Chapter 5.
Decision Making, Learning, Creativity, and
Innovation
1. The programmed and nonprogrammed decisions.
All decisions made by managers are programmed or nonprogrammed.
Programmed decision-making is a routine, virtually automatic
process. These decisions have been made so many times in the past that managers
have been able to develop rules or guidelines to be applied when certain situations
inevitably occur.
Most decision-making that relates to day-to-day running of an organization
is programmed decision making. Programmed decision-making is possible when
managers have the information they need to create rules that will guide decision-
making.
Nonprogrammed decision-making is required for nonroutine
decisions. Nonprogrammed decisions are decisions that are made in response to
unusual or novel opportunities or threats. These occur when there are no ready-
made decision rules that managers can apply to a situation.
To make decisions in the absence of decision rules, managers may rely upon
their intuition or they may make reasoned judgments. When using intuition,
managers rely upon feelings, beliefs, and hunches that come readily to mind,
require little effort and information gathering, and result in on-the-spot decisions.
Reasoned judgments are decisions that take time and effort and may result from
careful information gathering, generation of alternatives, and evaluation of
alternatives.
Although ‘exercising’ one’s judgment is a more rational process than ‘going’
with one’s intuition, both processes are often flawed and can result in poor decision
making. Thus, the likelihood of error is much greater in nonprogrammed decision
making than in programmed decision making.
2. The steps that managers should take to make the best decisions.
Using the work of March and Simon as a basis, researchers have developed
a step-by-step model of the decision-making process. There are six steps that
managers should consciously follow to make a good decision.
1. Recognize the Need for a Decision
Some stimuli usually spark the realization within the organization that a
decision needs to be made. The stimuli may originate from the actions of managers
inside of the organization or from changes in the external environment. Be it
proactive or reactive, it is imperative that managers immediately recognize this
need and respond in a timely and appropriate manner
2. Generate Alternatives
A manager must generate a set of feasible alternative courses of action to
take in response to the opportunity or threat. Failure to properly generate and
consider a variety of alternatives can lead to bad decisions. Sometimes managers
find it difficult to generate creative, alternative solutions to specific problems.
Generating creative alternatives may require that we abandon our existing mid-sets
and develop new ones.
3. Evaluate Alternatives
Once managers have generated a set of alternatives, they must evaluate the
advantages and disadvantages of each one. Successful managers use four criteria to
evaluate the pros and cons of alternative courses of action. Often a manager must
consider these four criteria simultaneously. Some of the worst managerial decisions
can be traced to poor assessment of the alternatives.
4. Compare what actually happened to what was expected Choose
Among Alternatives
The next step is to rank the various alternatives using the criteria listed
above in order to make a decision. Managers must be sure that all information that
is available is used. Sometimes managers have a tendency to ignore critical
information, even when it is available.
5. Implement the Chosen Alternative
Once a course of action has been determined, it must be implemented. Many
managers make a decision and then fail to act on it. Thousands of subsequent
decisions are necessary to implement a course of action. To ensure that
implementation occurs, top managers must assign to middle managers the
responsibility for making follow-up decisions, give them the sufficient resources
required to achieve the goal, and hold them accountable for their performance.
6. Learning from Feedback
a. Effective managers always conduct a retrospective analysis in order to
learn from past successes or failures. To ensure that they learn from to happen as a
result of the decision.
b. Explore why any expectations for the decision were not met.
c. Develop guidelines that will help in future decision making.
3. The advantages and disadvantages of group decision making.
Many important decisions are made by groups or teams of managers instead
of individuals.
Groupthink is a pattern of faulty and biased decision making that occurs in
groups whose members strive for agreement within the group at the expense of
accurately assessing information.
Devil’s advocacy is a technique used to counteract groupthink It involves a
critical analysis of the group’s preferred alternative in order to ascertain its
strengths and weaknesses before implementation. One member of the decision
making group plays the role of devil’s advocate by critiquing and challenging the
way in which the group evaluated alternatives and selected one alternative over the
other.
Diversity Among Decision Makers
Promoting diversity within decision-making groups also improves group
decision making by broadening the range of experiences and opinions that the
group members can draw from as they generate, assess, and choose among
alternatives. Groups containing members from diverse backgrounds are less prone
to groupthink because of the differences that exist.
4. Intuition as a key factor in 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
5. The Models of Decision Making: Classical and Administrative.
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.
Optimum decision
The most appropriate decision in light of what managers believe to be the
most desirable future consequences for their organization.
Administrative Model of Decision Making
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 abilities.
Incomplete information
Most managers do not see all alternatives and decide based on incomplete
information.