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OB1105 - Ch 7

Decision Making and Creativity

Anthony Okuchi

on 3 April 2016

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Transcript of OB1105 - Ch 7

Ch 7 Decision Making and Creativity
How do we get teams to make better decisions and become more creative?
The conscious process of making choices among one or more alternatives with the intention of moving towards some desired state of affairs
Rational Decision Making
How do people make rational decisions?
1. Identify problem or opportunity
2. Choose the best decision process
3. Develop alternative solutions
4. Choose the best alternative
6. Evaluate the decision outcomes
5. Implement the selected alternative
Identify the deviation between the current and desired state and the root causes
follows standard operating procedures
best for routine problems with clear goals
careful search for alternatives
Usually search for existing solutions
Custom-made solutions created if existing ones unacceptable
Rational choice paradigm - assumes people will identify all the factors, assign weights to reflect importance, rate alternatives on factors, and the choose the option with highest subjective utility

Subjective expected utility refers to the expected level of happiness produced by the alternative
The question is... does this really what happen?
Problem Identification Process
Problem and opportunities are not announced or pre-defined

Problem identification uses both logical analysis and nonconscious emotional reaction during perceptual process
How do we know that there is a problem?
need to interpret ambiguous information

need to pay attention to both logic and emotional reaction in problem identification
Problem Identification Challenges
Stakeholder framing

Perceptual defense

Mental models

Decisive leadership

Solution-focused problems
Why is it so hard to know that a problem exists?
According to science: We are bad at making decisions. Our decisions are based on oversimplification, laziness and prejudice. And that's assuming that we haven't already been hijacked by our surroundings or led astray by our subconscious!
If we have time...
Others frame the situation as a problem or opportunity
ignoring bad news
affect expectations, evaluation of what works
short cuts assessment of whether situation is a problem
defining problems as favourite solutions
The Space Shuttle Columbia disaster occurred on February 1, 2003, when shortly before it was scheduled to conclude its 28th mission, STS-107, the Space Shuttle Columbia disintegrated over Texas during re-entry into the Earth's atmosphere, resulting in the death of all seven crew members
Identifying problems effectively
What can you do to identify problems?
Be aware of perceptual and diagnostic limitations
Understand mental models
Discussing the situation with colleagues - see different perspectives
Your doctor tells you that you have to undergo an operation. Would you do the operation?
As people get older, people take pride in making fewer mistakes.

We constantly try to hire staff that are smart and don’t make mistakes.

Goggle, and IDEO are famous for allowing for mistakes
Ask yourself this, as a people manager do you yell at your employees when they make a mistake, or do you praise them for trying and ask them what they plan to do differently tomorrow?
OB must design organizational structures to allow for survivable mistakes, and learning mechanisms for this.
You make decisions based on your experience on what worked before or what you have experienced.

You also make inferences from the past.
Red houses are made of red brick, yellow houses are made of yellow brick, what are green houses made of?
A Canuck talking about the weather in Ghana...
Steve is very shy and withdrawn, invariably helpful but with little interest in people or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.
80% chance of surviving.
20% chance of dying.
Need to look at whether the problem is being framed as a problem, or as an opportunity and realize the inherent bias that is introduced by the ‘frame’.
Is Steve more likely to be a librarian or a farmer?
Fact - 20 male farmers for each male librarian.
Making choices - Rational vs OB view
information processing
evaluation timing
evaluation standards
decision objective
information quality
Rational view - goals are clear, compatible with each other, agreed upon by decision makers
OB view - goals ambigous, conflicting, not agreed upon
Rational view - people can process all information about all alternatives and their outcomes
OB view - people have limited information processing capability, and limited time to assess all info
Rational view - choices evaluated simultaneously
OB view - choices evaluated sequentially
Rational view - evaluate against absolute standards
OB view - evaluate against implicit favourites
Rational view - information is factual
OB view - information is perceptually distorted
Rational view - maximization: people try to select the best alternative (subjective expected utility)
OB view - satisficing: people try to select a 'good enough' alternative
The challenge is that opportunities are not evaluated in detail and people tend to generate an emotional preference.
Emotions and making choices
How do emotions affect making choices?
Emotional marker process forms preferences before we consciously think about choices

Moods and emotions influence the decision process
affects vigilance, risk aversion, etc.

We ‘listen in’ on our emotions and use that information to make our choices
Intuitive decision making
How role does intuition play in making choices?
Often called System 1 Thinking

Ability to know when a problem or opportunity exists and select the best course of action without conscious reasoning

Intuition as emotional experience
Gut feelings are emotional signals
Not all emotional signals are intuition

Intuition as rapid unconscious analysis
Uses action scripts (jumping to action)

Thomas Edison napping with weights.
Making choices more effectively
how do you make the 'best' choice?
Systematically evaluate alternatives

Balance emotions and rational influences

Scenario planning

Often called System 2 Thinking
developing an original idea that makes a socially recognized contribution
Postdecisional justification
Escalation of commitment
Evaluating decisions more effectively
why do people commit even more after?
Tendency to inflate quality of the selected option; forget or downplay rejected alternatives

Results from need to maintain a positive self-identity

Initially produces excessively optimistic evaluation of decision
The tendency to repeat an apparently bad decision or allocate more resources to a failing course of action

Four main causes of escalation:

Prospect theory effect

Perceptual blinders

Closing costs
why do people commit even further?
persistence shows confidence in their decision
saving face and engage in impression management
losing a given amount is more disliked
take more risk to avoid losses
perceptual defense screening out or explaining away negative information
high/unknown costs of ending project
Separate decision choosers from evaluators

Establish a preset level to abandon the project

Involve several people in the evaluation process
how do you evaluate decisions better?
Employee Involvement
the degree which employees influence how their work is organized and carried out
Different levels and forms of involvement

low involvement - employees provide information, but may not know the problem - employee does not make recommendations

moderate - problem described, recommendations provided

high involvement - employees have complete decision making power, from problem identification, choosing the best alternatives, and implementing their choice
Employee involvement model
Employee involvement
Contingencies of involvement
better problem identification
synergy produces more/better solutions
better at picking the best choice
higher decision commitment
Decision structure

Source of decision knowledge

Decision commitment

Risk of conflict
involvement better when problem is new and complex
programmed decisions need less involvement

involve employees when leader lacks knowledge and employees have information
employees likely to have relevant information for complex decisions

involve employees when they are unlikely to accept a decision made without their involvement

only low levels of involvement possible if employee norms conflict with firms goals
high involvement ineffective if employees cannot agree on solution
how does creativity fit in decision making?
Developing an original idea that make a socially recognized contribution

Creativity identifies problems, alternatives, solutions

Part of all decisions, not something separate
Creative process model
how does the creative process work?
acquiring knowledge/skills regarding the problem or opportunity

developing a clear understanding of what you are trying to achieve and study information related to the topic
time for reflective thought

putting the problem aside by maintaining low-level awareness of it

assist divergent thinking
reframing the problem in a unique way
contrasts with convergent thinking
fleeting awareness of unique idea

can be lost quickly if not documented
evaluate and experiment with the idea
Characteristics of creative people
Above average intelligence


Relevant knowledge and experience

Independent imagination
ability to synthesize information (ability to connect small bits of information together), analyze and apply ideas
drive to continue developing and testing after others have given up
caused by a high need for achievement, motivation from the task, and higher self esteem
good knowledge, several years of experience, but too long an mental models establish
cluster of traits that include openness to experience, openness to change in values, relatively low need for affiliation
range of experiences
depth of experience
Creative work environments
Learning orientation
Encourage experimentation
Tolerate mistakes

Intrinsically motivating work
Task significance, autonomy, feedback

Open communication and sufficient resources

Team competition and time pressure have complex effect on creativity
So, where is this all going?
With today's tools and environment, radical innovation is extraordinarily accessible to those who know how to cultivate it.
Creative activities
Redefine the problem
look at abandoned projects
ask people unfamiliar with the problem

Associative play
art activities
morphological analysis

diverse teams
formal information sessions
internal trade shows
Where do creative ideas come from?
Tell your boss you need a nap...
Other fallacies
What else should we look for?
The science of availability
A salient event attracts your attention. Divorces amongst hollywood celebrities and sex scandals amongst politicians attract much attention, and you are therefore, more likely to exaggerate the frequency.

A dramatic event temporarily increases your belief. For example, a dramatic plane crash will temporarily affect your feelings on airplane safety.

Imagine this experiment...
First, list three instances in which you behaved assertively. Next, evaluate how assertive you are.
Now, what if I asked you for 12 instances? Would this change your views on assertiveness?
A few years ago, supermarket shoppers in Sioux City, Iowa, encountered a sales promotion for Campbells Soup at about 10% off the regular price.

On some days, the sign said, NO LIMIT PER PERSON.

On other days, the sign said, LIMIT OF 12 PER PERSON.
Average 3 per person
Average 7 per person
Orthodoxes and mental models that cause dysfunction
Prof. Mohanbir Sawhney (born 1963) is a management consultant, author and a McCormick Tribune Professor of Technology at the Kellogg School of Management. He advises on 25 companies about their e-commerce strategies.
Dan Ariely
Are we in control of our decisions?
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