CHAPTER 5 Decision Making, Learning, and Creativity

Because learning changes everything.®
CHAPTER 5
Decision Making,
Learning, and
Creativity
© 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.

© McGraw Hill
Learning Objectives
1. Understand the nature of managerial decision
making, differentiate between programmed and
nonprogrammed decisions, and explain why
nonprogrammed decision making is a complex,
uncertain process.
2. Describe the six steps that managers should take to
make the best decisions.
3. Identify the advantages and disadvantages of group
decision making and describe techniques that can
improve it.
4. Explain the role that organizational learning and
creativity play in helping managers to improve their
decisions.

© McGraw Hill
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 specific
organizational goals and courses of action.

© McGraw Hill
Decision Making 1
Programmed Decision Making:
• 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.

© McGraw Hill
Decision Making 2
Nonprogrammed Decisions:
• Nonroutine decision making that occurs in
response to unusual, unpredictable
opportunities and threats.

© McGraw Hill
Topics for Discussion 1
What are the main differences between
programmed decision making and nonprogrammed
decision making? [LO5-1]

© McGraw Hill
Decision Making 3
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.

© McGraw Hill
The Classical Model
Classical Decision-Making
Model:
• 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.
Optimum Decision:
• The most appropriate
decision in light of
what managers
believe to be the
most desirable
consequences for the
organization.

© McGraw Hill
The Classical Model of Decision Making
Figure 5.1
Access the text alternative for slide image.
Copyright © McGraw-Hill Education. Permission required for reproduction or display.

© McGraw Hill
The Administrative Model 1
Administrative Model
• 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.

© McGraw Hill
In what ways do the classical and administrative
models of decision making help managers
appreciate the complexities involved in real-world
decision making? [LO5-1]

© McGraw Hill
The Administrative Model 2
Bounded Rationality:
• Cognitive
limitations that
constrain one’s
ability to interpret,
process, and act
on information.
Incomplete Information:
• Happens because
the full range of
decision-making
alternative is
unknowable in most
situations and the
consequences are
uncertain.

© McGraw Hill
Why Information Is Incomplete
Figure
5.2
Copyright McGraw-Hill Education. Permission required for reproduction or display.

© McGraw Hill
Causes of Incomplete Information 1
Risk:
• The degree of
probability that the
possible outcomes
of a particular
course of action
will occur.
Uncertainty:
• The probabilities
of alternative
outcomes cannot
be determined and
future outcomes
are unknown.

© McGraw Hill
Figure 5.3
Young Woman or Old
Woman?
Ambiguous Information:
• Information that can be
interpreted in multiple
and often conflicting
ways.
Chronicle of World History/Alamy Stock Photo

© McGraw Hill
Time Constraints and Information Costs:
• Managers have neither the time nor money to
search for all possible alternatives and
evaluate potential consequences.

© McGraw Hill
Satisficing:
• Satisficing is a strategy of searching for and
choosing an acceptable, or satisfactory, response
to problems and opportunities, rather than trying
to make the best decision.
• Managers search for and choose acceptable, or
satisfactory, ways to respond to problems and
opportunities rather than trying to make the
optimal decision.

© McGraw Hill
Why do capable managers sometimes make bad
decisions? What can individual managers do to
improve their decision-making skills? [LO5-1, 5-2]

© McGraw Hill
Steps in the Decision-Making Process
Figure 5.4
Access the text alternative for slide images.

© McGraw Hill
General Criteria for Evaluating Possible Courses of
Action
Figure 5.5.
Is the
possible
course of
action…
Copyright McGraw-Hill Education. Permission required for reproduction or display.

© McGraw Hill
Group Decision Making 1
• 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.
• Allows managers to process more information.
• Managers affected by decisions agree to
cooperate.

© McGraw Hill
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.

© McGraw Hill
In what kinds of groups is groupthink most likely to
be a problem? When is it least likely to be a
problem? What steps can group members take to
ward off groupthink? [LO5-3]

© McGraw Hill
Devil’s Advocacy:
• Critical analysis of a preferred alternative,
made in response to challenges raised by a
group member who, playing the role of devil’s
advocate, defends unpopular or opposing
alternatives for the sake of argument.

© McGraw Hill
Diversity among Decision Makers:
• Diverse groups are often less prone to
groupthink because group members already
differ from each other and thus are less
subject to pressures for uniformity.

© McGraw Hill
Organizational Learning and Creativity 1
Organizational Learning:
• The process
through which
managers seek to
improve employees’
desire and ability to
understand and
manage the
organization and its
task environment.
D. Hurst/Alamy Stock Photo

© McGraw Hill
Learning Organization:
• An organization in which managers try to
maximize the ability of individuals and groups
to think and behave creatively and thus
maximize the potential for organizational
learning to take place.

© McGraw Hill
Creativity:
• A decision maker’s ability to discover original
and novel ideas that lead to feasible
alternative courses of action.

© McGraw Hill
Promoting Individual Creativity
Certain conditions enhance individual creativity.
• Opportunity and freedom to generate new ideas.
• Opportunity to experiment and learn from
mistakes.
• No punishment for ideas that seem outlandish.
• Constructive feedback.

© McGraw Hill
Promoting 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.
• Group member are encouraged to be as
innovative and radical as possible.
• When all alternatives are listed, the pros and cons
of each are discussed and a short list created.

© McGraw Hill
Building Group Creativity 1
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.

© McGraw Hill
Building Group Creativity 2
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.

© McGraw Hill
Intrapreneurship and Organizational Learning
Product Champion:
• A manager who
takes “ownership”
of a project and
provides the
leadership and
vision that take a
product from the
idea stage to the
final customer.
Skunkworks:
• A group that is
deliberately
separated from
normal operations
to encourage
members to
devote all their
attention to
developing new
products.

Because learning changes everything.®
www.mheducation.com
© 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.

CHAPTER 5 Decision Making, Learning, and Creativity

More Related Content

Similar to CHAPTER 5 Decision Making, Learning, and Creativity

Recently uploaded

CHAPTER 5 Decision Making, Learning, and Creativity