Decision Making,
Learning,
Creativity, and
Entrepreneurship*
*(related to Glass Ceiling)
Chapter Five
McGraw-Hill/Irwin
Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
LO1 Understand the nature of managerial decision
making, differentiate between programmed and
nonprogrammed decisions, and explain why
nonprogrammed decision making is a complex,
uncertain process.
LO2 Describe the six steps that managers should take
to make the best decisions
LO3 Identify the advantages and disadvantages of
group decision making, and describe techniques
that can improve it
5-2
Learning Objectives
LO4 Explain the role that organizational learning and
creativity play in helping managers to improve
their decisions.
LO5 Describe how managers can encourage and
promote entrepreneurship to create a learning
organization, and differentiate between
entrepreneurs and intrapreneurs
5-3
The Nature of Managerial
Decision Making
• Decision Making
– The process by which managers respond to
opportunities and threats by analyzing options,
and making determinations about organizational
goals and courses of action
http://www.youtube.com/watch?v=iNb2I1lzAOk
5-4
Decision Making
• Programmed Decision
Routine, virtually automatic decision making that
follows established rules or guidelines.
• Managers have made the same decision
many times before
• There are rules or guidelines to
follow based on experience with
past decisions
• Little ambiguity involved
5-5
Decision Making
• Non-Programmed Decisions
– Non-routine decision making that occurs in
response to unusual, unpredictable opportunities
and threats.
– “Battlefield” Decisions
5-6
Question?
What are feelings, beliefs, and hunches that
come readily to mind and require little
effort?
A.
B.
C.
D.
Reasoned Judgment
Intuition
Wild Guess
Scientific Deduction
5-7
Decision Making
• Intuition
– Feelings, beliefs, and
hunches that come
readily to mind,
require little effort
and information
gathering and result
in on-the-spot
decisions
• Reasoned judgment
– Decisions that take
time and effort to
make and result from
careful information
gathering, generation
of alternatives, and
evaluation of
alternatives
5-8
1-The Classical Model
• Classical Model
of Decision Making
– A prescriptive approach to
decision making that assumes
the decision maker can
identify and evaluate all
possible alternatives and
their consequences and
rationally choose the most
appropriate course of action
5-9
The Classical Model of Decision Making
Figure 5.1
5-10
2-The Administrative Model
• Administrative Model of Decision Making
(James March and Herbert Simon)
– An approach to decision making that explains why
decision making is inherently uncertain and risky
and why managers usually make satisfactory
rather than optimum decisions
– This model is based on 3 concepts:
1. Bounded rationality
2. Incomplete information
3. “Satisficing”
5-11
Bounded Rationality
• Bounded Rationality
– Limitations that constrain one’s
ability to interpret process and act on information
5-12
Causes of Incomplete Information
• Risk
– The degree of probability that the possible
outcomes of a particular course of action will
occur (or may not occur)
• Uncertainty and Time Constraints
– The probabilities of alternative outcomes cannot
be determined and future outcomes are unknown
5-13
Why Information Is Incomplete
Figure 5.2
5-14
Causes of Incomplete Information
• Ambiguous
Information
– Information that can
be interpreted in
multiple and often
conflicting ways.
Young Woman or Old
Woman
Figure 5.3
5-15
Causes of Incomplete Information
• Time Constraints and Information Costs
– Managers have neither the time nor money to
search for all possible alternatives and evaluate
potential consequences
5-16
Satisficing
• Satisficing
– Searching for and choosing an acceptable, or
satisfactory response to problems and
opportunities, rather than trying to make the best
decision
– Managers explore a limited number of options
and choose an acceptable decision rather than the
optimum decision
5-17
Decision Making
• Question:
– What exactly is Decision Making?
• Answer:
– Choosing among two
or more alternatives.
5-18
Six Steps in Decision Making
Figure 5.4
5-19
7 Steps in Decision Making
1. Define the situation
2. Describe and collect needed information
3. Develop alternatives
4. Develop agreement among those involved
5. Decide which alternative is best
6. Do what is indicated
7. Determine if the decision was good and follow up
5-20
Compare & Contrast
1. Recognize the need
for a decision
2. Generate Alternatives
3. Assess Alternatives
4. Choose Among
Alternatives
5. Implement the choice
6. Learn from feedback
1. Define the situation
2. Describe and collect
needed information
3. Develop alternatives
4. Develop agreement
among those involved
5. Decide which alternative
is best
6. Do what is indicated
7. Determine if the decision
was good and follow up
5-21
Discussion Question?
Which is the most important step in the decision
making process? (depends on the situation)
A.
B.
C.
D.
E.
F.
Recognize the need for a decision
Generate Alternatives
Assess Alternatives
Choose among Alternatives
Implement the Chosen Alternative
Learn from Feedback
5-22
Decision Making Steps
Step 1. Recognize Need for a Decision
• Sparked by an event such as environmental
changes.
• Managers must first realize that a decision
must be made.
5-23
Decision Making Steps
Step 2. Generate Alternatives
• Managers must develop feasible alternative
courses of action
– If good alternatives are missed, then the resulting
decision is poor
– It is hard to develop creative alternatives, so
managers need to look for new ideas
5-24
Decision Making Steps
Step 3. Evaluate Alternatives
• What are the advantages and disadvantages
of each alternative?
• Managers should specify criteria, then
evaluate.
5-25
General Criteria for Evaluating Possible
Courses of Action
Figure 5.5
5-26
Decision Making Steps
Step 4. Choose Among Alternatives
• Rank the various alternatives and make a
decision
– Tendency is for managers to ignore critical
information, even when available
5-27
Decision Making Steps
Step 5. Implement Chosen Alternative
• Managers must now carry out the alternative
• Often a decision is made and not
implemented
5-28
Decision Making Steps
Step 6. Learn From Feedback
• Compare what happened to what was
expected to happen
• Explore why any expectations for the decision
were not met
• Derive guidelines that will help in future
decision making
5-29
Group Decision Making
• Superior to individual
• Improve ability to
making
generate feasible
alternatives
• Choices less likely to fall
victim to bias
• Allows managers to
process more
• Able to draw on
information
combined skills of group
members
• Managers affected by
decisions agree to
cooperate
5-30
Group Decision Making
• Groupthink
– A pattern of faulty and biased decision making
that occurs in groups whose members strive for
agreement among themselves at the expense of
accurately assessing information relevant to a
decision
5-31
Group Decision Making
• Devil’s Advocacy
– Critical analysis of a preferred alternative to
ascertain its strengths and weaknesses before it is
implemented
5-32
Organizational Learning and Creativity
• Organizational Learning
– The process through which managers seek to
improve a employee’s desire and ability to
understand and manage the organization and its
task environment so as to raise effectiveness
5-33
Peter Senge’s Principles for Creating a
Learning Organization
Figure 5.6
5-34
Question?
What is a decision maker’s ability to discover
original and novel ideas that lead to feasible
alternative courses of action?
A. Risk
B. Decision-making
C. Creativity
D. Inventiveness
5-35
Organizational Learning and Creativity
• Creativity
– A decision maker’s
ability to discover
original and novel
ideas that lead to
feasible alternative
courses of action
• Innovation
– The implementation
of creative ideas in
an organization.
5-36
Building Group Creativity
• Brainstorming
– Managers meet face-to-face to generate and
debate many alternatives.
– Group members are not allowed to evaluate
alternatives until all alternatives are listed.
– When all are listed, then the pros and cons of
each are discussed and a short list created.
5-37
Building Group Creativity
• Production blocking
– Loss of productivity in brainstorming sessions due
to the unstructured nature of brainstorming
• Nominal Group Technique
– A decision-making technique in which group
members write down ideas and solutions, read
their suggestions to the whole group, and discuss
and then rank the alternatives
5-38
Building Group Creativity
• Delphi Technique
– A decision-making technique in which group
members do not meet face-to-face but respond in
writing to questions posed by the group leader
5-39
Entrepreneurship and Creativity
• Entrepreneurs
– An individual who notices opportunities and
decides how to mobilize the resources necessary
to produce new and improved goods and services
• Social entrepreneurs
– Individuals who pursue initiatives and
opportunities to address social problems and
needs in order to improve society and well-being
5-40
Entrepreneurship and Creativity
• Intrapreneur
– A manager, scientist, or researcher who works
inside an organization and notices opportunities
to develop new or improved products and better
ways to make them
– Post-it notes were invented by 3M's
Art Fry, using an adhesive developed
by a colleague, Spencer Silver
5-41
Entrepreneurship and Creativity
• Entrepreneurship
– Mobilization of
resources to take
advantage of an
opportunity to
provide customers
with new and
improved goods and
services
5-42
Intrapreneurship and Creativity
• Product champion
• Skunkworks
– A manager who takes
– A group deliberately
“ownership” of a
separated from
project and provides
normal operations to
the leadership and
encourage them to
vision that take a
devote all their
product from the
attention to
idea stage to the final
developing new
customer
products
5-43
Intrapreneurship and Creativity
5-44