Decision Making and Creativity

McGraw-Hill/Irwin

Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Decision Making, Creativity, and Involvement at Chrysler Corp.

Fiat and Chrysler CEO Sergio Marchionne encourages better decision making, involvement, and creativity to revitalize Chrysler Corp.

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Decision Making Defined

The conscious process of making choices among one or more alternatives with the intention of moving toward some desired state of affairs.

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Rational Choice Paradigm

Rational choice paradigm -- effective decision makers identify, select, and apply the best possible alternative Two main elements of rational choice
1. Subjective expected utility determines choice

with highest value (maximization) 2. Decision making process systematic stages of decision making

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Rational Choice Decisionmaking Process

2. Choose the best decision process

Subjective expected utility

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Problem Identification Challenges

Problems/opportunities are constructed from ambiguous information, not given to us Influenced by cognitive and emotional biases Five problem identification challenges
Stakeholder framing Mental models Decisive leadership

Solution-focused problems
Perceptual defense
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Identifying Problems Effectively

1. 2. 3.

Be aware of perceptual and diagnostic limitations Fight against pressure to look decisive Maintain divine discontent (aversion to complacency) Discuss the situation with colleagues -- see different perspectives

4.

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Making Choices: Rational vs OB Observations

Rational Choice Paradigm Assumptions
Goals are clear, compatible, and agreed upon

Observations from Organizational Behavior

Goals are ambiguous, conflicting, and lack agreement

People are able to calculate all alternatives and their outcomes

People have limited information processing abilities

People evaluate all alternatives simultaneously

People evaluate alternatives sequentially

more
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Making Choices: Rational vs OB Observations (cont)

Rational Choice Paradigm Assumptions
People use absolute standards to evaluate alternatives

Observations from Organizational Behavior

People evaluate alternatives against an implicit favorite

People make choices using factual information

People make choices using perceptually distorted information

People choose the alternative with the highest payoff (SEU)

People choose the alternative that is good enough (satisfice)

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Biased Decision Heuristics

People have built-in decision heuristics that bias evaluation of alternatives
1. Anchoring and adjustment initial information (e.g., opening

bid) influences evaluation of subsequent information

2. Availability heuristic we estimate probabilities by how easy

we can recall the event, even though other factors influence ease of recall
3. Representativeness heuristic -- we estimate probabilities by

how much they are similar to something else (e.g. stereotypes) even when better info about probabilities is available

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Paralyzed by Choice

Decision makers are less likely to make any decision at all as the number of options increases Occurs even when there are clear benefits of selecting any alternative (such as joining a company pension plan).

Evidence of human information processing limitations

Courtesy of Microsoft

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Emotions and Making Choices

1.

Emotions form preferences before we consciously evaluate those choices Moods and emotions influence how well we follow the decision process We listen in on our emotions and use that information to make choices

2.

3.

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Intuitive Decision Making

Ability to know when a problem or opportunity exists and select the best course of action without conscious reasoning Intuition as emotional experience
Gut feelings are emotional signals Not all emotional signals are intuition

Intuition as rapid nonconscious analysis

Uses action scripts

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Making Choices more Effectively

Systematically evaluate alternatives against relevant factors Be aware of effects of emotions on decision preferences and evaluation process Scenario planning

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Problems with Decision Evaluation

Confirmation bias
Inflate quality of the selected option; forget or

downplay rejected alternatives Caused by need to maintain a positive selfconcept

Escalation of commitment
Repeating or further investing in an apparently bad

decision Caused by self-justification, prospect theory effect, perceptual blinders, closing costs
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Evaluating Decisions More Effectively

Separate decision choosers from evaluators Establish a preset level to abandon the project

Find sources of systematic and clear feedback

Involve several people in the evaluation process

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Tangible Creativity
Alex Beim, founder and chief creative technologist of Tangible Interaction Design in Vancouver, relies on creative thinking to invent

enticing interactive displays, such as

the zygotes at the Vancouver Olympics.

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Creativity Defined

Developing an original idea that makes a socially recognized contribution Applies to all aspects of the decision process problems, alternatives, solutions

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Creative Process Model

Verification

Illumination

Incubation

Preparation

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Characteristics of Creative People

Independent imagination includes:
Higher openness to experience personality
Lower need for affiliation motivation Higher selfdirection/stimulation values

Independent imagination

Cognitive and practical intelligence

Characteristics of Creative People Subject knowledge/expe rience

Persistence

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Creative Work Environments

Learning orientation
Encourage experimentation Tolerate mistakes

Intrinsically motivating work

Task significance, autonomy, feedback

Open communication and sufficient resources Unclear/complex effects of team competition and time pressure on creativity
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Creative Activities
Redefine the Problem Associative Play Storytelling CrossPollination Diverse teams

Review abandoned projects Explore issue with other people

Artistic activities

Morphological analysis

Information sessions Internal tradeshows

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Employee Involvement at Yabulu

Employee involvement was a key factor in skyrocketing productivity at the Yabulu nickel and cobalt refinery in northern Queensland, Australia. We have given power to the people, and it is working, says refinery general manager Trefor Flood (in photo).

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Employee Involvement Defined

The degree to which employees influence how their work is organized and carried out

Various levels and forms of involvement

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Employee Involvement Model

Potential Involvement Outcomes

Employee Involvement

Better problem identification Synergy produces more/better solutions Better at selecting the best choice Higher decision commitment

Contingencies of Involvement

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Contingencies of Involvement
Higher employee involvement is better when:
Decision Structure Knowledge Source Decision Commitment
Problem is new & complex (i.e nonprogrammed decision) Employees have relevant knowledge beyond leader Employees would lack commitment unless involved 1. Norms support firms goals 2. Employee agreement likely

Risk of Conflict

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Decision Making and Creativity

The following exhibit on subjective expected utility (SEU) is not presented in the book

Subjective Expected Utility

Estimating the best possible alternative (maximization) Expected -- probability of an outcome occurring
e.g., Chance that outcome 3 will occur is 90% if choice A is chosen, 30% if choice B is chosen
.2 Choice A .5
Outcome 1 (+7)

Outcome 2 (-2)

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Outcome 3 (+1)

Utility -- Value or happiness produced by each option from value of expected outcomes
Choice B has higher utility (value) than choice A Choice B expected utility is (.8x7)+(.2x-2)+(.3x1)=6.4

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Choice B .2 .3

Outcome 1 (+7)

Outcome 2 (-2)

Outcome 3 (+1)

Probability of outcome occurring

Utility (expected happiness)

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Solutions to Creativity Brainbusters

Double Circle Problem

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Nine Dot Problem

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Nine Dot Problem Revisited

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Word Search

FCIRVEEALTETITVEERS

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Burning Ropes

After first rope burned i.e. 30 min.

One Hour to Burn Completely

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