making: The Case of Ingar Skaug


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If you always do what you always did, you always get what you always got, says Ingar Skaugand he shouldknow. Skaug is president and CEO of Wilh. Wilhelmsen ASA (OSE: ABM), a leading global maritime industrycompany based in Norway with 23,000 employees and 516 offices worldwide. He faced major challenges when hebegan his job at Wilhelmsen Lines in 1989. The entire top management team of the company had been killed inan airplane crash when returning from a ship dedication ceremony. As you can imagine, employees weremourning the loss of their friends and leadership team. While Skaug knew that changes needed to be madewithin the organization, he also knew that he had to proceed slowly and carefully in implementing any changes.The biggest challenge he saw was the decision-making style within the company.

Skaug recalls this dilemma as follows:

I found myself in a situation in Wilhelmsen Lines where everyone was coming to my office in the morning andthey expected me to take all the decisions. I said to people, Those are not my decisions. I dont want to takethose decisions. You take those decisions. So for half a year they were screaming about that I was very afraid ofmaking decisions. So I had a little bit of a struggle with the organization, with the people there at the time. Theythought I was a very poor manager because I didnt dare to make decisions. I had to teach them. I had to forcethe people to make their own decisions.

Figure 11.15

Source:http://www.wilhelmsen.com/about/invest/corporate/Management/Pages/IngarSkaug.aspx.


11.6 Empowered Decision Making: The Case of Ingar Skaug 553

His lessons paid off over the years. The company has now invented a cargo ship capable of transporting 10,000vehicles while running exclusively on renewable energy via the power of the sun, wind, and water. He andothers within the company cite the freedom that employees feel to make decisions and mistakes on their way tomaking discoveries in improved methods as a major factor in their success in revolutionizing the shippingindustry one innovation at a time.

Case written by [citation redacted per publisher request]. Based on information from McCarthy, J. F., OConnell,D. J., & Hall, D. T. (2005). Leading beyond tragedy: The balance of personal identity and adaptability. Leadership &Organizational Development Journal, 26, 458475; Skaug, I. (2007, July). Breaking free in turbulent times: Theintersection of turbulence, innovation and leadership. Business Leadership Review, 4, 17; Furness, V. (2005).Interview with Ingar Skaug. European Business Forum. Retrieved April 4, 2008, from http://www.ebfonline.com/article.aspx?extraid=30; Norwegian executive Ingar Skaug named chairman of Center for Creative LeadershipsBoard of Governors. (2006, September). Center for Creative Leadership news release. Retrieved April 4, 2008,from http://www.ccl.org/leadership/news/2006/skaug.aspx.

DISCUSSION QUESTIONS

1. What are some additional challenges Ingar Skaug probably faced whiletaking over control of Wilh. Wilhelmsen?

2. Skaug says that for the first several months as CEO, he deferred manydecisions to other employees. In what types of situations might this havebeen inappropriate? Would Skaugs method have worked if he weretaking over a hospital or an investment firm?

3. How would you approach a situation like Skaugs?4. For Skaug, the decision to defer decisions worked for the company.

What are some potential pitfalls this management style could havefallen into? Does the pace of the industry make a difference in whatmanagement style is appropriate (e.g., the fast pace of a high-techcompany versus the slower pace of an industrial manufacturingcompany)?


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11.7 Conclusion

Decision making is a critical component of business. Some decisions are obvious andcan be made quickly, without investing much time and effort in the decision-making process. Others, however, require substantial consideration of thecircumstances surrounding the decision, available alternatives, and potentialoutcomes. Fortunately, there are several methods that can be used when making adifficult decision, depending on various environmental factors. Some decisions arebest made by groups. Group decision-making processes also have multiple modelsto follow, depending on the situation. Even when specific models are followed,groups and individuals can often fall into potential decision-making pitfalls. If toolittle information is available, decisions might be made based on a feeling. On theother hand, if too much information is presented, people can suffer from analysisparalysis, in which no decision is reached because of the overwhelming number ofalternatives.

Ethics and culture both play a part in decision making. From time to time, adecision can be legal but not ethical. These gray areas that surround decisionmaking can further complicate the process, but following basic guidelines can helppeople ensure that the decisions they make are ethical and fair. Additionally,different cultures can have different styles of decision making. In some countriessuch as the United States, it may be customary to come to a simple majority whenmaking a decision. Conversely, a country such as Japan will often take the time toreach consensus when making decisions. Being aware of the various methods formaking decisions as well as potential problems that may arise can help peoplebecome effective decision makers in any situation.


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11.8 Exercises


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ETHICAL DILEMMA

Herbs Concoction (and Marthas Dilemma): The Case of

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