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Organizational Behaviour: Concepts, Controversies, Applications

Eighth Canadian Edition

Chapter 12

Decision Making, Creativity, and Ethics

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Chapter Outline (1 of 2)

How Should Decisions Be Made?

The Rational Decision-Making Process

How Do Individuals Actually Make Decisions?

Bounded Rationality in Considering Alternatives

Intuition

Judgment Shortcuts

Group Decision Making

Groups vs. the Individual

Groupthink and Groupshift

Group Decision-Making Techniques

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Material pertinent to this discussion is found under “SnapShot Summary” at the end of the chapter.

Chapter Outline (2 of 2)

Creativity in Organizational Decision Making

Creative Behaviour

Causes of Creative Behaviour

Creative Outcomes (Innovation)

What About Ethics in Decision Making?

Four Ethical Decision Criteria

Making Ethical Decisions

Corporate Social Responsibility

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Material pertinent to this discussion is found under “SnapShot Summary” at the end of the chapter.

Learning Outcomes

Contrast the rational model of decision making with bounded rationality and intuition.

Describe common decision biases and errors.

Contrast the strengths and weaknesses of group decision making.

Compare the effectiveness of interacting, brainstorming, and the nominal group technique.

Define creativity, and describe the three-stage model of creativity.

Describe the four criteria used in making ethical decisions

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This material is found at the beginning of the chapter.

How Should Decisions Be Made?

Decision: The choice made from two or more alternatives

Rational: Choices that are consistent and value-maximizing within specified constraints

Rational Decision-Making Model

Six step decision-making process

Describes how individuals should behave in order to maximize some outcome

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LO1; Material pertinent to this discussion is found under “How Should Decisions Be Made?”

It’s likely that decision makers identify and select problems that are visible to people in power in organizations, and for which they will receive some acknowledgment and reward for having done work on solving problems.

Steps in the Rational Decision-Making Model

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LO1; Material pertinent to this discussion is found under “How Should Decisions Be Made?”

This model assumes that the problem is clear and unambiguous, that the decision maker has complete information; that the decision maker can identify all relevant criteria; that there will be clear and constant preferences among the criteria and alternatives, that there are no time or cost constraints; and that the rational decision maker will choose the alternative with maximum payoff.

A brief discussion with students will lead them to realize that these conditions are rarely, if ever, fully met! You might want to get them to consider how they chose their college major, or what school to attend after high school.

Assumptions of the Rational Decision-Making Model

Complete information

The problem is clear and unambiguous

Known options

The decision maker is able to identify all relevant options in an unbiased manner

Chooses the option with the highest utility

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LO1; Material pertinent to this discussion is found under “How Should Decisions Be Made?”

How Do Individuals Actually Make Decisions?

Bounded Rationality

Limitations on one’s ability to interpret, process, and act on information

Satisficing

Identifying a solution that is “good enough”

The first acceptable option rather than the optimal one

Intuition

A non-conscious process created from distilled experience that results in quick decisions

Relies on holistic associations

Affectively charged – engaging the emotions

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LO1; Material pertinent to this discussion is found under “How Do Individuals Actually Make Decisions?”

Judgment Shortcuts (1 of 2)

Overconfidence Bias

Believing too much in our own ability to make good decisions – especially when outside of own expertise

Anchoring Bias

Using early, first received information as the basis for making subsequent judgments

Confirmation Bias

Selecting and using only facts that support our decision

Availability Bias

Emphasizing information that is most readily at hand

Recent

Vivid

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LO2; Material pertinent to this discussion is found under “How Do Individuals Actually Make Decisions?”

Judgment Shortcuts (2 of 2)

Escalation of Commitment

Increasing commitment to a decision in spite of evidence that it is wrong – especially if responsible for the decision!

Randomness Error

Creating meaning out of random events – superstitions

Risk Aversion

Tendency to prefer a sure thing over a risky outcome

Hindsight Bias

After an outcome is already known, believing it could have been accurately predicted beforehand

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LO2; Material pertinent to this discussion is found under “How Do Individuals Actually Make Decisions?”

Group Decision Making

Strengths of Group Decision Making

More complete information and knowledge

Increased diversity of views

Generates higher-quality decisions

Leads to increased acceptance of a solution

Weaknesses of Group Decision Making

More time consuming

Can create conformity pressures in groups

Discussion can be dominated by one or a few members

Decisions suffer from ambiguous responsibility

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LO3; Material pertinent to this discussion is found under “Group Decision Making.”

Group vs. Individual Decision Making

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LO3; Material pertinent to this discussion is found under “Group Decision Making.”

Effectiveness and Efficiency

Measures of Effectiveness

Accuracy

Speed

Creativity

Acceptance

Efficiency

Groups almost always stack up as a poor second to the individual decision maker

With few exceptions, group decision making consumes more work hours than if an individual were to tackle the same problem alone

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LO3; Material pertinent to this discussion is found under “Group Decision Making.”

Accuracy: group decisions are generally more accurate than the decisions of the average individual in a group, but they are less accurate than the judgments of the most accurate group member.

Speed: individuals are superior.

Creativity: groups tend to be more effective than individuals.

Acceptance: groups tend to be more effective than individuals.

But effectiveness cannot be considered without also assessing efficiency.

In terms of efficiency, groups almost always stack up as a poor second to the individual decision maker. With few exceptions, group decision making consumes more work hours than if an individual were to tackle the same problem alone. The exceptions tend to be the instances in which, to achieve comparable quantities of diverse input, the single decision maker must spend a great deal of time reviewing files and talking to people. Because groups can include members from diverse areas, the time spent searching for information can be reduced. However, as we noted, these advantages in efficiency tend to be the exception.

Groups are generally less efficient than individuals. In deciding whether to use groups, then, consideration should be given to assessing whether increases in effectiveness are more than enough to offset the reductions in efficiency.

Groupthink and Groupshift

Groupthink

Phenomenon in which the norm for conformity prevents the group from critically appraising unusual, minority, or unpopular views

Groupshift

Phenomenon in which the initial positions of individual members of a group are exaggerated because of the interactions of the group

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LO3; Material pertinent to this discussion is found under “Group Decision Making.”

This slide just introduces the topics of Groupthink and Groupshift. Slides that follow provide more detail on each concept.

Symptoms of Groupthink

Illusion of invulnerability

Assumption of morality

Rationalized resistance

Peer pressure

Minimized doubts

Illusion of unanimity

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LO3; Material pertinent to this discussion is found under “Group Decision Making.”

• Illusion of invulnerability. Group members become overconfident among themselves,

allowing them to take extraordinary risks.

• Assumption of morality. Group members believe highly in the moral rightness

of the group’s objectives and do not feel the need to debate the ethics of their

actions.

• Rationalized resistance. Group members rationalize any resistance to the

assumptions they have made. No matter how strongly the evidence may

contradict their basic assumptions, members behave so as to reinforce those

assumptions continually.

• Peer pressure. Group members apply direct pressure on those who momentarily

express doubts about any of the group’s shared views or who question

the validity of arguments supporting the alternative favoured by the majority.

• Minimized doubts. Those group members who have doubts or hold differing

points of view seek to avoid deviating from what appears to be group

consensus by keeping silent about misgivings and even minimizing to themselves

the importance of their doubts.

• Illusion of unanimity. If someone does not speak, it’s assumed that he or she is

in full agreement. In other words, abstention becomes viewed as a yes vote.

Minimizing Groupthink

Monitor group size

Encourage group leaders to play an impartial role

Appoint one group member to play the role of devil’s advocate

Stimulate active discussion of diverse alternatives to encourage dissenting views and more objective evaluations

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LO3; Material pertinent to this discussion is found under “Group Decision Making.”

Encourage group leaders to play an impartial role: Leaders should actively seek input from all members and avoid expressing their own opinions, especially in the early stages of deliberation.

Appoint one group member to play the role of devil’s advocate: This member’s role is to overtly challenge the majority position and offer divergent perspectives.

What Causes Groupshift?

Discussion creates familiarization among group members

Group discussion motivates individuals to take risks

Group diffuses responsibility

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LO3; Material pertinent to this discussion is found under “Group Decision Making.”

Group Decision-Making Techniques

Interacting Groups

Brainstorming

Nominal Group Technique

Electronic Meetings

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LO4; Material pertinent to this discussion is found under “Group Decision Making.”

Interacting Groups: Members meet face-to-face and rely on both verbal and nonverbal interaction to communicate with each other.

Brainstorming: An idea-generation process that specifically encourages any and all alternatives, while withholding any criticism of those alternatives.

Nominal Group Technique: A group decision-making method in which individual members meet face-to-face to pool their judgments in a systematic but independent fashion.

Electronic Meeting: A meeting where members interact on computers, allowing for anonymity of comments and aggregating of votes.

Nominal Group Technique

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LO4; Material pertinent to this discussion is found under “Group Decision Making.”

Evaluating Group Effectiveness

EXHIBIT 12-4 Evaluating Group Effectiveness

Type of Group

Effectiveness Criteria	Interacting	Brainstorming	Nominal	Electronic
Number and quality of ideas	Low	Moderate	High	High
Social pressure	High	Low	Moderate	Low
Money costs	Low	Low	Low	High
Speed	Moderate	Moderate	Moderate	Moderate
Task orientation	Low	High	High	High
Potential for interpersonal conflict	High	Low	Moderate	Low
Commitment to solution	High	Not applicable	Moderate	Moderate
Development of group cohesiveness	High	High	Moderate	Low

Source: Based on C. Woodyard, “Toyota Brass Shakeup Aims to Give Regions More Control,” USA Today, March 6, 2013, www.usatoday.com/story/money/cars/2013/03/06/toyota-shakeup/1966489/.

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LO4; Material pertinent to this discussion is found under “Group Decision Making.”

Creativity in Organizational Decision Making

The ability to produce novel (original) and useful ideas.

Creativity is important because

It allows the decision maker to more fully understand and appraise the problem

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LO5; Material pertinent to this discussion is found under “Creativity in Organizational Decision Making.”

Three-Stage Model of Creativity in Organizations (1 of 2)

Causes of Creative Behaviour

Creative potential

Creative environment

Creative Behaviour

Problem formulation

Information gathering

Idea generation

Idea evaluation

Creative Outcomes

Novelty

Usefulness

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LO5; Material pertinent to this discussion is found under “Creativity in Organizational Decision Making.”

Three-Stage Model of Creativity in Organizations (2 of 2)

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LO5; Material pertinent to this discussion is found under “Creativity in Organizational Decision Making.”

Creative Behaviour

Problem Formulation

Information Gathering

Idea Generation

Idea Evaluation

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LO5; Material pertinent to this discussion is found under “Creativity in Organizational Decision Making.”

Creative Potential

Who has the greatest creative potential?

Those who…

Are intelligent

Score high in Openness to Experience (Chapter 2)

Have a proactive personality

Have high self-confidence

Are risk-takers

Are tolerant of ambiguity

Are able and willing to persevere

Have expertise in the area

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LO5; Material pertinent to this discussion is found under “Creativity in Organizational Decision Making.”

Creative Environment

We need to be in an environment where creative potential can be realized

An environment which…

Creates motivation

Rewards and recognizes creative work

Is free from excessive rules

Has good leadership

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LO5; Material pertinent to this discussion is found under “Creativity in Organizational Decision Making.”

Creative Outcomes (Innovation)

Ideas or solutions judged to be novel and useful by relevant stakeholders

“Ideas are useless unless used”

Creative ideas are more likely to be used when

The individual was motivated to translate the idea into practice

There is a conducive organizational climate

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LO5; Material pertinent to this discussion is found under “Creativity in Organizational Decision Making.”

Ethics

The study of moral values or principles that guide our behaviour and inform us whether actions are right or wrong

Help us do the “right thing”

Ethical considerations should be an important criterion in organizational decision making

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LO6; Material pertinent to this discussion is found under “Creativity in Organizational Decision Making.”

Four Ethical Decision Criteria (1 of 2)

Utilitarian criterion

A decision focused on outcomes or consequences that emphasize the greatest good for the greatest number of people

Rights criterion

Decisions consistent with fundamental liberties and privileges as set forth in documents like the Canadian Charter of Rights and Freedoms.

Protects whistle-blowers

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LO6; Material pertinent to this discussion is found under “What About Ethics in Decision Making?”

Four Ethical Decision Criteria that one can use include:

Utilitarianism, in which decisions are made solely on the basis of their outcomes or consequences

Rights, which calls on individuals to make decisions consistent with fundamental liberties and privileges

(see next slide for more)

Four Ethical Decision Criteria (2 of 2)

Justice criterion

Decisions that impose and enforce rules fairly and impartially so there is an equitable distribution of benefits and costs

Care criterion

Decisions “that express care in protecting the special relationships that individuals have with each other.”

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LO6; Material pertinent to this discussion is found under “What About Ethics in Decision Making?”

Four Ethical Decision Criteria that one can use include:

(3) Justice, which requires individuals to impose and enforce rules fairly and impartially so there is an equitable distribution of benefits and costs.

These criteria should be helpful in resolving ethical dimensions of decision making in an organized manner, but it should be recognized that each has advantages and liabilities.

A good discussion can stem from posing the question: “Suppose a manager knows she will have to get some workers to do overtime on the weekend. Describe the decision-making process based on utilitarianism, rights, and justice.”

(4) Care criterion

Decisions “that express care in protecting the special relationships that individuals have with each other.”

Making Ethical Decisions

Broken Windows Theory: Idea that decayed and disorderly urban environments may facilitate criminal behaviour because they signal antisocial norms

Ethical behaviour can be affected by signals – signs of status and money of high importance rather than ethics

Managers should encourage conversations about moral issues

We should be aware of our own moral “blind spots”

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LO6; Material pertinent to this discussion is found under “Creativity in Organizational Decision Making.”

Is a Decision Ethical?

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LO6; Material pertinent to this discussion is found under “What About Ethics in Decision Making?”

This is a simple framework for helping one determine whether a decision is ethical.

Corporate Social Responsibility

An organization’s responsibility to consider the impact of its decisions on society.

45 percent of Canadians believe individual shareholders, not the company, should make personal decisions about giving to charity

35 percent of Canadians, however, feel that corporations should donate to charities

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LO7; Material pertinent to this discussion is found under “What About Ethics in Decision Making?”

Economist Milton Friedman remarked in Capitalism and Freedom that “few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.”

Joel Bakan, professor of law at the University of British Columbia, author of The Corporation, and co-director of the documentary of the same name, finds that current laws support troubling corporate behaviour. Bakan suggests that today’s corporations have many of the same characteristics as a psychopathic personality (e.g., self-interested, lacking empathy, manipulative, and reckless in their disregard of others).

MBA response to CSR:

At the start of their program, 40 percent reported that one of the primary responsibilities of a company is to produce useful, high quality goods and services.

By the time the students graduated, only 30 percent of them thought this was a valuable corporate goal; 75 percent suggested that a company’s primary responsibility was to maximize shareholder value.

Global Implications

Cultural background can have a significant influence on decision making. Cultures differ in:

their time orientation

the importance of rationality

their belief in the ability of people to solve problems

their preference for collective decision making

No global ethical standards

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Material pertinent to this discussion is found under “What About Ethics in Decision Making?”

Summary

Individuals often short-cut the decision-making process and do not consider all options.

Intuition leads to better results when supplemented with evidence and good judgment.

Exceptional creativity is rare, but expertise in a subject and a creative environment encourage novel and useful creative outcomes.

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Material pertinent to this discussion is found at the end of the chapter.

OB at Work: For Review (1 of 2)

What is the rational model of decision making? How is it different from bounded rationality and intuition?

What are some common decision biases or errors people make?

What are the strengths and weaknesses of group (versus individual) decision making?

How effective are interacting, brainstorming, and the nominal group technique?

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Material pertinent to this discussion is found at the end of the chapter.

OB at Work: For Review (2 of 2)

What is creativity, and what is the three-stage model of creativity?

What are the four criteria used in making ethical decisions, and how do they differ?

What is corporate social responsibility?

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Material pertinent to this discussion is found at the end of the chapter.

OB at Work: For Managers (1 of 2)

Adjust your decision-making approach to the national culture you are operating in and to the criteria your organization values.

If you operate in a country that does not value rationality, don’t feel compelled to follow the rational decision-making model or to try to make your decisions appear rational. Adjust your decision-making approach to ensure compatibility with the organizational culture.

Be aware of biases. Then try to minimize their impact. OB in Action—Reducing Biases and Errors in Decision Making on page 422 offers some suggestions.

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Material pertinent to this discussion is found at the end of the chapter.

OB at Work: For Managers (2 of 2)

Combine rational analysis with intuition. These are not conflicting approaches to decision making. By using both, you can actually improve your decision-making effectiveness.

Try to enhance your creativity. Actively look for novel solutions to problems, attempt to see problems in new ways, use analogies, and hire creative talent. Try to remove work and organizational barriers that might impede your creativity.

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Material pertinent to this discussion is found at the end of the chapter.

Breakout Group Exercises

Form small groups to discuss the following:

Apply the rational decision-making model to deciding where your group might eat dinner this evening. How closely were you able to follow the rational model in making this decision?

The company that makes your favourite snack product has been accused of being weak in its social responsibility efforts. What impact will this have on your purchase of any more products from that company?

You’ve seen a classmate cheat on an exam or an assignment. Do you do something about this or ignore it?

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Material pertinent to this discussion is found at the end of the chapter.

Ethical Dilemmas: What Would You Do? (1 of 5)

You are negotiating a contract with a potentially very large customer whose representative has hinted that you could almost certainly be assured of getting his business if you gave him and his wife an all-expenses-paid cruise to the Caribbean. You know the representative’s employer would not approve of such a “payoff,” but you have the discretion to authorize such an expenditure. What would you do?

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Material pertinent to this discussion is found at the end of the chapter.

Discussion: This size of a gift is clearly a bribe, and most corporations have specific policies limiting such behaviour.

Ethical Dilemmas: What Would You Do? (2 of 5)

You have an autographed CD by Drake and put it up for sale on eBay. So far, the highest bid is $74.50. A friend has offered you $100 for the CD, commenting that he could get $150 for it on eBay in a year. You know this is highly unlikely. Should you sell your friend the CD for what he offered ($100)? Do you have an obligation to tell your friend you have listed your CD on eBay?

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Material pertinent to this discussion is found at the end of the chapter.

Ethical Dilemmas: What Would You Do? (3 of 5)

Your company policy on reimbursement for meals while travelling on company business is that you will be repaid for your out-of-pocket costs, which are not to exceed $80 a day. You don’t need receipts for these expenses—the company will take your word. When travelling, you tend to eat at fast-food places and rarely spend in excess of $20 a day. Most of your colleagues submit reimbursement requests in the range of $55 to $60 a day regardless of what their actual expenses are. How much would you request for your meal reimbursements?

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Material pertinent to this discussion is found at the end of the chapter.

Discussion: The actual cost of the meals should probably be put in for reimbursement. In some corporations, however, the accounting and travel reimbursement personnel do not want the traveller to request amounts that vary from the standard $50. The per diem rate simplifies the amount of accounting transactions and is thus considered more effective for company practices. It is also possible that your company’s culture may allow the full amount to compensate for various incidental expenses that are not explicitly covered by the policy.

Ethical Dilemmas: What Would You Do? (4 of 5)

You are the manager at a gaming company, and you are responsible for hiring a group to outsource the production of a highly anticipated new game. Because your company is a giant in the industry, numerous companies are trying to get the bid. One of them offers you some kickbacks if you give that firm the bid, but ultimately, it is up to your bosses to decide on the company. You don’t mention the incentive, but you push upper management to give the bid to the company that offered you the kickback. Is withholding the truth as bad as lying? Why or why not?

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Material pertinent to this discussion is found at the end of the chapter.

Discussion: It is tempting for students to feel that a little bit of equivocation is nothing like lying. The questions that they must ask themselves are why are they pushing the product, and why keep it a secret if there is nothing wrong with the practice.

Ethical Dilemmas: What Would You Do? (5 of 5)

You have discovered that one of your closest friends at work has stolen a large sum of money from the company. Would you do nothing? Go directly to an executive to report the incident before talking about it with the offender? Confront the individual before taking action? Make contact with the individual with the goal of persuading that person to return the money?

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Material pertinent to this discussion is found at the end of the chapter.

Discussion: Arguments can be made for almost all of the listed options except the “do nothing” option. If you believe that the employee would accept responsibility for correcting his or her own action, everyone might be best served by your going to him or her. If you believe that the employee would threaten you or in some way further harm the company, you would probably want to go to an executive.