Moore PUA 5303 Unit 5 ESY

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Decision Making and Creativity

After reading this chapter, you should be able to:Page 422

LO 11-1 Compare rational and nonrational models of decision making.

LO 11-2 Describe eight decision-making biases.

LO 11-3 Explain evidence-based decision making.

LO 11-4 Compare the four styles of decision making.

LO 11-5 Describe how to assess the ethics of decision making.

LO 11-6 Outline the basics of group decision making.

LO 11-7 Explain how creativity relates to decision making.

LO 11-8 Describe the implications of decision making and creativity for you and managers.

Throughout this book we encourage you to use the Organizing Framework to solve problems, a skill recruiters say college graduates need.1 The goal of this chapter is to further help you develop your problem-solving skills. The Organizing Framework in Figure 11.1 summarizes what you will learn in this chapter. Although the chapter focuses on decision making, which is an individual- and group/team-level process, a host of person and situation factors influence it. Figure 11.1 further shows that many other individual, group/team, and organizational level processes impact how we make decisions. We will touch on many of these in the sections to come. Finally, take note of how the various decision-making processes affect numerous individual, group/team, and organizational level outcomes. Page 423

FIGURE 11.1 Organizing Framework for Understanding and Applying OB

Decision making and problem solving affect all aspects of our lives. Consider the success of a basketball team. Here we see a coach meeting with her team to discuss strategies to defeat the opposing team. Making effective decisions during the game can make the difference between winning and losing.Page 424

Randy Faris/Corbis/Getty Images

Winning at Work

How to Practice Critical Thinking for Decision Making

We make decisions every day. Some are minor—bring the umbrella or not? Others are consequential, like your choice of career, and others can be life-changing. This chapter explores types of decisions, useful models and tools for management decision making, and logical biases and other problems that can get in the way of making good decisions.

One skill that underlies all good decision making, however, and one you can begin practicing right now, is critical thinking, the application of logic and reasoning to problem solving. Here are some tips:

Six different colored hats symbolize a popular step-by-step decision process.

YolLusZam1802/Shutterstock

Get all available facts. Decisions made in the absence of facts are often flawed, based on biased thinking or guesswork, or overly reliant on emotional responses to an uncertain situation. Getting reliable factual information from several different sources is an essential first step.

Understand your motive. This means being clear about whether you’ve sought objective information or merely validation of what you already believe. If you’re looking for validation, you’re not thinking critically, and you need to ask yourself why. You may be heading for a biased decision.2

Reconsider the facts. Look objectively at the facts. If you are basing your decision on some unavoidable assumptions, for instance, ask yourself how valid they are in light of objective reality. How often do circumstances like yours lead to the outcome you’re hoping for? Learning about probability (the measure of an event’s likelihood of occurring) can help you avoid many of the cognitive biases this chapter will discuss.3

Expect to be wrong. Realize that no one is right all the time. (Most of us are wrong surprisingly often.) Instead of seeing this as a roadblock, use it to avoid the mistake of overconfidence. Ask for and listen to others’ opinions, reconsider your own logic, and be open to the possibility that you could change your mind.4

Choose your course of action. If you’ve collected facts, looked at them objectively, made sure you’re not just confirming your own opinion, and listened carefully to input from others, you’re ready to make a decision as grounded in critical thinking as possible.

Another useful idea that roughly parallels these suggestions is the “six thinking hats” strategy popularized by Edward De Bono.5 The six hats are symbols in a step-by-step decision process that asks you to imagine putting on a different-colored hat for each step. The white hat is first and calls for you to focus on the available facts and keep your thinking free of bias, just as white is free of color. Next, the black hat allows you to think negatively and assess which ideas won’t work, followed by the yellow hat, which focuses on the positive (think sunshine) and the potential for opportunity.

Like the shoots of a new plant, the next hat is green for creativity and insights from outside-the-box thinking, while red, suggesting hearts, puts emotion in the picture so you can test your intuition and feelings. The last hat is blue like the sky and signals it’s time to put all ideas together into an action plan that will fly. One advantage of De Bono’s strategy is that sequentially imagining the six hats helps keep members of decision-making groups focused on the same step at the same time. And it offers a good blueprint for individuals making decisions, too.

What’s Ahead in This Chapter

We contrast rational and nonrational decision making and explain why it’s important to understand both. We also show you eight decision-making biases and the benefits of evidence-based decision making. We explain why companies are leveraging big data and utilizing artificial intelligence to make decisions. Next we discuss general decision-making styles and ethical decision making. We conclude by distinguishing the pros and cons of group decision making, group problem-solving techniques, and the process of creativity. All this information will help you improve your ability to make decisions.Page 425

11.1 RATIONAL AND NONRATIONAL MODELS OF DECISION MAKING

THE BIGGER PICTURE

Decision making is a key process within the Organizing Framework for Understanding and Applying OB. The process varies along a continuum of rational to nonrational. Four steps in making rational decisions are (1) identify the problem, (2) generate alternative solutions, (3) evaluate alternatives and select a solution, and (4) implement and evaluate the solution. Examples of nonrational models include (1) satisficing and (2) intuition.

LO 11-1

Compare rational and nonrational models of decision making.

Decision making matters deeply in your personal and work life. Let’s consider the impact of decisions made by a few college graduates during the interview process. One job applicant took a nonemergency call on his smartphone 15 minutes into the interview. Do you think this decision made a positive impression? Another decided to bring his father into a 45-minute interview: The recruiter was shocked. Paula Welch, a Cigna HR representative, similarly noted how one recent grad asked his father to call and negotiate a higher salary after the son received a job offer. Here’s another decision: A college senior brought her cat to the interview in a cage and then proceeded to play with it during the interview. The end results of these decisions were negative for all the applicants.6

Decision making entails identifying and choosing from among alternate solutions that lead to a desired state of affairs. The above examples illustrate how decisions affect your chances of getting a job after graduation, but successful decision making has much broader applications. Among organizations, for example, Fortune concluded, “Decision making at even the most basic level has slowed materially over the past five to 10 years.”7 Slower decision making leads to increased costs, lower efficiency, and lower customer satisfaction.8 In sum, individuals, teams, and organizations are well served to improve their decision-making skills.

Before discussing rational and nonrational models of decision making, we set the context by discussing two ways of thinking that affect the way we make decisions.

Two Ways of Thinking

In his book Thinking, Fast and Slow, Daniel Kahneman, a professor who received the 2002 Nobel Prize in economics, described two kinds of thinking, which he labeled System 1 and System 2.9

System 1—Intuitive and Largely Unconscious Thought System 1 is our automatic, instinctive, and emotional mode of decision making. It is fast because it relies on mental shortcuts that create intuitive solutions to problems as they come up, for example, when we hit the brakes at the sight of another car’s brake lights or pause when we detect anger in someone’s voice.

System 2—Analytical and Conscious Thought System 2 is our slow, logical, deliberate mode of decision making. It helps us identify when our intuition is wrong or when our emotions are clouding our judgment. It requires more cognitive effort than System 1 and is used when contemplating a discrete task such as parallel parking or how to best climb a tree.Page 426

Both Systems Have Value There are pros and cons to both systems of thinking. For example, System 1 thinking forms first impressions and judgments, which may be automatic but may lead us to jump to conclusions that may or may not be accurate. It can also lead to poor follow-through on plans because it focuses on immediate payoffs, which distract us from considering the long-term implications of our decisions.10

When System 1 runs into difficulties, we can call on System 2 thinking for a more methodical approach to a specific situation or problem. System 2 thinking typically gets involved only when we encounter something unexpected that System 1 thinking can’t answer. In addition, System 2 thinking can be time consuming, especially when we don’t have the cognitive energy or attention required to think through a situation. For example, suppose you were looking to purchase a new phone. Comparing two different smartphones to determine their features and price points requires attention to detail and may take longer than a quick decision that occurs using System 1 thinking.11

What do you do when you see the rear brake lights like this light up? Do you think about stepping on the brake, or do you automatically hit the brakes? This automatic process is an example of System 1 thinking.

Ingram Publishing

Rational Decision Making: Managers Make Logical and Optimal Decisions

The rational model of decision making explains how managers should make decisions. It assumes that managers are completely objective and possess all information for their decisions. In this model, decisions thus demonstrate excellent logic and promote the organization’s best interests.

Four generic stages are associated with rational decision making (see Figure 11.2). We discuss each one next.

Stage 1: Identify the Problem or Opportunity—Determining the Actual versus the Desirable We defined a problem in Chapter 1 as a difference or gap between an actual and a desired situation. By now you know that problem identification is the first step in solving any type of problem. In addition to making decisions to solve problems, however, managers also have to make decisions about optimizing opportunities. An opportunity is a situation in which results that exceed goals and expectations are possible. For example, U.S. medical schools must prepare to graduate more than 12,000 more medical students each year over the next decade. This opportunity, however, will require some tough decisions because the number of funded medical residencies has been frozen by the federal government since 1997. Residencies are the three to seven years of additional on-the-job training that medical students need before they can practice medicine on their own. Without Congress approving the additional funding for more medical residencies, the Association of American Medical Colleges predicts a shortage of as many as 121,000 doctors by 2030.12Page 427

FIGURE 11.2 The Four Stages in Rational Decision Making

McGraw-Hill Global Education Holdings, LLC

Whether you face a problem or an opportunity, the goal is always the same: to make improvements that change conditions from their current state to a more desirable one. This requires you to diagnose the cause of the problem, or the nature of the opportunity.

Stage 2: Generate Alternative Solutions—Both the Obvious and the Creative For many people generating solutions is the exciting part of decision making, the step where you get to be creative, think outside the box, and share your ideas about how things should be done. Brainstorming, for instance, is a common technique (discussed later in the chapter) that both individuals and groups use to generate potential solutions. A research study of 400 strategic decisions revealed that managers struggled during brainstorming because of three key decision-making blunders:13

Rushing to judgment. Managers simply make decisions too quickly without considering all relevant information.

Selecting readily available ideas or solutions. Managers take the easy solution without rigorously considering alternatives. This can happen when emotions about the problem are running high.

Making poor allocation of resources to study alternate solutions. Managers don’t invest the resources to properly study the problem and the alternate courses of action.

Decision makers thus are encouraged to slow down and use System 2 thinking (analytical and conscious) when making decisions. This should lead them to identify a broader set of alternatives and potential solutions.14

Stage 3: Evaluate Alternatives and Select a Solution—Ethics, Feasibility, and Effectiveness In the third stage, evaluate your alternatives on several criteria. Costs and quality are important, but you should also consider the following questions: (1) Is it ethical? (If not, don’t consider it.) (2) Is it feasible? (If time is an issue, costs are high, resources are limited, new technology is needed, or customers are resistant, for instance, then the alternative is not feasible.) (3) Will it remove the causes and solve the problem?

Stage 4: Implement and Evaluate the Solution Chosen After the solution has been implemented, stakeholders need to evaluate how effectively it solves the problem. If effective, it should eliminate or significantly reduce the difference between the problem state and the desired outcome. If not, either the problem was incorrectly identified or the solution was inappropriately conceived or executed. Management can return to the first step, problem identification. If the problem was correctly identified, management should consider implementing one of the untried solutions. This process can continue until all feasible solutions have been tried or the problem has changed. System 2 thinking is needed to effectively work through this stage.

What Are the Pros and Cons of the Rational Model? The rational model is prescriptive. It outlines a logical process managers should use, assuming they are optimizing when making decisions. Optimizing means solving problems by producing the best possible solution based on a set of highly desirable conditions—having complete information, leaving emotions out of the decision-making process, honestly and accurately evaluating all alternatives, having abundant and accessible time and resources, and having people willing to implement and support decisions. Practical experience, of course, tells us that these conditions are all rarely met, and assumptions to the contrary are unrealistic. Social scientist Herbert Simon earned the 1978 Nobel Prize for his work on decision making. He put it this way: “The assumptions of perfect rationality are contrary to fact. It is not a question of approximation; they do not even remotely describe the processes that human beings use for making decisions in complex situations.”15Page 428

That said, there are three benefits of trying to follow a rational process as closely as is realistically possible:

Quality. The quality of decisions may be enhanced, in the sense that they follow more logically from all available knowledge and expertise.

Transparency. Rationality makes the reasoning behind a decision transparent and available to scrutiny.

Responsibility. The rational model discourages decision makers from acting on suspect considerations (such as personal advancement or avoidance of bureaucratic embarrassment) and therefore encourages more responsible decisions.16

Nonrational Models of Decision Making: Decision Making Does Not Follow an Orderly Process

Nonrational models of decision making explain how managers actually make decisions. These models typically build on assumptions that decision making is uncertain, that decision makers do not possess complete information, and that managers struggle to make optimal decisions. The choice to text while driving is an example of nonrational decision making.

According to recent statistics, 9 percent of all U.S. fatal crashes involve texting while driving, and texting while driving increases by 400 percent a driver’s time spent with their eyes off the road. At 55 mph, that’s enough time to travel the length of a football field.17 Psychologist Dan Ariely noted, “This behavior embodies the way we’re capable of doing things that can kill us without thinking about the long-term consequences.”18 Two nonrational models that might explain this behavior are Herbert Simon’s normative model and the