Decision Making And Creative Problem Solving

Chapter 8

Decision Making and Creative Problem Solving

Every now and then, Im reminded that the difference between success and failure in business is often one decision. You make the right one, and you will survive. You make the wrong one, and you dont. -Norm Brodsky,Entrepreneur

WHAT IS DECISION MAKING?

Is

the process of identifying and choosing among alternative courses of action in a manner appropriate to the demands of the situation. The act of choosing implies that alternative courses of action must be:

Identified Weighed Weeded Out Judgment and discretion are fundamental to decision making.

The Challenges For Decision Making

According

to a survey of 479 managers, 77% reported making more decisions during the previous years, and 43% said they had less time to make each of those decisions Todays decision makers face a host of Four tough challenges

Dealing with Complex Streams of Decisions

There are 8 intertwined factors contributing to decision complexity can help decision makers successfully navigate stream
Multiple Criteria Intangibles Risk and uncertainty Long-term implications Interdisciplinary input Pooled decision making Value Judgments Unintended cinsequences

Multiple Criteria
Typically,

a decision today must satisfy a number of often-conflicting criteria representing the interest of different groups A major challenge for todays decision makers is identifying stakeholders and laboring their conflicting interests.

INTANGIBLES
Factors

such as customer goodwill, employee morale, increased bureaucracy and aesthetic appeal (example: negative reaction to a billboard or a scenic highway), although difficult to measure, often determine decision alternatives.

Risk And Uncertainty

Along

with every decision alternative goes the chance that it will fail in some way. Poor choices can prove costly yet the right decision can open up whole new worlds of opportunity because of the importance of the particular aspect of decision complexity.

Long-term Implications
Major

decisions generally have a ripple effect with todays decisions creating the need for later sounds of decisions

Interdisciplinary Input
Decision

complexity is greatly increased when technical specialists such as lawyers, consumer advocates, tax advisers, accountants, engineers and production and marketing experts are consulted before making a decision This process can become even more complex and time consuming in traditional societies such as china.

Pooled Decision Making

Rarely

is a single manager totally responsible for the entire decision process. After pooled input, complex decisions wind their way through the organization, with individuals and groups interpreting, modifying, and sometimes resisting.

Value Judgments
As

long as decisions are made by people with differing backgrounds, perceptions, aspirations, and values, the decisionmaking process will be marked by disagreement over what is right or wrong, good or bad, and ethical or unethical.

Unintended Consequences

The law of unintended consequences, according to an expert on the subject, states that you cannot always predict the results of purposeful action. In other words, there can be a disconnect between intentions and actual results. Although unintended consequences can be positive, negative ones are most troublesome and have been called the Frankenstein Monster Effect.

Coping With Uncertainty

Among the valuable contributions of decision theorists are classification schemes for types and degrees of uncertainty. Managers are continually asked to make the best decisions they can, despite uncertainties about both present and future circumstances. Managers who are able to access the degrees of uncertainty in a situation-whether conditions are certain, risky or uncertain- are able to make more effective decisions.

Certainty

A condition of certainty exists when there is no doubt about that factual basis of a particular decision, and its outcome can be predicted accurately. Much like the economic concept of pure competition, the concept of certainty is useful mainly as a theoretical anchor point for a continuum. In a world filled with uncertainties, certainty is relative rather than absolute.

Risk
A

condition of risk is exist when a decision must be made on the basis of incomplete but reliable factual information. Reliable information, though incomplete, is still useful to managers coping with risk because they can use it to calculate the probability that a given event will occur and then to select a decision alternate with favorable odds.

Two Basics Types Of Probabilities

Objective

Probabilities- derived mathematically from reliable historical data Subjective Probabilities- are estimated on the basis of ones past experience or judgment.

Decision making based on probabilities is common in all areas of management today.

Uncertainty
A

condition of uncertainty exists when little or no reliable factual information is available. Still, Judgmental or subjective probabilities can be estimated
Decision

making under conditions of uncertainty can be both rewarding and nerve-racking for managers.

Information Processing Styles

Researchers

have identified two general information styles:

Thinking Intuitive

Style Style.

Thinking Style
Thinking

Style- managers rely predominantly on the thinking style tend to be logical, precise, and objective. They prefer routine assignments requiring attention to detail and systematic implementation

Intuitive Style
managers

who predominantly intuitive find comfort in rapidly changing situations in which they can be creative and follow their hunches and visitors. They see things in complex patterns rather than as logically ordered bits and pieces They typically rely on their own mental shortcuts and detours.

Avoiding Perceptual And Behavioral Decision Traps

Behavioral

Scientists have identified some common human tendencies that are capable of eroding the quality of decision making There are 3 well documented ones

Framing Escalation overconfidence

Three well Documented Ones

Framing Error is the tendency to evaluate positively presented information favorably and negatively presented information unfavorably. Escalation of Commitment Is the tendency of individuals and organizations to get locked into losing courses of action because quitting is personally and socially difficult. This decision making trap has been the Throwing good money after bad dilemma.

Three well Documented Ones

Overconfidence It is a common place and requires no formal definition. We need to comprehend the psychology of overconfidence because it can expose managers to unreasonable risks. Researchers have found a positive relationship between overconfidence and task difficulty. In other words, the more difficult the task, the greater the tendency for the people to be overconfident.

Three well Documented Ones

Easier

and more predictable situations faster confidence, but generally not unrealistic overconfidence People may be overconfident about one or more of the following:

Accuracy of input data Individual Team or organizational ability The probability of success.

Making Decisions
It

stands to reason that if the degree of uncertainty varies from situation to situation, there can be no single way to make decisions. Managers do indeed make decisions in every conceivable way One of the oddest examples is how the stacked potato chips we know as Pringles got their own name

Making Programmed Decisions

Programmed Decisions are those that are repetitive and routine Examples include hiring decisions, billing decisions in a hospital, supply reorder decisions in a purchasing department , consumer loan in a bank and pricing decisions in a university bookstore. Managers tend to devise fixed procedures for handling these everyday decisions.

Decision Rule
Decision

Rule is a statement that identifies the situation in which a decision is required and specifies how the decision will be made Enable busy managers to make routine decisions quickly without having to go through comprehensive problem solving over and over again It should be stated in If-then terms.

Making Non programmed Decisions

Non-programmed Decisions- are those made in complex, important and non routine situations, often under new and largely unfamiliar circumstances This kind of decision is made much less frequently than programmed decisions. Examples of non-programmed decisions include deciding whether to merge with another company, how to replace an executive who died unexpectedly , whether a foreign branch should be opened and how to marked an entirely new king of product or service

Six Questions need to be asked prior to making a nonprogrammed decision

What

decision needs to be made? When does it have to be made? Who will decide? Who will need to be consulted prior to the making of the decision? Who will ratify or veto the decision? Who will need to be informed of the decision?

A General Decision-Making Model

It

shows an idealized, logical, and rational model of organizational decision making describes how decisions can be made, but it does not portray how managers actually make decisions.

It

Knowledge Management : A Tool for improving the Quality of Decisions

Knowledge Management is a powerful and robust concept that deserves a permanent place in management theory and practice. Authorities on the subject desire knowledge management (KM) as the development of tools, processes, systems, structures, and cultures explicitly to improve the creation, sharing, and the use of knowledge critical for decision-making. KM is at the heart of what organizational theorists call learning organizations.

Two Types Of knowledge

Tacit

Knowledge Knowledge

Explicit

TACIT KNOWLEDGE
Tacit

Knowledge is personal, intuitive, and undocumented information about how to skillfully perform tasks, solve problems, and make decisions. People who are masters of their craft have tacit knowledge( or deep smarts) accumulated through years of experience.

EXPLICIT KNOWLEDGE

Readily sharable information because it is in verbal, textual , visual or numerical form It can be found in presentations and lectures, books, and magazines (both hard copy and online), policy manuals, technical specifications, training programs, data bases, and software programs. In short, Explicit Knowledge is public ( to varying degrees), whereas tacit knowledge is private.

Group-Aided Decision Making: A Contingency Perspective

Decision

Making, like any other organizational activity, does not take place in a vacuum. Decision Making is a highly social activity with committees, study groups, reviews panels, or project teams contributing a variety of ways.

Collaborative Computing

A catchphrase for a new body of software and hardware that helps people work better together. A collaborative system creates an environment in which people can share information without the constraints of time and space. Collaborative applications include calendar management, video teleconferencing, computer teleconferencing, integrated team support for business meetings and group authoring.

Group Involvement in Decisions

5

aspects of the decision-making process can be assigned to groups:

Analyzing the problem Identifying components of the decision situation Estimating components of the decision situation Designing alternatives Choosing an alternatives

The Problem Of Dispersed Accountability

There is critical difference between group aided decision making and group decision making. 1st instance, in the group does everything except make the final decision 2nd instance, the group actually makes the final decision Managers who choose the second route face a dilemma. Although a decision made by a group will probably reflect the collective experience and wisdom of all those involved, personal accountability is lost.

The Problem Of Dispersed Accountability

The

traditional formula for resolving this problem is to make sure that a given manager is personally accountable for a decision when the responsibility for it has to be traced. According to this line of reasoning, even when a group is asked to recommend a decision, the responsibility for the final outcome remains with the manager in charge.

The Problem Of Dispersed Accountability

There

are 3 situations in which individual accountability for a decision is necessary:

The decision will have significant impact on the success or failure of the unit or organization. The decision has legal ramifications (such as possible prosecution for price-fixing, antitrust, or product safety violations) A competitive reward is tied to a successful decision.

Advantages and Disadvantages of GroupAided Decision Making

Various

combination of positive and negative factors are encountered when a manager brings others into the decision making process. Are two or more heads actually better than one? The answer depends on the nature of the task, the ability of the contributions, and the form of interaction

Advantages and Disadvantages of GroupAided Decision Making

An Analysis of dozens of individual versus group performance studies conducted over a 61-year period led one researcher to the following conclusions:

Groups tend to do quantitatively and qualitatively better that the average individual Exceptional individuals tend to outperform the group, particularly when the task is complex and the group is made up of relatively lowability people.

Managerial Creativity
Demands

for creativity and innovation make the practice for management endlessly exciting (and often extremely difficult). Nearly all managerial problem solving requires a healthy measure of creativity as managers mentally take thing apart, rearrange the pieces in new and potentially productive configurations and look normal frameworks for new solutions

What is Creativity?

Creativity reorganization of experience into new configurations. According to a management consultant specializing in creativity, Creativity is a function of knowledge, imagination and evaluation Creativity is often subtle and may not be readily apparent to the untrained eye. The greater our knowledge, the more ideas, patterns, or combinations we can achieve.

What is Creativity?
One

pioneering writer on the subject isolated three overlapping domains of creativity:

Art, Discovery and Humor These have been called the Ah! reaction. The Aha! and the haha! reaction respectively The Discovery (Aha!) variation is the most relevant to management.

Workplace Creativity: Myth And Modern Reality

Recent research has shattered a longstanding myth about creative employees. According to the myth, creative people are typically nonconformists. Thus, creative self-expression through unconventional chess and strange behavior does not necessarily translate into creative work. Todays managers are challenged to create an organizational culture and climate capable of evoking the often hidden creative talents of every employee.

Learning To Be More Creative

Creative

ability can be learned, in the sense that our creative energies can be released from the bonds of convention, lack of self-confidence and narrow thinking. We all have the potential to be more creative.

10 Mental Locks by Roger von Oech

Looking for the right answer A given problem may have several right answers, depending on ones perspective. Always trying to be logical Logic does not prevail, given human emotions and organizational inconsistencies, ambiguity, and contradictions Strictly following rules If things are to be improved, arbitrary limits on thinking and behavior to be questioned

10 Mental Locks by Roger von Oech

Insisting on being practical Impractical answers to what-if questions can become steppingstones to creative insights Avoiding Ambiguity Creativity can be stunted by too much objectivity and specificity Fearing and Avoiding failure Fear of failure can paralyze us into not acting on our good ideas. This is unfortunate because we learn many valuable and lasting lessons from our mistakes.

10 Mental Locks by Roger von Oech

Forgetting

how to play The playful experimentation of childhood too often disappears by adulthood Becoming too specialized Crossfertilization of specialized areas helps in defining problems and generating solutions

10 Mental Locks by Roger von Oech

Not

wanting to look foolish Humor can release tensions and unlock creative energies. Seemingly foolish questions can enhance understanding. Saying Im not creative. By nurturing small and apparently insignificant ideas, we can convince ourselves that we are indeed creative.