Chapter 6

What are some practices in identifying problems and opportunities effectively?

-Be aware of the problem identification biases -Resist the temptation to look decisive -Have an aversion to complacency (practice divine discontent) -Discuss the situation

Describe perceptual defense and problems with it

-People sometimes fail to become aware of problems because they block out bad news as a coping mechanism. -Their brain refuses to see information that threatens their self-concept. -The tendency to engage in perceptual defense varies from one decision maker to the next. -Studies also report that perceptual defense is more common when decision makers have limited options to solve the problem.

Describe decisive leadership and a potential problem with it:

-Various studies have found that executives are valued for their decisiveness, including how quickly they determine that the situation is a problem, opportunity, or nothing worth their attention.16 -Consequently, many leaders announce problems or opportunities before having a chance to logically assess the situation. -The result is often a misguided effort to solve an ill-defined problem or resources wasted on a poorly identified opportunity.

Describe low level employee involvement

A low level of involvement occurs where employees are individually asked for specific information but the problem is not described to them. Somewhat higher involvement occurs where the problem is described and employees are asked individually or collectively for information relating to that problem.

Describe a problem with opportunity selection:

An opportunity is usually experienced as an exciting and rare revelation, so decision makers tend to have an emotional attachment to the opportunity. Unfortunately, this emotional preference motivates decision makers to implement the opportunity and short-circuit any detailed assessment of it.

Decision structure.

At the beginning of this chapter, we learned that some decisions are programmed whereas others are nonprogrammed. Programmed decisions are less likely to need employee involvement because the solutions are already worked out from past incidents. In other words, the benefits of employee involvement increase with the novelty and complexity of the problem or opportunity.

cognitive and practical intelligence

Creative people have above-average intelligence to synthesize information, analyze ideas, and apply their ideas.66 -They recognize the significance of small bits of information and are able to connect them in ways that few others can imagine. -They also have practical intelligence—the capacity to evaluate the potential usefulness of their ideas.

persistence

Creative people have persistence, which is based on a higher need for achievement, a strong motivation from the task itself, and a moderate or high degree of self-esteem. -Persistence is vital because people need this motivation to continue working on and investing in a project in spite of failures and advice from others to quit. In fact, people have a general tendency to dismiss or criticize creative ideas, so creative people need persistence to withstand these negative social forces.67

independent imagination

Creative people possess a cluster of personality traits and values that support an independent imagination: high openness to experience, moderately low need for affiliation, and strong values around self-direction and stimulation.70 -Openness to experience is a Big Five personality dimension representing the extent to which a person is imaginative, curious, sensitive, open-minded, and original (see Chapter 2). Creative people have a moderately low need for affiliation so they are less embarrassed when making mistakes. -Self-direction includes the values of creativity and independent thought; stimulation includes the values of excitement and challenge. Together, these values form openness to change—representing the motivation to pursue innovative ways

knowledge and experience

Creative people require a foundation of knowledge and experience to discover or acquire new knowledge.68 -However, this expertise is a double-edged sword. As people acquire knowledge and experience about a specific topic, their mental models tend to become more rigid. -They are less adaptable to new information or rules about that knowledge domain. Some writers suggest that expertise also increases "mindless behavior" because expertise reduces the tendency to question why things happen.69 -To overcome the limitations of expertise, some corporate leaders like to hire people from other industries and areas of expertise.

What is another problem with the evaluation decision making model?

It neglects emotion

Decision commitment.

Participation tends to improve employee commitment to the decision. If employees are unlikely to accept a decision made without their involvement, some level of participation is usually necessary.

Describe the 5th step: implement the selected choice

The fifth step is to implement the selected alternative. Rational choice decision making assumes that implementation occurs without any problems. The final step is to evaluate whether the gap has narrowed between "what is" and "what ought to be." Ideally, this information should come from systematic benchmarks so that relevant feedback is objective and easily observed.

Describe step four: select the choice with the highest value

The fourth step is to select the best choice by applying the rational choice calculation. Choosing the alternative that offers the greatest satisfaction or value requires the decision maker to have information about all possible alternatives and their outcomes. That condition is usually impossible, but the rational choice view of decision making assumes this can be accomplished with ease.

cognitive dissonance

an emotional experience caused by a perception that our beliefs, feelings, and behavior are incongruent with one another

learning orientation

beliefs and norms that support the acquisition, sharing, and use of knowledge as well as work conditions that nurture these learning processes

convergent thinking

calculating the conventionally accepted "right answer" to a logical problem.

nonprogrammed decisions

require all steps in the decision model because the problems are new, complex, or ill-defined.

practical intelligence

the capacity to evaluate the potential usefulness of their ideas.

What are the two pieces of info that rational decisions primarily rely on?

(a) the probability that each outcome will occur (b) the valence or expected satisfaction of each outcome.

What are some of the biased decision heuristics?

-Anchoring and adjustment heuristic -Availability heuristic -Representativeness heuristic

Describe sunk costs effect:

-Another disincentive to axing a failing project is sunk costs—the value of resources already invested in the decision rational choice view states that investing resources should be determined by expected future gains and risk, not the size of earlier resources invested in the project. -A variation of sunk costs is time investment. Time is a resource, so the more time decision makers have devoted to a project, the more motivated they are to continue investing in that project. Finally, sunk costs can take the form of closing costs, that is, the financial or nonfinancial penalties associated with shutting down a project. As with other forms of sunk costs, the higher the closing costs, the more motivated decision makers are to engage in escalation of commitment. -Escalation of commitment is usually framed as poor decision making, but persistence may be the better choice under some circumstances.58 Indeed, many breakthroughs have occurred because of the decision makers' persistence and optimism. -Continuing with a losing project may be prudent when the cost overruns are small relative to the project cost, the benefits of success are high, and the rewards of a successful project are received quickly. -Some experts also suggest that throwing more money into a failing project is sometimes a logical attempt to further understand an ambiguous situation. By adding more resources, the decision maker gains new information about the project's development, which provides more feedback about the project's future success. This strategy is particularly common where the project has high closing costs.

How can you make choices more effectively?

-By systematically assessing alternatives against relevant factors, decision makers minimize the implicit favorite and satisficing problems that occur when they rely on general subjective judgments. -A second piece of advice is to remember that decisions are influenced by both rational and emotional processes. Therefore, some decision makers deliberately revisit important issues later when their initial emotions have subsided and they can look at the information in a different mood. -Utilize scenario planning

What's at the heart of rational decision making?

-Calculating the best alternative -Goes hand in hand with systematic decision making

What are the characteristics of creative people?

-Cognitive and practical intelligence -Persistence -Knowledge and experience -Independent imagination

What are the contingencies of employee involvement?

-Decision structure -Source of decision knowledge -Decision commitment -Risk of conflict

What are the three ways in which emotions affect the evaluation of alternatives?

-Emotions from early preferences -Emotions change the decision evaluation process -Emotions serve as information when we evaluate alternatives

Describe stakeholder framing and problems with it

-Employees, suppliers, customers, and other stakeholders provide (or hide) information in ways that make the decision maker see the situation as a problem, opportunity, or steady sailing. -Employees point to external factors rather than their own faults as the cause of production delays. Suppliers market their new products as unique opportunities and competitor products as problems to be avoided. -Many other stakeholders also offer concise evaluations of the situation in the hope the decision maker will accept their verdict without further analysis. -Decision makers fall prey to these constructed realities because they have a need to simplify the daily bombardment of complex and often ambiguous information.

What are the steps in the rational choice decision making process?

-Identify the problem or opportunity -Choose the best decision process -Discover or develop possible choices -Select the choice with the highest value -Implement the selected choice -Evaluate the selected choice

Describe some design thinking practices:

-Involve several people so the issue and possible solutions are viewed from several angles. -Include clients and end users to enable an iterative process of problem identification and solution development. -Preserve ambiguity rather than seek clarity too quickly. -Question and refine the stated problem. -Develop more than one solution to the problem. -Review past solutions to understand how those inventions tried to satisfy human needs. -Use foresight tools to imagine better solutions for the future. -Build several low-cost prototypes to test ideas. -Don't analyze alternatives at a purely conceptual level. -Tolerate failure; embrace a learning orientation.

What are some of the conditions of creativity?

-Learning orientation. It is the most important one! -A second condition for creativity is motivation from the job itself.74 Employees tend to be more creative when they believe their work benefits the organization and/or larger society (i.e., task significance) and when they have the freedom to pursue novel ideas without bureaucratic delays (i.e., autonomy). Creativity is about changing things, and change is possible only when employees have the authority to experiment. More generally, jobs encourage creativity when they are challenging and aligned with the employee's knowledge and skills.

List some potential problems with with problem identification in rational choice decision making :

-Mental models -Decisive leadership -Stakeholder framing -Perceptual defense -Solution focused problems

Describe how emotions change the decision evaluation process:

-Moods and specific emotions influence the process of evaluating alternatives.41 -For instance, we pay more attention to details when in a negative mood, possibly because a negative mood signals that there is something wrong that requires attention. When in a positive mood, on the other hand, we pay less attention to details and rely on a more programmed decision routine. -This phenomenon explains why executive teams in successful companies are often less vigilant about competitors and other environmental threats.42 -Research also suggests that decision makers rely on stereotypes and other shortcuts to speed up the choice process when they experience anger. -Anger also makes them more optimistic about the success of risky alternatives, whereas the emotion of fear tends to make them less optimistic. Overall, emotions shape how we evaluate information, not just which choice we select.

Describe self enhancement effect:

-People have a natural tendency to feel good about themselves—to feel luckier, more competent, and more successful than average—regarding things that are important to them.54 -self-enhancement supports a positive self-concept, but it also increases the risk of escalation of commitment. When presented with evidence that a project is in trouble, the self-enhancement process biases our interpretation of the information as a temporary aberration from an otherwise positive trend line. -And when we eventually realize that the project isn't going as well as planned, we continue to invest in the project because our probability of rescuing the project is above average. -Self-justification and self-enhancement often occur together, but they are different mechanisms. Self-justification is a deliberate attempt to maintain a favorable public image, whereas self-enhancement operates mostly nonconsciously, distorting information so we do not recognize the problem sooner and biasing our probabilities of success so we continue to invest in the losing project

Describe the self justification effect:

-People try to convey a positive public image of themselves. In decision making, this self- justification typically involves appearing to be rational and competent. -Decision makers are therefore motivated to demonstrate that their choices will be successful, which includes continuing to support a decision even when it is not having the desired outcomes. In contrast, pulling the plug symbolizes the project's failure and the decision maker's incompetence. -This self-justification effect is particularly evident when decision makers are personally identified with the project, have staked their reputations to some extent on the project's success, and have low self-esteem.53

What are the influences of escalation of commitment?

-Self justification effect -Self enhancement effect -Prospect theory effect -Sunk cost effect

Describe solutions focused problems and problems with it

-Some decision makers describe the problem as a veiled solution.18 -For instance, someone might say: "The problem is that we need more control over our suppliers." This isn't a description of the problem; it is a rephrased statement of a solution to a problem that has not been adequately diagnosed. -One reason why people fall into the solution-focused problem trap is that they have been reinforced by past successes, so those solutions quickly come to mind when new problems arise. -Solution-focused problem identification also occurs because decision makers are comforted by closure to problems, so they seek out solutions while still defining the problem. -Unfortunately, they fail to fully diagnose the underlying causes that need to be addressed.

Describe how emotions form early preferences in evaluating alternatives:

-The emotional markes shapes our preference for each alternative before we consciously evaluate those alternatives. -Our brain very quickly attaches specific emotions to information about each alternative, and our preferred alternative is strongly influenced by those initial emotional markers.40 -Of course, logical analysis also influences which alternative we choose, but it requires strong logical evidence to change our initial preferences (initial emotional markers). -Yet even logical analysis depends on emotions to sway our decision. Specifically, neuroscientific evidence says that information produced from logical analysis is tagged with emotional markers that then motivate us to choose or avoid a particular alternative. -Ultimately, emotions, not rational logic, energize us to make the preferred choice. In fact, people with damaged emotional brain centers have difficulty making choices.

Describe the distinction between all gut feelings being emotional signals but not all emotional signals being intuition

-The main distinction is that intuition involves rapidly comparing our observations with deeply held patterns learned through experience.46 -These "templates of the mind" represent tacit knowledge that has been implicitly acquired over time. -They are mental models that help us understand whether the current situation is good or bad, depending on how well that situation fits our mental model. -When a template fits or doesn't fit the current situation, emotions are produced that motivate us to act. -Studies have found that when chess masters quickly scan a chessboard, they experience emotional signals that the chess configuration poses an opportunity or threat. -These emotional signals motivate closer observation to logically confirm the situation and to act on it. Thus, intuition signals that a problem or opportunity exists long before conscious rational analysis has occurred. -A key message here is that some emotional signals are not intuition, so gut feelings shouldn't always guide our decisions. The problem is that emotional responses are not always based on well-grounded mental models. Instead, we sometimes compare the current situation to more remote templates, which may or may not be relevant. A new employee might feel confident about relations with a supplier, whereas an experienced employee senses potential problems. -The difference is that the new employee relies on templates from other experiences or industries that might not work well in this situation. Thus, the extent to which our gut feelings in a situation represent intuition depends on our level of experience in that situation.

Describe rational choice versus organizational processes when it comes to goals:

-The rational choice view assumes that organizational goals are clear and agreed on. Goals are necessary to identify "what ought to be" and, therefore, provide a standard against which each alternative is evaluated. -Unfortunately, organizational goals are often ambiguous or in conflict with each other.22 Ambiguous goals make it difficult to know if a particular choice has greater value to the organization. For example, "satisfy customer needs" may refer to providing efficient service, a variety of services, more personalized service, and other possibilities. When goals conflict, decision makers rarely have a guide map to determine which ones should take priority.

Describe how emotions serve as info when we evaluate alternatives in the evaluation process

-The third way that emotions influence the evaluation of alternatives is through a process called "emotions as information." Marketing experts have found that we listen in on our emotions to gain guidance when making choices.43 This process is similar to having a temporary improvement in emotional intelligence. Most emotional experiences remain below the level of conscious awareness, but people actively try to be more sensitive to these subtle emotions when making a decision. -When buying a new car, for example, you not only logically evaluate each vehicle's features; you also try to gauge your emotions when visualizing what it would be like to own each of the cars on your list of choices. Even if you have solid information about the quality of each vehicle on key features (purchase price, fuel efficiency, maintenance costs, resale value, etc.), you are swayed by your emotional reaction and actively try to sense that emotional response when thinking about it. Everyone consciously pays attention to his or her emotions to some degree when choosing alternatives. This phenomenon ties directly into our next topic, intuition.

What are reasons why decision makers compare alternatives against an implicit favorite?

-Why do decision makers rely on an implicit favorite? One reason is that human beings like to compare two choices rather than systematically evaluate many alternatives at the same time.27 An implicit favorite becomes a common anchor point against which to compare all other choices one at a time. -A second reason is because people are cognitive misers. They minimize mental effort by forming preferences quickly, and then looking mainly for evidence that supports the preference. In other words, they engage in confirmation bias, -main reason why decision makers compare alternatives against an implicit favorite is the hard-wired human need to minimize cognitive dissonance

Why is the second step in the rational choice decision making process a meta decision (deciding how to decide)?

-because it refers to choosing among the different approaches and processes to make the decision. -One meta-decision is whether to solve the problem alone or involve others in the process. -Another meta-decision is whether to assume the decision is programmed or nonprogrammed

How should people make decisions in organizations?

-effective decision making involves identifying, selecting, and applying the best possible alternative. -In other words, the best decisions use pure logic and all available information to choose the alternative with the highest value—such as highest expected profitability, customer satisfaction, employee well-being, or some combination of these outcomes. -These decisions sometimes involve complex calculations of data to produce a formula that points to the best choice.

Describe benefits of employee involvement:

-employee involvement potentially improves decision-making quality and commitment. -it improves the identification of problems and opportunities. Employees are, in many respects, the sensors of the organization's environment. -Employee involvement also can potentially improve the number and quality of solutions generated. In a well-managed meeting, team members create synergy by pooling their knowledge to form new alternatives. In other words, several people working together can potentially generate better solutions than the same people working alone. -A third benefit of employee involvement is that, under specific conditions, it improves the evaluation of alternatives. Numerous studies on participative decision making, task conflict, and team dynamics have found that involvement brings out more diverse perspectives, tests ideas, and provides more valuable knowledge, all of which help the decision maker select the best alternativ -involvement tends to strengthen employee commitment to the decision. Rather than viewing themselves as agents of someone else's decision, those who participate in a decision feel personally responsible for its success. Involvement also has positive effects on employee motivation, satisfaction, and turnover. It also increases skill variety, feelings of autonomy, and task identity, all of which increase job enrichment and potentially employee motivation. Participation is also a critical practice in organizational change because employees are more motivated to implement the decision and less likely to resist changes resulting from the decision.93

What is rational choice decision making?

-selects the best alternative by calculating the probability that various outcomes will occur from the choices and the expected satisfaction from each of those outcomes.5 -We have already seen how similar calculations of probability and valences are used in two earlier organizational behavior theories, namely the attitude model

What are some of the most effective ways to minimize escalation of commitment and confirmation bias?

-to ensure that the people who made the original decision are not the same people who later evaluate that decision -A second strategy is to publicly establish a preset level at which the decision is abandoned or reevaluated. This is similar to a stop-loss order in the stock market, whereby the stock is sold if it falls below a certain price. The problem with this solution is that conditions are often so complex that it is difficult to identify an appropriate point to abandon a project -A third strategy is to find a source of systematic and clear feedback.60 At some point, even the strongest escalation and confirmation bias effects deflate when the evidence highlights the project's failings. -A fourth strategy to improve the decision evaluation process is to involve several people in the evaluation. Coworkers continuously monitor each other and might notice problems sooner than someone working alone on the project.

Describe the steps in the creative process model:

Preparation -Understand the problem or opportunity -Investigate info that seems relevant to the issue Incubation -Period of reflective thought -Nonconscious or low level awareness, not direct attention to the issue -Active divergent thinking process Illumination -Sudden awareness of a novel, although vague and incomplete, idea entering ones consciousness -May include an initial period of fringe awareness Verification -Detailed logical and experimental evaluaion of the illuminated idea -Further creative thinking

Describe problems with information processing

Rational choice decision making also makes several questionable assumptions about the human capacity to process information. It assumes that decision makers can process information about all alternatives and their consequences. In reality, people evaluate only a few alternatives and only some of the main outcomes of those alternatives.23 For example, there are more than a dozen tablet brands to choose from and dozens of features to consider, yet people typically evaluate only a few brands and a few features. A related problem is that decision makers typically evaluate alternatives sequentially rather than all at the same time. This sequential evaluation occurs partly because all alternatives are not usually available to the decision maker at the same time.25 Consequently, as a new alternative comes along, it is compared to an implicit favorite—an alternative that the decision maker prefers and that is used as a comparison with other choices. When choosing a new tablet, for example, people typically have an implicit favorite brand or model against which they compare the other brands. Sometimes, decision makers aren't even aware of this favoritism!26 -Why do decision makers rely on an implicit favorite? One reason is that human beings like to compare two choices rather than systematically evaluate many alternatives at the same time.27 An implicit favorite becomes a common anchor point against which to compare all other choices one at a time. -A second reason is because people are cognitive misers. They minimize mental effort by forming preferences quickly, and then looking mainly for evidence that supports the preference. In other words, they engage in confirmation bias the main reason why decision makers compare alternatives against an implicit favorite is the hard-wired human need to minimize cognitive dissonance (see Chapter 4).29 Just as people want their behavior to be consistent with their attitudes, decision makers want their choices to be consistent with their beliefs and feelings about which alternative offers the highest satisfaction. -Therefore, they distort information (usually nonconsciously) to ensure it supports an implicit favorite. -This information distortion during the decision-making process includes ignoring or underweighting problems with the implicit favorite, overweighting attributes in which the implicit favorite is better, underweighting features in which the alternative is superior, and overweighting problems with the alternative.

What are some activities that encourage creativity?

Redefining the problem -Revisit projects that have been set aside. After a period of neglect, these projects might be seen in new ways.78 You also can see the problem from different perspectives by asking coworkers unfamiliar with the issue to explore the problem. By verbalizing the problem, listening to questions, and hearing what others think, you are more likely to view the problem in a new light.79 Associative play -Associative play is literally playing games, particularly with unusual twists to the traditional equipment or rules. Creative thinking emerges naturally from playful activities, and then carries over to work-related problem solving.80 Challenge employees to create something new with a specific purpose (cleaning cutlery) using existing unrelated products (e.g., blow dryer and electric toothbrush). Apply morphological analysis, which involves systematically investigating all combinations of characteristics of a product, event, or other target.81 For instance, employees at a food manufacturer might investigate all combinations of yogurt-based products by considering the contents (fruit, low-fat, etc.), occasion (breakfast, dessert, etc.), target group (children, older adults, etc.), size, and packaging. A novel, yet commercially successful, innovation may emerge from the resulting list Cross pollination -Creativity is sparked when people from different areas of the organization exchange ideas or when new people are brought into an existing team.82 This may occur through social gathering or, as a few firms do, asking employees to move their desks every few months to another location with employees who are only acquaintances. Design thinking -Design thinking is an emerging set of practices that are human-centered, are solution-focused, and apply both intuition and analytical thinking.83 It recognizes that creativity depends on collaboration among people with diverse knowledge and experiences who can empathize with the end user.84 Design thinkers also preserve ambiguity; they question and refine the problem statement and continually question emerging solutions. They review and learn from past solutions, then use tools to imagine better solutions for the future. Design thinkers spend more time trying out ideas with low-cost prototypes, rather than analyzing those ideas at a purely conceptual level.85 They live by the mantra "fail fast, fail often," meaning that prototypes are made quickly and frequently, and that failures are a natural part of the creative process (i.e., a learning orientation).

Source of decision knowledge.

Subordinates should be involved in some level of decision making when the leader lacks sufficient knowledge and subordinates have additional information to improve decision quality. In many cases, employees are closer to customers and production activities, so they often know where the company can save money, improve product or service quality, and realize opportunities. This is particularly true for complex decisions where employees are more likely to possess relevant information.

risk of conflict

Two types of conflict undermine the benefits of employee involvement. First, if employee goals and norms conflict with the organization's goals, only a low level of employee involvement is advisable. Second, the degree of involvement depends on whether employees will agree with each other on the preferred solution. If conflict is likely to occur, high involvement (i.e., employees make the decision) would be difficult to achieve.

Design Thinking

a human-centered, solution-focused creative process that applies both intuition and analytical thinking to clarify problems and generate innovative solutions

anchoring and adjustment heurisitc

a natural tendency for people to be influenced by an initial anchor point such that they do not sufficiently move away from that point as new information is provided -The anchor point might be an initial offer price, initial opinion of someone, or initial estimated probability that something will occur. -One explanation for this effect is that human beings tend to compare alternatives rather than evaluate them purely against objective criteria. -Therefore, if someone requests a high initial price for a car we want to buy, we naturally compare—and thereby anchor—our alternative offer against that high initial price.

availability heuristic

a natural tendency to assign higher probabilities to objects or events that are easier to recall from memory, even though ease of recall is also affected by non probability factors (e.g., emotional response, recent events) -Unfortunately, how easily we recall something is due to more than just its frequency (probability).32 -For instance, we easily remember emotional events (such as earthquakes and shark attacks), so we overestimate how often these traumatic events occur. We also have an easier time recalling recent events. --If the media report several incidents of air pollution, we likely give more pessimistic estimates of air quality generally than if there have been no recent reports.

representativeness heuristic

a natural tendency to evaluate probabilities of events or objects by the degree to which they resemble (are representative of) other events or objects rather than on objective probability information\ -Suppose that one-fifth of the students in your class are in engineering and the others are business majors. There is only a 20 percent chance that any classmate is from engineering, yet we don't hesitate to assume a student is from engineering if he or she looks and acts like (is representative of) our stereotype of an engineering student.

self enhancement

a person's inherent motivation to have a positive self-concept (and to have others perceive him or her favorably), such as being competent, attractive, lucky, ethical, and important

scenario planning

a systematic process of thinking about alternative futures and what the organization should do to anticipate and react to those environments -involves thinking about what would happen if a significant environmental condition changed and what the organization should do to anticipate and react to such an outcome. -useful vehicle for choosing the best solutions under possible scenarios long before they occur because alternative courses of action are evaluated without the pressure and emotions that occur during real emergencies.

post-decisional justification

bias continues long after the decision has been made -Decision makers ignore or underemphasize negative outcomes of the choice they made and overemphasize new information about its positive features. -Confirmation bias gives people an excessively optimistic evaluation of their decisions, but only until they receive very clear and undeniable information to the contrary.

programmed decisions

follow standard operating procedures; they have been resolved in the past, so the optimal solution has already been identified and documented.

maximization

human attempts to choose the best alternative -can result in better decisions when some alternatives are clearly better than others. -But maximizing decision makers run into trouble where there are many alternatives, those alternatives have many features, and the quality of those features for each alternative is ambiguous. -For example, it is difficult to choose the best possible car because of the large number of choices, the many features to consider for each choice, and the unclear qualities of some of those features. Under those conditions, maximization leads to a spiral of endless trade-offs among features across the various choices, which can actually result in worse decisions and less satisfied decision makers.

What does the third step in rational choice decision making usually begin with?

identify and/or develop a list of possible choices. This usually begins by searching for ready-made solutions, such as practices that have worked well on similar problems. If an acceptable solution cannot be found, then decision makers need to design a custom-made solution or modify an existing one.

opportunity

is a deviation between current expectations and a potentially better situation that was not previously expected. -exists when decision makers discover that some choices may produce better results than current goals or expectations.

problem

is a deviation between the current and the desired situation—the gap between "what is" and "what ought to be." -This deviation is a symptom of more fundamental causes that need to be corrected.9 -The "ought to be" refers to goals, and these goals later help evaluate the selected choice. -For instance, if a customer contact center's goal is to answer incoming client calls within 30 seconds, the problem is the gap between that goal and the actual time the contact center takes to answer most client calls

mental models

knowledge structures that we develop to describe, explain, and predict the world around us. -fill in information that we don't immediately see, which helps us understand and navigate in our surrounding environment -Many mental images are also prototypes—they represent models of how things should be. Unfortunately, these mental models can blind us from seeing unique problems or opportunities because they produce a negative evaluation of things that deviate from the mental model. -If an idea doesn't fit the existing mental model of how things should work, then it is quickly dismissed as unworkable or undesirable.

prospect theory effect

natural tendency to feel more dissatisfaction from losing a particular amount than satisfaction from gaining an equal amount -motivates us to avoid losses, which typically occurs by taking the risk of investing more in that losing project. Stopping a project is a certain loss, which evokes more negative emotions to most people than the uncertainty of success associated with continuing to fund the project. -Given the choice, decision makers choose escalation of commitment, which is the less painful option at the time

What are ways to improve the process of recognizing problems and opportunities more effectively?

one way to improve the process is by becoming aware of the five problem identification biases just described. -For example, by recognizing that mental models restrict a person's perspective of the world, decision makers are more motivated to consider other perspectives of reality. Along with increasing their awareness of problem identification flaws, leaders require considerable willpower to resist the temptation of looking decisive when a more thoughtful examination of the situation should occur. A third way to improve problem identification is to create a norm of "divine discontent." -Decision makers with this mindset are never satisfied with current conditions, so they more actively search for problems and opportunities.20 Fourth, employees can minimize problem identification errors by discussing the situation with colleagues and clients. -It is much easier to discover blind spots in problem identification when listening to how others perceive the situation. -Opportunities also become apparent when outsiders explore this information from their different mental models.

implicit Favorite

preferred alternative that the decision maker uses repeatedly as a comparison with other choices -When choosing a new tablet, for example, people typically have an implicit favorite brand or model against which they compare the other brands. Sometimes, decision makers aren't even aware of this favoritism

confirmation bias

process of screening out information that is contrary to our values and assumptions, and to more readily accept confirming information

action scripts

programmed decision routines that speed up our response to pattern matches or mismatches -Intuition relied on this -effectively shorten the decision-making process by jumping from problem identification to selection of a solution. In other words, action scripting is a form of programmed decision making. -They are generic

divergent thinking

reframing a problem in a unique way and generating different approaches to the issue -breaks us away from existing mental models so that we can apply concepts or processes from completely different areas of life.

intuition

the ability to know when a problem or opportunity exists and to select the best course of action without conscious reasoning -emotions are always present in human decision making, so intuition and logical analysis are not opposites and never completely replace each other.45 Some people pay more attention to emotional signals, whereas others pay more attention to logic, but emotions are always involved. -Intuition is both an emotional experience and a rapid nonconscious analytic process. The gut feelings we experience are emotional signals that have enough intensity to make us consciously aware of them. These signals warn us of impending danger or motivate us to take advantage of an opportunity. -Some intuition also directs us to preferred choices relative to other alternatives in the situation.

employee involvement

the degree to which employees influence how their work is organized and carried out -Participative management -Employee involvement has become a natural process in every organization, but the optimal level of involvement depends on the situation.87 -A low level of involvement occurs where employees are individually asked for specific information but the problem is not described to them. Somewhat higher involvement occurs where the problem is described and employees are asked individually or collectively for information relating to that problem. -The problem is described to employees, who are collectively given responsibility for developing recommendations. However, the decision maker is not bound to accept those recommendations. At the highest level of involvement, the entire decision-making process is handed over to employees. They identify the problem, discover alternative solutions, choose the best alternative, and implement that choice. The original decision maker serves only as a facilitator to guide the team's decision process and keep everyone on track.

creativity

the development of original ideas that make a socially recognized contribution -operates when imagining opportunities such as how Infosys's expertise can improve value for its clients. -is also applied when developing and selecting alternatives because we need to visualize the future in different ways and to figure out how each choice might be useful or a liability in those scenarios.

selection criteria

the outcomes that you want from selecting a particular supplier

decision making

the process of making choices among alternatives with the intention of moving toward some desired state of affairs -Vital for an organization's health -All businesses, governments, and not-for-profit agencies depend on employees to foresee and correctly identify problems, to survey alternatives, to pick the best alternative based on several relevant factors, and to execute those decisions effectively.

Escalation of commitment-

the tendency to repeat an apparently bad decision or allocate more resources to a failing course of action. -Main influences are self justification effect, self enhancement effect, prospect theory effect, and sunk costs effect

bounded rationality

the view that people are bounded in their decision-making capabilities, including access to limited information, limited information processing, and tendency toward satisficing rather than maximizing when making choices -Theorized by herbert simon -the dominant theory explaining why it is impossible to apply rational choice decision making. However, other theories point to additional flaws overlooked by bounded rationality.

sastisficing

they choose an alternative that is satisfactory or "good enough."34 People satisfice when they select the first alternative that exceeds a standard of acceptance for their needs and preferences. -usually necessary because decision makers lack enough information, time, and information processing capacity to figure out the best choice. -also occurs because alternatives present themselves over time, not all at once. Consider the process of hiring new employees.It is impossible to choose the best possible job candidate because people apply over a period of time and the best candidate might not apply until next month, after earlier candidates have found other jobs. Consequently, decision makers rely on sequential evaluation of new alternatives against an implicit favorite. This necessarily calls for a satisficing decision rule—choose the first alternative that is "good enough."

True Or false? One important discovery is that decisions tend to have a higher failure rate when leaders are decisive rather than contemplative about the available options

true

True or false? According to rational choice decision making, people rely on logic to evaluate and choose alternatives. This view assumes that decision makers have well-articulated and agreed-on organizational goals, that they efficiently and simultaneously process facts about all alternatives and the consequences of those alternatives, and that they choose the alternative with the highest payoff.

true

True or false? All gut feelings are emotional signals, but not all emotional signals are intuition

true

True or false? You should select the supplier with a higher score?

true