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CHAPTER SEVEN
Decision Making
and Creativity
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Learning Objectives
1. Describe the elements of rational choice decision making.
2. Explain why people differ from rational choice decision
making when identifying problems/opportunities,
evaluating/choosing alternatives, and evaluating decision
outcomes.
3. Discuss the roles of emotions and intuition in decision
making.
4. Describe employee characteristics, workplace conditions,
and specific activities that support creativity.
5. Describe the benefits of employee involvement and
identify four contingencies that affect the optimal level of
employee involvement.
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Aurecon Group’s Future-Ready Decision Makers
Australian/South African
engineering firm Aurecon
Group has won numerous
awards by helping its
7,500 employees across 28
countries to become more
“future ready” decision
makers.
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Rational Choice Decision Making
Rational choice decisions.
• Identify, select, apply, evaluate
best alternative.
• Use logic, all information to
choose highest value choice.
• Historically considered ideal
state of decision making.
Two key elements of rational
choice.
1. Calculating the best
alternative.
2. Systematic decision-making
process.
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"cogito, ergo sum"
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5
“And although perhaps (or rather
as I shall shortly say, certainly), I
have a body to which I am very
closely united, nevertheless,
because, on the one hand, I have
a clear and distinct idea of myself
in so far as I am only a thinking
and unextended thing, and
because, on the other hand I have
a distinct idea of the body in so far
as it is only an extended thing but
which
does not think, it is certain that I,
that is to say my mind, by which I
am what I am, is entirely and truly
distinct from my body, and may
exist without it”.
Descartes (1677): "Vision and the Mechanism
for Response to External Stimuli"
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Descartes (1640): Discourse on Method and the
Meditations
Rational Choice Best Alternative Calculation
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Rational Choice Decision-making Process
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Mental Model Myopia Almost Rejected Seinfeld
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STLE ROCK/WEST-SHAPIRO/Album/Alamy Stock Photo
Problem Identification Challenges
Problems and
opportunities are
constructed from
ambiguous and
conflicting information.
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Five Problem Identification
Challenges:
1.
2.
3.
4.
5.
Solution-focused problems.
Decisive leadership.
Stakeholder framing.
Perceptual defense.
Mental models.
Identifying Problems Effectively
1. Be aware of problem identification biases.
2. Resist temptation of looking decisive.
3. Develop a norm of “divine discontent” (aversion to
complacency).
4. Discuss the situation with colleagues.
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Choosing Alternatives: Rational Choice Assumptions
vs. OB Evidence
Rational Choice Assumptions
OB Evidence
Goals are clear, compatible, and
agreed on.
Goals are ambiguous, in conflict, and
lack full support.
Decision makers can calculate all
alternatives and their outcomes.
Decision makers have limited
information-processing abilities.
Decision makers evaluate all
alternatives simultaneously.
Decision makers evaluate alternatives
sequentially.
Decision makers use absolute
standards to evaluate alternatives.
Decision makers evaluate alternatives
against an implicit favorite.
Decision makers use factual
information to choose alternatives.
Decision makers process perceptually
distorted information.
Decision makers choose the highest
payoff alternative (maximization).
Decision makers choose the “good
enough” alternative (satisficing).
‘People act intentionally rational but only limitedly so’ (Simon,1957).
See Herb Simon at: https://www.youtube.com/watch?v=QFLxazu6pCw
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Sequential Evaluation and
Implicit Favorite Biases
Rational choice: evaluate alternatives concurrently using
unbiased valences and probabilities.
Reality: We use implicit favorite to compare each
alternative sequentially.
Why sequential evaluation with an implicit favorite?
•
•
•
•
Alternatives not all available at same time.
People are ipsative.
People are cognitive misers (confirmation bias).
Minimizes cognitive dissonance.
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Biased Decision Heuristics
Rational choice: calculate alternative with highest expected
satisfaction.
Reality: We have built-in decision heuristic biases.
1. Anchoring and adjustment:
• Adjusting expectations/standards around an initial anchor point (e.g.
opening bid).
2. Availability heuristic:
• Estimating probabilities by how easy event is recalled, even ease of
recall is also due to other factors.
3. Representativeness heuristic:
• Estimating the probability of something by its similarity to known
others rather than by more precise statistics.
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Problems with Maximization
Rational choice: Maximization is choosing the highest
value alternative.
Three human limitations:
1. People engage in satisficing. First is “good enough”
alternative.
• Occurs because information is imperfect, lack of time or cognitive capacity,
many features with endless trade-offs.
2. People simplify the decision calculation.
3. People avoid making any decision when too many
choices are presented.
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Emotions and Making Choices
1. Emotions form preferences before conscious
evaluation.
2. Moods and emotions affect the decision process.
3. Emotions serve as information in decisions.
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Intuitive Decision Making
Ability to know when a problem or opportunity exists
and to select the best course of action without conscious
reasoning.
(variously referred to as ‘gut feeling’, acting on the hoof’, implicit/tacit knowing,
etc.)
Intuition as emotional experience:
• Gut feelings are emotional signals.
• Not all emotional signals are intuition.
Intuition as rapid nonconscious analysis:
• Uses action scripts.
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Improving Alternative Selection
1. Systematically evaluate alternatives against relevant
factors (don’t be too decisive).
2. Revisit decisions later when emotions/moods have
changed.
3. Scenario planning.
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Decision Evaluation Problems
Confirmation bias (post-decisional justification).
• Ignore/deflate strengths of rejected alternatives.
• Inflate strengths of the selected alternative.
Escalation of commitment is repeating or further
investing in an apparently bad decision.
Causes of escalation:
•
•
•
•
Self-justification effect.
Self-enhancement effect.
Prospect theory effect.
Sunk costs effect.
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Improving Decision Evaluation
1. Change the decision maker.
2. Establish a preset level to abandon the project.
3. Find sources of systematic and clear feedback.
4. Involve several people in the evaluation process.
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Encouraging Creativity at Estée Lauder
Creativity is key to Estée
Lauder’s success as the
global leader in the
prestige beauty industry.
“Creativity is at the center
of our innovation models,”
says Fabrizio Freda, CEO of
the New York cosmetics
firm.
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Creative Process Model
Exhibit 7.4. The Creative Process Model
Source: Based on G. Wallas, The Art of Thought (London: Jonathan Cape, 1926), Chap. 4.
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Characteristics of Creative People
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Creative Work Environments
• Learning orientation.
• Intrinsically motivating
work.
• Creative work setting.
• Sufficient resources.
• Leader and coworker
support (usually).
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Creative Activities
Redefine the problem.
• Revisit, involve others.
Associative play.
• Playful activities, creative
challenges, morphological
analysis.
Cross-pollination.
• Exchange ideas across the firm.
Design thinking.
• Human-centered, solutionfocused creative process.
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Design Thinking
Human-centered, solution-focused process – relies on
creative thinking, logical analysis, empathy, intuition.
Four design thinking rules:
•
•
•
•
Human rule – involve others.
Ambiguity rule – avoid problem identification too soon.
Re-design rule – review past solutions.
Tangible rule – build prototypes, embrace learning orientation.
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Levels of Employee Involvement
High: Employees responsible for entire
decision-making process.
Medium-high: Employees collectively
recommend solution to problem.
Medium-low: Employees hear problem
individually or collectively, then asked for
information relating to that problem.
Low: Employees individually asked for
specific information; problem is not
described to them.
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High
Medium
Low
Employee Involvement Model
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Contingencies of Involvement
Decision
Structure.
Problem is new and complex.
Knowledge
Source.
Employees have relevant knowledge
beyond leader’s knowledge.
Decision
Commitment.
Employees would lack commitment
unless involved.
Risk of
Conflict.
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1. Norms support firm’s goals.
2. Employee agreement likely.
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