decision making and creativity chapter 7. 7-2 copyright © 2013 mcgraw-hill australia pty ltd...

Decision making and creativity

Chapter 7

7-2Copyright © 2013 McGraw-Hill Australia Pty LtdMcShane, Olekalns, Travaglione, Organisational Behaviour, 4e

Learning Objectives 7.1 Describe the rational choice paradigm

7.2 Explain why people differ from the rational choice paradigm when identifying problems/opportunities, evaluating/choosing alternatives and evaluating decision outcomes

7.3 Discuss the roles of emotions and intuition in decision making

7.4 Describe employee characteristics, workplace conditions and specific activities that support creativity

7.5 Describe the benefits of employee involvement and identify four contingencies that affect the optimal level of employee involvement


Decision Making at HP

At HP technicians moved from being problem solvers to having the autonomy to embrace entrepreneurialism in customer service. Through training, the company developed the technicians’ enthusiasm, ability and skills, resulting in happy costumers and employees


Decision Making Defined

Decision making is a conscious process of making choices among one or more alternatives, with the intention of moving toward some desired state of affairs


Rational Choice Paradigm

• Rational choice paradigm: effective decision makers identify, select and apply the best possible alternative

• Two key elements of rational choice1. Subjective expected utility: determines choice

with highest value (maximisation)

2. Decision-making process: systematic application of stages of decision making


Subjective Expected UtilityEstimating the best possible alternative (maximisation)Expected—probability of an outcome occurring• E.g. chance that outcome 3 will occur is 90% if choice ‘A’ is chosen, 30% if choice ‘B’ is chosen

Utility—value or happiness produced by each option from value of expected outcomes• Choice ‘B’ has higher utility (value) than choice ‘A’• Choice ‘B’ expected utility is(0.8×7)+(0.2×–2)+(0.3×1)=6.4

Choice BChoice BChoice BChoice B

Outcome 1 (+7)Outcome 1 (+7)

Outcome 2 (-2)Outcome 2 (-2)


0.8

0.2

0.3

Choice AChoice AChoice AChoice A


Outcome 2 (-2)Outcome 2 (-2)


0.2

0.5

0.9

Utility (expected happiness)

Probability of outcome occurring


Rational Choice Decision Process


Rational Choice Decision Process• Identify problem or

opportunity– Symptom vs problem

• Choose decision process– E.g. (non) programmed

• Develop/identify alternatives– Search, then develop

• Choose best alternative– Subjective expected utility

• Implement choice

• Evaluate choice


Problems with the Rational Choice Paradigm• The model assumes that people are

efficient and logical information-processing machines

• In reality, people have difficulty recognising problems and failures and cannot simultaneously process huge volumes of information

• The model focuses on logical thinking and completely ignores emotions


Identifying Problems and Opportunities• Stakeholder framing

• Mental models

• Decisive leadership

• Solution-focused problems

• Perceptual defence


Identifying Problems and Opportunities Effectively

1.Be aware of perceptual and diagnostic limitations

2.Fight against pressure to look decisive

3.Maintain ‘divine discontent’ (aversion to complacency)

4.Discuss the situation with colleagues—see different perspectives


Making Choices: Rational vs OB Views

Goals are ambiguous, conflicting and lack agreement

Goals are clear, compatible and agreed upon

People are able to calculate all alternatives and their outcomes

People evaluate all alternatives simultaneously

People have limited information processing abilities

People evaluate alternatives sequentially

Rational choice paradigm assumptions

Observations from organisational behaviour


Making Choices: Rational vs OB Views continued

People evaluate alternatives against an implicit favourite

People use absolute standards to evaluate alternatives

People make choices using factual information

People choose the alternative with the highest payoff (SEU)

People make choices using perceptually distorted information

People choose the alternative that is good enough (satisficing)

Rational choice paradigm assumptions

Observations from organisational behaviour


Biased Decision HeuristicsPeople have built-in decision heuristics that bias evaluation of alternatives

1. Anchoring and adjustment—initial information (e.g. opening bid) influences evaluation of subsequent information

2. Availability heuristic—we estimate probabilities by how easily we can recall the event, even though other factors influence ease of recall

3. Representativeness heuristic—we estimate probabilities by how much they are similar to something else (e.g. stereotypes) even when better information about probabilities is available


Paralysed by Choice• Decision makers are less likely

to make any decision at all as the number of options increases

• Occurs even when there are clear benefits to selecting any alternative (such as joining a company retirement plan)

• Evidence of human information processing limitations

Courtesy of Microsoft


Emotions and Making Choices

1.Emotions form preferences before we consciously evaluate those choices

2.Moods and emotions influence how well we follow the decision process

3.We ‘listen in’ on our emotions and use that information to make choices


Intuitive Decision Making

• Ability to know when a problem or opportunity exists and select the best course of action without conscious reasoning

• Intuition as emotional experience– Gut feelings are emotional signals

– Not all emotional signals are intuition

• Intuition as rapid non-conscious analysis– Uses action scripts


Making Choices More Effectively• Systematically evaluate alternatives

against relevant factors

• Be aware of effects of emotions on decision preferences and evaluation process

• Scenario planning


Implementing Decisions

• Execution—translating decisions into action—is one of the most important and challenging tasks of leaders


Evaluating Decision Outcomes

• Post-decisional justification is the tendency to inflate the quality of the selected option, and forget or downplay rejected alternatives

• Caused by need to maintain a positive self-concept

• Initially produces excessively optimistic evaluation of decision


Escalation of Commitment

• The tendency to repeat an apparently bad decision or allocate more resources to a failing course of action

• Four main causes of escalation:– Self-justification

– Prospect theory effect

– Perceptual blinders

– Closing costs


Evaluating Decisions More Effectively• Separate decision choosers from

evaluators

• Establish a preset level to abandon the project

• Find sources of systematic and clear feedback

• Involve several people in the evaluation process


Creativity at GoogleGoogle encourages its engineers to use 20% of their time to develop projects of their choosing

The company initially allocates limited resources to initiatives, then assigns more people and budget to projects that show progress and viability, like Google Maps


Creativity Defined

• Developing an original idea that makes a socially recognised contribution

• Applies to all aspects of the decision process—problems, alternatives, solutions


Creativity


Characteristics of Creative People


Organisational Conditions Supporting Creativity• Learning orientation in the organisation • Forgiveness for mistakes• Creating intrinsically motivating jobs• Open communication and sufficient

resources• A reasonable level of job security • Support from leaders and co-workers


Creative Work Environments

• Learning orientation– Encourage experimentation

– Tolerate mistakes

• Intrinsically motivating work– Task significance, autonomy, feedback

• Open communication and sufficient resources

• Unclear/complex effects of team competition and time pressure on creativity


Creative Activities

• Review abandoned projects

• Explore issue with other people

• Review abandoned projects

• Explore issue with other people

Redefinethe problem

• Storytelling

• Artistic activities

• Morphological analysis

• Storytelling

• Artistic activities

• Morphological analysis

Associative

play

• Diverse teams

• Information sessions

• Internal tradeshows

• Diverse teams

• Information sessions

• Internal tradeshows

Cross-pollination


Double Circle Problem


Nine Dot Problem


Nine Dot Problem Revisited


Word Search

FCIRVEEALTETITVEERS


Burning Ropes

One Hour to Burn Completely

After first rope burnedi.e. 30 min.


Employee Involvement Defined

• The degree to which employees influence how their work is organised and carried out

• Different levels and forms of involvement:– Decide alone

– Receive information from individuals

– Consult with individuals

– Consult with the team

– Facilitate the team’s decision


Employee Involvement Model


Contingencies of Involvement

Knowledge source

Decision commitment

• Employees have relevant knowledge beyond leader

• Employees would lack commitment unless involved

Risk ofconflict

1. Norms support firm’s goals2. Employee agreement likely

Decision structure

• Problem is new and complex(i.e. Non-programmed decision)

Higher employee involvement is better when:


Summary• The rational choice paradigm relies on subjective

expected utility to identify the best choice, but it has limitations

• Emotions and intuition also have an important role, not just our rational decision-making

• Creativity is the development of original ideas that make a socially recognised contribution. The four creativity stages are preparation, incubation, insight and verification

• In the right conditions, employee involvement can contribute greatly to the decision-making process, as well as to the employees and the organisation

Decision making and creativity

Chapter 7

decision making and creativity chapter 7. 7-2 copyright © 2013 mcgraw-hill australia pty ltd...

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