CHAPTER-05
PROBLEM SOLVING AND DECISION
MAKING
1
Dr. Gehan Shanmuganathan, (DBA)
HAMMOND’S CANDIES
2
HAMMOND’S CANDIES

Schuman bought the 90 year old company in 2007

Offered $ 50 bonus for the assembly-line workers to
come up with successful ideas to cut manufacturing
costs

One worker suggested a tweak in machine gear that
reduced workers needed on an assembly line from five to
four

Another devised a new way to protect candy canes while en
route to stores that resulted in a 4% reduction in breakage
3
CHAPTER OBJECTIVES
4
6.1
LEARNING OBJECTIVES
1
Differentiate between programmed and non-programmed decisions.
2
Explain the steps involved in making a non-programmed decision.
3
Understand the major factors influencing decision making in
organizations.
4
Understand the nature of creativity and how it contributes to
managerial work.
5
Describe organizational programs for improving creativity and
innovation.
6
Implement several suggestions for becoming a more creative
problem solver.
7
Appreciate the value and potential limitations of group decision
making.
WHAT IS A PROBLEM ?
6
WHAT IS A PROBLEM ?
A
discrepancy between ideal and
actual conditions
What
A
is a decision?
choice among alternatives
7
NON-PROGRAMMED VERSUS
PROGRAMMED DECISIONS
8
NON-PROGRAMMED DECISIONS

A decision that is difficult because of its complexity and
the fact that the person faces it infrequently

All strategic decisions are non-programmed decisions

A well-planned and highly structured organization
reduces the number of non-programmed decisions

E.g- outsourcing, merging, acquisitions
9
PROGRAMMED DECISIONS

A decision that is repetitive, or routine, and
made according to a specific procedure

First level managers or supervisors make more
routine decisions. E.g- signing payment vouchers

Middle managers generally make both routine and
non-routine decisions

A well-managed organization encourages all
managers to delegate as many non-programmed
decisions as possible
10
PROGRAMMED AND NONPROGRAMMED DECISIONS:
A COMPARISON
Programmed Decisions
Types of
problems
Procedures
Examples
Nonprogrammed
Decisions
Repetitive, routine,
frequent; decisions made
according to specific
procedures
Depend on policies and
rules
Novel, complex, difficult,
infrequent; decisions
require original thinking
Business firm: Periodic
Business firm:
reorders of inventory
Health care: Procedure for
admitting patients
University: Necessary GPA
for good academic
standing
Require creativity,
intuition, tolerance for
ambiguity, innovation
Diversification into new
products and markets
Health care: Purchase of
experimental equipment
University: Construction of
new classrooms
STEPS IN PROBLEM SOLVING AND
DECISION MAKING
12
STEPS IN PROBLEM SOLVING
AND DECISION MAKING
Identify and
diagnose the
problem
Develop creative
alternatives
Evaluate the
alternative solutions
“What really, really
is our problem?”
“Let’s dream up
some great ideas.”
“Some of these
ideas are good;
others are wacko.”
Evaluate and
control
Implement the
decision
Choose one
alternative solution
“How really good
was that idea?”
“Now let’s take
action.”
“This alternative is
a winner!”
1. IDENTIFY AND DIAGNOSE THE PROBLEM

The first step in problem solving and decision
making is to identify a gap between desired and
actual conditions

Why our sales dropped over time?

Why former customers stopped buying from us?

Why can not we have a global presence?
14
2. DEVELOP ALTERNATIVE SOLUTIONS

To explore all kinds of possibilities
15
3. EVALUATE ALTERNATIVE

SOLUTIONS
Examination of pros and cons of all the
possibilities and considers the feasibility of each

Evaluation parameters

Cost

Time

Return

Risk

Resources availability

Capabilities
16
4. CHOOSE ONE ALTERNATIVE

SOLUTION
The process of weighing the alternatives must
stop at some point

Analysis paralysis
17
5. IMPLEMENT THE DECISION

Converting a decision into action
18
6. EVALUATE AND CONTROL

The final step in the decision making process is
to investigate how effectively the chosen
alternative solved the problem

Single loop and double loop learning
19
BOUNDED RATIONALITY AND
INFLUENCES ON DECISION
MAKING
20
BOUNDED RATIONALITY

The observation that people’s limited mental
abilities, combined with external influences
over which they have little or no control, prevent
them from making entirely rational decisions

Superstitions
Hong Kong people avoid 40-59
 Westerners avoid 13

Satisficing decisions- a decision meets the
minimum standards of satisfaction
 Heuristics- rule of thumb using decision making



Smiling within first three minutes at an interview
Intuition – experience based reasoning
21
FACTORS INFLUENCING DECISION MAKING
“I like risks
and I’m really
bright.”
“Let’s wait
before
deciding.”
Personality and
cognitive intelligence
Procrastination
“I’ve got
integrity.”
“I’m great at
hunches.”
Intuition
Emotional
intelligence
Values
“Our backs are
to the wall, and
we disagree.”
Decision
Maker
Quality of
information
Crisis and conflict
Degree of
uncertainty
“Looks like a
sure thing.”
“I can read
people
great and
control my
emotions.”
Political
considerations
“What does my
boss want me
to decide?”
“The IS group
is feeding me
great stuff.”
PERSONALITY AND COGNITIVE INTELLIGENCE

Risk taking, cautiousness, and conservatism influences
decisiveness

Cautiousness will lead to low risk taking decisions

Good decision makers, by definition, are decisive

Perfectionism- people who seek perfect solution to a problem
are usually indecisive

Optimism and pessimism- optimistic people are more decisive

Cognitive intelligence- imagination, adaptability, and
practical intelligence

In general, intelligent and well educated people are more likely to
identify problems and make sound decisions
23
EMOTIONAL INTELLIGENCE

The ability to connect with people and
understand their emotions

Key factors of emotional intelligence

Self- awareness – to understand your own emotions

Self- management – control one’s emotions

Social- awareness – having empathy for others

Relationship management – interpersonal skills of
clear and convincing communication
24
QUALITY AND ACCESSIBILITY OF
INFORMATION

Accessing high quality and valid information for
decision making

Sources

Organizational reports, Interviews, Observations,
News and Case studies

Avoid

Anchoring and perceptual errors (selective, figure-ground,
stereotyping, and closure)
25
POLITICAL CONSIDERATIONS

Status quo

Take revenge

Political affiliations to stay in favor with,

Senior managers

Middle managers

Operational level staff
26
DEGREE OF CERTAINTY

The more certain a decision maker is of the
outcome of a decision, the more calmly and
confidently the person will make the decision
27
CRISIS AND CONFLICT

In a crisis many decision makers panic and they
become less rational and more emotional than
they would be in a calm environment

In such situation, some managers concentrate
poorly, use poor judgment, and think impulsively

Some managers consider crisis as an exciting
challenge that energizes them towards their best
level of problem solving and decision making
28
VALUES OF THE DECISION MAKER

What do the manager value?

Employees

Profits

Prestige

Any other
29
PROCRASTINATION

Delaying taking an action without a valid reason

Procrastination results in indecisiveness
30
DECISION MAKING STYLE

Managers use

Intuition

Procrastination

Satisficing

Decisive

Flexible (many options and less information)

Hierarchic

Integrative (many options more information)
31
GROUP PROBLEM SOLVING AND
DECISION MAKING
32
GROUP PROBLEM SOLVING AND DECISION
MAKING

The process of several people contributing to a
final decision
33
ADVANTAGES AND
DISADVANTAGES OF GROUP
DECISION MAKING
34
ADVANTAGES AND DISADVANTAGES
Advantages

High quality due to
Disadvantages

Time consuming

Depends on intelligent
combined wisdom of the
group

avoid due to individual
evaluation

individuals
Errors are likely to
Gains acceptance and
commitment

Groupthink lose
ability to evaluate bad
ideas
35
GENERAL METHOD OF GROUP
PROBLEM SOLVING
36
GENERAL METHOD OF GROUP PROBLEM
SOLVING
1.
2.
Identify the problem
Clarify the problem
a)
3.
Analyze the cause
a)
4.
5.
6.
9.
Decide what actions are necessary
Clarify the contract
a)
8.
Search for “what we want”
Search for alternative solutions
Select alternatives
Plan for implementation
a)
7.
Everyone share the same definition of the problem
What group members have agreed to do
Develop an action plan
Provide evaluation and accountability
a)
Hold people accountable for results
37
SUGGESTIONS FOR IMPROVING
GROUP PROBLEM-SOLVING
1. Have a specific
2. Rely on
agenda and adhere
qualified group
to it
members
5. Build
consensus so
the decision is
more likely to be
implemented 3. Have the
4. Provide
leader
share
summaries for
decision-making
each major point
authority
A SPECIFIC METHOD OF GROUP
PROBLEM SOLVING
39
THE NOMINAL GROUP TECHNIQUE (NGT)

A group-decision making technique that follows a
highly structured format
40
THE NOMINAL GROUP TECHNIQUE
1. Small group is
assembled
6. Alternatives are
rated and bestrated one is
chosen
2. Leader presents
a problem
5. Group clarifies
and evaluates all
suggestions
3. Members write
down ideas
individually
4. Each participant
presents one idea
to group
CREATIVITY AND INNOVATION IN
MANAGERIAL WORK
42
CREATIVITY

The process of developing novel ideas that
can be put into action

Creativity is closely linked to innovation by the
application of the ideas
43
THE CREATIVE PERSONALITY

Creative people think outside the box or get
beyond the usual constraints when solving
problems

Creative people want to learn new things, stretch
themselves, and strive to do better in their jobs

They break the rule challenging the status quo

Unconventional
44
KEY PARTS OF CREATIVITY

Lateral thinking

A thinking process that spreads out to find many
alternative solutions to a problem

Vertical thinking In contrast

An analytical, logical process that results in few
answers
45
CONDITIONS NECESSARY FOR
CREATIVITY
46
CONDITIONS NECESSARY FOR CREATIVITY

Expertise

Creative-thinking skill

Internal motivation

Environment need

Encouragement from others
47
THE CREATIVE AND INNOVATIVE
ORGANIZATION
48
6.5
Providing
challenges
Encouraging
risk taking
Providing
organizational
support
Establishing a
Creative
Atmosphere
Involves. . .
Providing
encouragement
Allowing
freedom
Allocating
ample
resources
Creativity!
ORGANIZATIONAL PROGRAMS
FOR IMPROVING CREATIVITY AND
INNOVATION
50
ORGANIZATIONAL PROGRAMS FOR
IMPROVING CREATIVITY AND INNOVATION

Creativity training

Brainstorming

Systematically gathering ideas

Appropriate physical surroundings
51
SELF-HELP TECHNIQUES FOR
IMPROVING CREATIVITY
52
SUGGESTIONS TO BUILD CREATIVITY
1. Keep an idea notebook
2. Stay current in your field
3. Listen to other people
4. Learn to think in the five senses
5. Improve your sense of humor
6. Adopt a risk-taking attitude
7. Develop a creative mental set
8. Identify your most creative times
9. Be curious about your environment
10. Step back when faced with a creativity block
6.6
WRITE FIVE KEY THINGS (AREAS)
THAT YOU CAN CRITICALLY
REMEMBER IN TODAY’S
DISCUSSION
54
WHAT WE DISCUSSED TODAY?
55
6.1
OUR DISCUSSION TODAY
1
Differentiate between programmed and non-programmed decisions.
2
Explain the steps involved in making a non-programmed decision.
3
Understand the major factors influencing decision making in
organizations.
4
Understand the nature of creativity and how it contributes to
managerial work.
5
Describe organizational programs for improving creativity and
innovation.
6
Implement several suggestions for becoming a more creative
problem solver.
7
Appreciate the value and potential limitations of group decision
making.
MID-TERM TEST
57
MIDTERM PRESENTATIONS- DUE
MARCH 14TH 2012 – 10-15 MINUTES

Find mission statements of three large
corporations in different industries from the
web

Compare the mission statements in terms of the
purposes of being in the business and its
concern for employees, customers, and
shareholders

Which company you would like to work for and
why?
58