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Chapter Seven: Decision Making, Learning, Creativity, and Entrepreneurship
Chapter Seven: Decision Making, Learning, Creativity, and Entrepreneurship
Chapter Seven: Decision Making, Learning, Creativity, and Entrepreneurship
Decision Making,
Learning, Creativity,
and Entrepreneurship
Learning Objectives
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Learning Objectives
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The Nature of Managerial
Decision Making
• Decision Making
– The process by which managers respond to
opportunities and threats that confront them
by analyzing options and making
determinations about
specific organizational
goals and courses of
action.
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The Nature of Managerial
Decision Making
• Decisions in response to opportunities
• occurs when managers respond to ways
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Decision Making
Programmed Decision
– Routine, virtually automatic decision making
that follows established rules or guidelines.
• Managers have made the same decision
many times before
• Little ambiguity involved
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Decision Making
Non-Programmed Decisions
– Nonroutine decision made in response to
unusual or novel opportunities and threats.
– The are no rules to follow since the decision
is new.
• Decisions are made based on information,
and a manager’s intuition, and judgment.
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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
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Decision Making
• Reasoned judgment
– decisions that take time and effort to make
and result from careful information
gathering, generation of alternatives, and
evaluation of
alternatives
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The Classical Model
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The Classical Model of Decision Making
Figure 7.1
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The Administrative Model
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The Administrative Model
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Why Information Is Incomplete
Figure 7.2
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Causes of Incomplete Information
• Risk
– Present when managers know the possible
outcomes of a particular course of action
and can assign probabilities to them.
• Uncertainty
– Probabilities cannot be given for outcomes
and the future is unknown.
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Causes of Incomplete Information
Young Woman
Ambiguous or Old Woman
Information
– Information whose
meaning is not clear
allowing it to be
interpreted in
multiple or
conflicting ways.
Figure 7.3
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Causes of Incomplete Information
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Causes of Incomplete Information
• Satisficing
– Searching for and choosing an acceptable,
or satisfactory response to problems and
opportunities, rather than trying to make the
best decision.
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Causes of Incomplete Information
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Six Steps in Decision Making
Figure 7.4
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Decision Making Steps
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Decision Making Steps
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Decision Making Steps
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General
Criteria for
Evaluating
Possible
Courses of
Action
Figure 7.5
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Decision Making Steps
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Decision Making Steps
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Feedback Procedure
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Cognitive Biases and Decision
Making
Heuristics
– Rules of thumb that simplify the process of
making decisions.
– Decision makers use heuristics to deal with
bounded rationality.
• If the heuristic is wrong, however, then poor
decisions result from its use.
• Systematic errors – errors that people make
over and over and that result in poor
decision making
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Sources of Cognitive Bias at the
Individual and Group Levels
Figure 7.6
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Types of Cognitive Biases
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Types of Cognitive Biases
• Illusion of Control
– The tendency to overestimates one’s own
ability to control activities and events.
• Escalating Commitment
– Committing considerable resources to
project and then committing more even if
evidence shows the project is failing.
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Group Decision Making
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Group Decision Making
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Group Decision Making
• Potential Disadvantages
– Can take much longer than individuals to
make decisions
– Can be difficult to get two or more
managers to agree because of different
interests and preferences
– Can be undermined by biases
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Group Decision Making
Groupthink
– 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
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Improved Group Decision Making
• Devil’s Advocacy
– Critical analysis of a preferred alternative to
ascertain its strengths and weaknesses
before it is implemented
– One member of the group who acts as the
devil’s advocate by critiquing the way the
group identified alternatives and pointing out
problems with the alternative selection.
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Improved Group Decision Making
• Dialectical Inquiry
– Two different groups are assigned to the problem
and each group is responsible for evaluating
alternatives and selecting one of them
– Top managers then hear each group present their
alternatives and each group can critique the other.
• Promote Diversity
– Increasing the diversity in a group may result in
consideration of a wider set of alternatives.
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Devil’s Advocacy and Dialectical Inquiry
Figure 7.7
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Organizational Learning and
Creativity
• Organizational Learning
– 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.
• The Learning Organization
– Managers try to maximize the people’s
ability to behave creatively to maximize
organizational learning.
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Organizational Learning and
Creativity
Creativity
– The ability of the decision maker to discover
novel ideas leading to a feasible course of
action.
• A creative management
staff and employees are
the key to the learning
organization.
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Senge’s Principles for Creating a
Learning?
Figure 7.8
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Creating a Learning Organization
1. Personal Mastery
– Managers empower employees and allow them to
create and explore.
2. Mental Models
– Challenge employees to find new, better methods
to perform a task.
3. Team Learning
– Learning that takes place in a group or team.
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Creating a Learning Organization
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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.
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Building Group Creativity
• Production Blocking
– Occurs because group members cannot
simultaneously make sense of all the
alternatives being generated, think up
additional alternatives, and remember what
they were thinking
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Building Group Creativity
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Building Group Creativity
Delphi Technique
– Written approach to creative problem solving.
– Group leader writes a statement of the problem to
which managers respond
– Questionnaire is sent to managers to generate
solutions
– Team of managers summarizes the responses and
results are sent back to the participants
– Process is repeated until a consensus is reached
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Entrepreneurship
Entrepreneurs
– Individuals who notice opportunities and
take the responsibility for mobilizing the
resources necessary to produce new and
improved goods and services.
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Entrepreneurship
Intrapreneurs
– Individuals (managers, scientists, or
researchers) who work inside an existing
organization and notice an opportunity for
product improvements and are responsible
for managing the product development
process.
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Entrepreneurship and New Ventures
Characteristics of entrepreneurs—most
share these common traits:
– Open to experience: they are original thinkers
and take risks.
– Internal locus of control: they take
responsibility for their own actions.
– High self-esteem: they feel competent and
capable.
– High need for achievement: they set high
goals and enjoy working toward them.
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Entrepreneurship and Management
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Entrepreneurship and Management
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Intrapreneurship and
Organizational Learning
Learning organizations encourage their
employees to act as intrapreneurs:
– Product champions: taking ownership of a
product from concept to market.
– Skunkworks: keeping a group of intrapreneurs
separate from the rest of the firm.
– Rewards for innovation: linking innovation by
workers to valued rewards.
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