Management CH 08
non-programmed decision
A decision that recurs infrequently and for which there is no previously established decision rule Problem-solving is a special form of decision-making in which the issue is unique; it often requires developing and evaluating alternatives without the aid of a decision rule. Non-programmed decisions are poorly structured because the information is ambiguous, there is no clear procedure for making the decision, and the goals are often vague. a primary responsibility of top management is to make the difficult, nonprogrammed decisions that determine the organization's long-term effectiveness.
programmed decision
A decision that recurs often enough for a decision rule to be developed Programmed decisions usually are highly structured; that is, the goals are clear and well known, the decision-making procedure is already established, and the sources and channels of information are clearly defined programmed decisions are more common at the lower levels of the organization. Programmed decisions, then, can be made according to previously tested rules and procedures.
groupthink
A mode of thinking that occurs when members of a group are deeply involved in a cohesive in-group, and the desire for unanimity offsets their motivation to appraise alternative courses of action When groupthink occurs, then, the group unknowingly makes unanimity rather than the best decision its goal. Individual members may perceive that raising objections is not appropriate. Groupthink can occur in many decision-making situations in organizations. The current trend toward increasing use of teams in organizations may increase instances of groupthink because of the susceptibility of self-managing teams to this type of thought. The three primary conditions that foster the development of groupthink are cohesiveness, the leader's promotion of his or her preferred solution, and insulation of the group from experts' opinions. A group in which groupthink has taken hold exhibits eight well-defined symptoms: 1. An illusion of invulnerability, shared by most or all members, that creates excessive optimism and encourages extreme risk taking 2. Collective efforts to rationalize or discount warnings that might lead members to reconsider assumptions before recommitting themselves to past policy decisions 3. An unquestioned belief in the group's inherent morality, inclining members to ignore the ethical and moral consequences of their decisions 4. Stereotyped views of "enemy" leaders as too evil to warrant genuine attempts to negotiate or as too weak or stupid to counter whatever risky attempts are made to defeat their purposes 5. Direct pressure on a member who expresses strong arguments against any of the group's stereotypes, illusions, or commitments, making clear that such dissent is contrary to what is expected of loyal members 6. Self-censorship of deviations from the apparent group consensus, reflecting each member's inclination to minimize the importance of his or her doubts and counterarguments 7. A shared illusion of unanimity, resulting partly from self-censorship of deviations, augmented by the false assumption that silence means consent 8. The emergence of self-appointed "mindguards," members who protect the group from adverse information that might shatter their shared complacency about the effectiveness and morality of their decisions
Creativity
A person's ability to generate new ideas or to conceive of new perspectives on existing ideas Creativity is an important individual difference variable that exists in everyone and it plays such a central role in both decision making and problem solving. creativity can play a role in how a problem or decision situation is defined, what alternatives are identified, and how each is evaluated. Creativity can also enable a manager to identify a new way of looking at things These attributes generally fall into three categories: background experiences- Researchers have observed that many creative individuals were raised in an environment in which creativity was nurtured. personal traits- The traits shared by most creative people are openness, an attraction to complexity, high levels of energy, independence and autonomy, strong self-confidence, and a strong belief that one is, in fact, creative. Individuals who possess these traits are more likely to be creative than are those who do not have them. cognitive abilities- Cognitive abilities are an individual's power to think intelligently and to analyze situations and data effectively. Intelligence may be a precondition for individual creativity—but, although most creative people are highly intelligent, not all intelligent people necessarily are creative. Creativity is also linked with the ability to think divergently and convergently. Divergent thinking is a skill that allows people to see differences between situations, phenomena, or events. Convergent thinking is a skill that allows people to see similarities between situations, phenomena, or events. Creative people are generally very skilled at both divergent and convergent thinking One important method for enhancing creativity is to make it a part of the organization's culture, often through explicit goals. Firms that truly want to stress creativity, such as 3M and Rubbermaid, for example, state goals that some percent of future revenues are to be gained from new products. This clearly communicates that creativity and innovation are valued. Another important part of enhancing creativity is to reward creative successes, while being careful to not punish creative failures. Many ideas that seem worthwhile on paper fail to pan out in reality. If the first person to come up with an idea that fails is fired or otherwise punished, others in the organization will become more cautious in their own work. And as a result, fewer creative ideas will emerge.
Ethics
A person's beliefs about what constitutes right and wrong behavior. Ethical behavior is that which conforms to generally accepted social norms; unethical behavior does not conform to generally accepted social norms. Some decisions made by managers may have little or nothing to do with their own personal ethics, but many other decision are influenced by the manager's ethics. For example, decisions involving such disparate issues as hiring and firing employees, dealing with customers and suppliers, setting wages and assigning tasks, and maintaining one's expense account are all subject to ethical influences.
decision rule
A statement that tells a decision-maker which alternative to choose based on the characteristics of the decision situation all problems require a decision, but not all decisions require problem solving.
rational decision-making approach
A systematic, step-by-step process for making decisions It further assumes that the organization is dedicated to making logical choices and doing what makes the most sense economically and that it is managed by decision makers who are entirely objective and have complete information
Brainstorming
A technique used in the idea-generation phase of decision making that assists in development of numerous alternative courses of action In brainstorming, the group convenes specifically to generate alternatives. The members present ideas and clarify them with brief explanations. Each idea is recorded in full view of all members, usually on a flip chart. To avoid self-censoring, no attempts to evaluate the ideas are allowed. Group members are encouraged to offer any ideas that occur to them, even those that seem too risky or impossible to implement. (The absence of such ideas, in fact, is evidence that group members are engaging in self-censorship.) In a subsequent session, after the ideas have been recorded and distributed to members for review, the alternatives are evaluated. The intent of brainstorming is to produce totally new ideas and solutions by stimulating the creativity of group members and encouraging them to build on the contributions of others. Brainstorming does not provide the resolution to the problem, an evaluation scheme, or the decision itself. Instead, it should produce a list of alternatives that is more innovative and comprehensive than one developed by the typical interacting group.
coalition
An informal alliance of individuals or groups formed to achieve a common goal. This common goal is often a preferred decision alternative. The impact of coalitions can be either positive or negative. They can help astute managers get the organization on a path toward effectiveness and profitability, or they can strangle well-conceived strategies and decisions. Managers must recognize when to use coalitions, how to assess whether coalitions are acting in the best interests of the organization, and how to constrain their dysfunctional effects.
Intuition
An innate belief about something without conscious consideration Managers sometimes decide to do something because it "feels right" or they have a hunch. This feeling is usually not arbitrary, however. Rather, it is based on years of experience and practice in making decisions in similar situations. An inner sense may help managers make an occasional decision without going through a full-blown rational sequence of steps. intuition is both used more commonly and results in better decisions than had previously been believed. On the other hand, some experts challenge this view and suggest that underlying understanding and experience make intuition mask the true processes used to make quick decisions.
administrative model of decision making
Argues that managers use bounded rationality, rules of thumb, suboptimizing, and satisfying in making decisions administrative model is that decision makers operate with bounded rationality rather than with the perfect rationality assumed by the rational approach.
prospect theory
Argues that when people make decisions under a condition of risk they are more motivated to avoid losses than they are to seek gains Stated another way, people may be more motivated by the threat of losing something they have than they are by the prospect of gaining something they do not have.
post-decision dissonance
Doubt about a choice that has already been made To reduce the tension created by the dissonance, the decision maker may seek to rationalize the decision further with new information.
Participation in Decision Making
Early management theories, such as those of the scientific management school, advocated a clear separation between the duties of managers and workers: Management was to make the decisions, and employees were to implement them Numerous research studies have shown that whereas employees who seek responsibility and challenge on the job may find participation in the decision-making process to be both motivating and enriching, other employees may regard such participation as a waste of time and a management imposition Participation in decision making is also related to organizational structure. For example, decentralization involves delegating some decision-making authority throughout the organizational hierarchy. The more decentralized the organization, the more its employees tend to participate in decision making. Whether one views participation in decision making as pertaining to leadership, organization structure, or motivation, it remains an important aspect of organizations that continues to occupy managers and organizational scholars
satisficing
Examining alternatives only until a solution that meets minimal requirements is found The search for alternatives usually is a sequential process guided by procedures and rules of thumb based on previous experiences with similar problems. The search often ends when the first minimally acceptable choice is encountered. The resulting choice may narrow the discrepancy between the desired and the actual states, but it is not likely to be the optimal solution. As the process is repeated, incremental improvements slowly reduce the discrepancy between the actual and desired states.
Problem solving
Finding the answer to a question
nominal group technique
Group members follow a generate-discuss-vote cycle until they reach a decision this technique may be used in other phases of decision making, such as identification of the problem and of appropriate criteria for evaluating alternatives. The nominal group technique has two principal advantages. It helps overcome the negative effects of power and status differences among group members, and it can be used to explore problems to generate alternatives, or to evaluate them. Its primary disadvantage lies in its structured nature, which may limit creativity.
Bounded rationality
Idea that decision makers cannot deal with information about all the aspects and alternatives pertaining to a problem and therefore choose to tackle some meaningful subset of it
Suboptimizing
Knowingly accepting less than the best possible outcome to avoid unintended negative effects on other aspects of the organization The decision maker often must suboptimize to avoid unintended negative effects on other departments, product lines, or decisions.
condition of certainty
Manager knows what the outcomes of each alternative of a given action will be and has enough information to estimate the probabilities of various outcomes
escalation of commitment
Occurs when a decision maker stays with a decision even when it appears to be wrong People sometimes justify continued or increased investments of time, money, or in the case of the military even human lives because of their prior investment in a decision, even if new evidence suggests that the decision should be changed or even reversed. On the one hand, they must guard against sticking with an incorrect decision too long. To do so can bring about financial decline. On the other hand, managers should not bail out of a seemingly incorrect decision too soon,
Evidence-based management (EBM)
The commitment to identify and utilize the best theory and data available to make decisions Advocates of this approach encourage the use of five basic "principles": 1. Face the hard facts, and build a culture in which people are encouraged to tell the truth, even if it's unpleasant. 2. Be committed to "fact-based" decision making—which means being committed to getting the best evidence and using it to guide actions. 3. Treat your organization as an unfinished prototype—encourage experimentation and learning by doing. 4. Look for the risks and drawbacks in what people recommend (even the best medicine has side effects). 5. Avoid basing decisions on untested but strongly held beliefs, what you have done in the past, or uncritical "benchmarking" of what winners do. Under these circumstances, the greater the gap between highest and lowest paid executives, the weaker the firm's financial performance. Why? According to Pfeffer and Sutton, wide disparities in pay often weaken both trust among team members and the social connectivity that contributes to strong team-based decision making. Pfeffer and Sutton found that, according to many HR managers, forced ranking impaired morale and collaboration and ultimately reduced productivity. They also concluded that automatically firing the bottom 10 percent resulted too often in the unnecessary disruption of otherwise effective teamwork. That's how they found out that 73 percent of the errors committed by commercial airline pilots occur on the first day that reconfigured crews work together.
the creative process
The creative process generally follows the four steps illustrated here. Of course, there are exceptions, and the process is occasionally different. In most cases, however, these steps capture the essence of the creative process.
condition of risk
The decision maker cannot know with certainty what the outcome of a given action will be but has enough information to estimate the probabilities of various outcomes
condition of uncertainty
The decision maker lacks enough information to estimate the probability of possible outcomes Under such circumstances, the decision maker may wait for more information to reduce uncertainty or rely on judgment, experience, and intuition to make the decision. Of course, it is also important to remember that decision making is not always so easy to classify in terms of certainty, risk, and uncertainty.
risk propensity
The extent to which a decision maker is willing to gamble in making a decision Some managers are cautious about every decision they make. They try to adhere to the rational model and are extremely conservative in what they do. Such managers are more likely to avoid mistakes, and they infrequently make decisions that lead to big losses. Other managers are extremely aggressive in making decisions and are willing to take risks. They rely heavily on intuition, reach decisions quickly, and often risk big investment on their decisions. As in gambling, these managers are more likely than their conservative counterparts to achieve big successes with their decisions; they are also more likely to incur greater losses
verification
The final stage of the creative process, the validity or truthfulness of the insight is determined For many creative ideas, verification includes scientific experiments to determine whether or not the insight actually leads to the results expected. Verification may also include the development of a product or service prototype. A prototype is one (or a very small number) of products built just to see whether the ideas behind this new product actually work. Product prototypes are rarely sold to the public but are very valuable in verifying the insights developed in the creative process. Once the new product or service is developed, verification in the marketplace is the ultimate test of the creative idea behind it.
Decision making
The process of choosing from among several alternatives A decision maker's actions are guided by a goal. Each of several alternative courses of action is linked with various outcomes. Information is available on the alternatives, on the likelihood that each outcome will occur, and on the value of each outcome relative to the goal. The decision-maker chooses one alternative on the basis of his or her evaluation of the information. Decisions made in organizations can be classified according to the frequency and to information conditions. In a decision-making context, frequency is how often a particular decision situation recurs, and information conditions describe how much information is available about the likelihood of various outcomes. Decisions are made to bring about desired outcomes, but the information available about those outcomes varies. The range of available information can be considered as a continuum whose endpoints represent complete certainty—when all alternative outcomes are known—and complete uncertainty, when all alternative outcomes are unknown.
insight
The stage in the creative process in which all the scattered thoughts and ideas that were maturing during incubation come together to produce a breakthrough It may occur suddenly or develop slowly over time. Insight can be triggered by some external event—such as a new experience or an encounter with new data that forces the individual to think about old issues and problems in new ways—or it can be a completely internal event in which patterns of thought finally coalesce in ways that generate new understanding.
incubation
The stage of less-intense conscious concentration during which a creative person lets the knowledge and ideas acquired during preparation mature and develop. A curious aspect of incubation is that it is often helped along by pauses in concentrated rational thought. Some creative people rely on physical activity such as jogging or swimming to provide a "break" from thinking. Others may read or listen to music. Sometimes sleep may even supply the needed pause.
group polarization
The tendency for a group's average post-discussion attitudes to be more extreme than its average pre-discussion attitudes. Members' attitudes and opinions with respect to an issue or a solution may change during group discussion. Some studies of this tendency have showed the change to be a fairly consistent movement toward a more risky solution, called "risky shift." Other studies and analyses have revealed that the group-induced shift is not always toward more risk; the group is just as likely to move toward a more conservative view. When individuals discover during group discussion that others share their opinions, they may become more confident about their opinions, resulting in a more extreme view. Persuasive arguments also can encourage polarization. If members who strongly support a particular position are able to express themselves cogently in the discussion, less avid supporters of the position may become convinced that it is correct. In addition, members may believe that because the group is deciding, they are not individually responsible for the decision or its outcomes. This diffusion of responsibility may enable them to accept and support a decision more radical than those they would make as individuals. Polarization can profoundly affect group decision making. If group members are known to lean toward a particular decision before a discussion, it may be expected that their post-decision position will be even more extreme. Understanding this phenomenon may be useful for one who seeks to affect his or her decision.
preparation
Usually the first stage in the creative process, includes education and formal training To make a creative contribution to business management or business services, individuals must usually receive formal training and education in business or a related field like economics. Formal business education can be an effective way for an individual to get "up to speed" and begin making creative contributions quickly.
Delphi technique
was originally developed by Rand Corporation as a method of systematically gathering the judgments of experts for use in developing forecasts. It is designed for groups that do not meet face-to-face. The Delphi technique is useful when experts are physically dispersed, anonymity is desired, or the participants are known to have trouble communicating with one another because of extreme differences of opinion. This method also avoids the intimidation problems that may exist in decision-making groups. On the other hand, the technique eliminates the often-fruitful results of direct interaction among group members.
