Chapter 7
Decision making
and creativity
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
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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
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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
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Rational Choice Paradigm
• Rational choice paradigm: effective
decision makers identify, select and apply
the best possible alternative
• Two key elements of rational choice
1. Subjective expected utility: determines choice
with highest value (maximisation)
2. Decision-making process: systematic
application of stages of decision making
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Subjective Expected Utility
Estimating 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
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0.2
Choice A
0.5
Outcome 1 (+7)
Outcome 2 (-2)
0.9
Outcome 3 (+1)
0.8
Choice B
0.2
Outcome 1 (+7)
Outcome 2 (-2)
0.3
Outcome 3 (+1)
Probability of
outcome occurring
Utility (expected
happiness)
7-6
Rational Choice Decision
Process
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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
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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
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Identifying Problems and
Opportunities
• Stakeholder framing
• Mental models
• Decisive leadership
• Solution-focused problems
• Perceptual defence
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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
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Making Choices: Rational vs OB
Views
Rational choice
paradigm assumptions
Observations from
organisational behaviour
Goals are clear, compatible and
agreed upon
Goals are ambiguous, conflicting
and lack agreement
People are able to calculate all
alternatives and their outcomes
People have limited information
processing abilities
People evaluate all alternatives
simultaneously
People evaluate alternatives
sequentially
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Making Choices: Rational vs OB
Views continued
Rational choice
paradigm assumptions
Observations from
organisational behaviour
People use absolute standards
to evaluate alternatives
People evaluate alternatives
against an implicit favourite
People make choices using
factual information
People make choices using
perceptually distorted information
People choose the alternative
with the highest payoff (SEU)
People choose the alternative
that is good enough (satisficing)
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Biased Decision Heuristics
People 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
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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
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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
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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
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Making Choices More
Effectively
• Systematically evaluate alternatives
against relevant factors
• Be aware of effects of emotions on
decision preferences and evaluation
process
• Scenario planning
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Implementing Decisions
• Execution—translating decisions into
action—is one of the most important and
challenging tasks of leaders
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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
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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
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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
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Creativity at Google
Google 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
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Creativity Defined
• Developing an original idea that makes a socially
recognised contribution
• Applies to all aspects of the decision process—problems,
alternatives, solutions
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Creativity
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Characteristics of Creative
People
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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
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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
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Creative Activities
Redefine
the problem
Associative
play
Crosspollination
• Review
abandoned
projects
• Storytelling
• Diverse teams
• Artistic activities
• Explore issue
with other
people
• Morphological
analysis
• Information
sessions
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• Internal
tradeshows
7-29
Double Circle Problem
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Nine Dot Problem
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Nine Dot Problem Revisited
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Word Search
FCIRVEEALTETITVEERS
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Burning Ropes
After first rope burned
i.e. 30 min.
One Hour to Burn Completely
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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
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Employee Involvement Model
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Contingencies of Involvement
Higher employee involvement is better when:
Decision
structure
• Problem is new and complex
(i.e. Non-programmed decision)
Knowledge
source
• Employees have relevant knowledge
beyond leader
Decision
commitment
• Employees would lack commitment
unless involved
Risk of
conflict
1. Norms support firm’s goals
2. Employee agreement likely
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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
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Chapter 7
Decision making
and creativity