Chapter Seven Decision Making, Learning, Creativity and Entrepreneurship McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Seven Decision Making, Learning, Creativity and Entrepreneurship McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All rights.
Dec 27, 2015
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Chapter Seven
Decision Making, Learning, Creativity and
Entrepreneurship
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
7-2
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.
7-3
Decision Making
Programmed Decision≈Routine, virtually automatic process≈Decisions have been made so many times in
the past that managers have developed rules or guidelines to be applied when certain situations inevitably occur
7-4
Decision Making
Non-Programmed Decisions≈Non-routine decision made in response to
unusual or novel opportunities and threats.≈The are no rules to follow since the decision is
new.
7-5
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
7-6
The Classical Model
Classical Model of Decision Making≈A prescriptive model of 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.
7-7
The Classical Model of Decision Making
Figure 7.1
7-8
The Administrative Model
Administrative Model≈An approach to decision making that explains
why decision making is inherently uncertain and risky and why managers can rarely make decisions in the manner prescribed by the classical model
7-9
The Administrative Model
Bounded rationality≈There is a large number of alternatives and
available information can be so extensive that managers cannot consider it all.
≈Decisions are limited by people’s cognitive limitations.
7-10
The Administrative Model
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.≈Ambiguous Information
Information whose meaning is not clear allowing it to be interpreted in multiple or conflicting ways.
≈Time constraints and information costs Managers have neither the time nor money to search for all
possible alternatives and evaluate potential consequences
7-11
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
7-12
Six Steps in Decision Making
Figure 7.4
7-13
Figure 7.5
General Criteria for Evaluating Possible Courses of Action
7-14
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.
Systematic errors ≈errors that people make over and over and
that result in poor decision making
7-15
Sources of Cognitive Biases
Prior Hypothesis Bias≈Allowing strong prior beliefs about a
relationship between variables to influence decisions based on these beliefs even when evidence shows they are wrong.
Representativeness≈The decision maker incorrectly generalizes a
decision from a small sample or a single episode.
7-16
Sources of Cognitive Biases
Illusion of Control≈The tendency to overestimate one’s own
ability to control activities and events.
Escalating Commitment≈Committing considerable resources to a
project and then committing more even if evidence shows the project is failing.
7-17
Group Decision Making
Superior to individual making Choices less likely to fall victim to bias Able to draw on combined skills of group
members Improve ability to generate feasible
alternatives
7-18
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
7-19
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
7-20
Devil’s Advocacy and Dialectical Inquiry
Figure 7.7
7-21
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.
Learning organization≈Managers try to maximize the people’s ability
to behave creatively to maximize organizational learning.
7-22
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.
7-23
Senge’s Principles for Creating a Learning Organization
Figure 7.8
7-24
Building Group Creativity
Brainstorming≈Managers meet face-to-face to generate and
debate many alternatives. Nominal Group Technique
≈Provides a more structured way to generate alternatives in writing and gives each manager more time and opportunity to come up with potential solutions
≈Useful when an issue is controversial and when different managers might be expected to champion different courses of action
7-25
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
7-26
Entrepreneurship
Entrepreneurs≈Individuals who identify opportunities and take
responsibility for mobilizing the resources necessary to produce new and improved goods and services. MNGT 352, 353, 354, 455 Case Study: The White House restaurant, New Harmony
Social entrepreneurs ≈those who pursue initiatives and opportunities to
address social problems and needs in order to improve society
7-27
Entrepreneurship
Intrapreneurs≈Individuals (managers, scientists, or
researchers) who work inside an existing organization and identify an opportunity for product improvements and are responsible for managing the product development process. Case Study: Berry Plastics,
business plan competition Case Study: Evansville ARC, Ideation competition
7-28
Characteristics of Entrepreneurs
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.
7-29
Entrepreneurship and Management
Frequently, founding entrepreneur lacks the skills, patience, and experience to engage in the difficult and challenging work of management
7-30
Intrapreneurship and Organizational Learning
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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