Chapter 05

Decision Making,

Learning, Creativity, and Entrepreneurs

hip McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives

•Understand the nature of managerial decision making, differentiate between programmed and nonprogrammed decisions, and explain why nonprogrammed decision making is a complex, uncertain process

•Describe the six steps managers should take to make the best decisions

•Identify the advantages and disadvantages of group decision making, and describe techniques that can improve it

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Learning Objectives

•Explain the role that organizational learning and creativity play in helping managers to improve their decisions

•Describe how managers can encourage and promote entrepreneurship to create a learning organization, and differentiate between entrepreneurs and intrapreneurs

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The Nature of Managerial Decision Making

•Decision making: Managers respond to threats and opportunities by analyzing options, and making determinations about organizational goals and courses of action

•Programmed decisions: Routine, virtually automatic decision making that follows established rules or guidelines

•Non-programmed decisions: Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats

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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

•Reasoned judgments: Decisions that require time and effort and result from careful information gathering, generation of alternatives, and evaluation of alternatives

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The Classical Model of Decision Making

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The Administrative Model of Decision Making

•Explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions

• Bounded rationality

• Incomplete information

•Satisficing: Searching for and choosing an acceptable, or satisfactory response to problems and opportunities, rather than trying to make the best decision

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Figure 5.2 - Why Information IsIncomplete

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Figure 5.4 - Six Steps in Decision Making

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Figure 5.5 - General Criteria forEvaluating Possible Courses of Action

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Group Decision Making

•Groupthink: Faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information

•Devil’s advocacy: Critical analysis of a preferred alternative to ascertain its strengths and weaknesses before it is implemented

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Promoting Group Creativity

•Employees should be able to experiment, take risks, and make mistakes and learn from them

•Brainstorming: A problem-solving technique in which managers meet face-to-face to generate and debate a wide variety of alternatives from which to make a decision

•Production blocking: Loss of productivity in brainstorming sessions due to the unstructured nature of brainstorming

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Promoting Group Creativity

•Delphi technique: Group members do not meet face-to-face but respond in writing to questions posed by the group leader

•Nominal group technique: Group members write down ideas and solutions, read their suggestions to the whole group, and discuss and then rank the alternatives

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Entrepreneurship and Creativity

•Social entrepreneurs: Individuals who pursue initiatives and opportunities to address social problems and needs in order to improve society and well-being

•Intrapreneur: A manager, scientist, or researcher who works inside an organization and notices opportunities to develop new or improved products and better ways to make them

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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 who is deliberately separated from normal operations to encourage them to devote all their attention to developing new products

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