DECISION MAKING AND CREATIVITY

Rational choice paradigm.

Decision making is a conscious process of making choices among one or more alternatives with
the intention of moving toward some desired state of affairs. The rational choice paradigm
relies on subjective expected utility to identify the best choice. It also follows the logical process
of identifying problems and opportunities, choosing the best decision style, developing
alternative solutions, choosing the best solution, implementing the selected alternative, and
evaluating decision outcomes.

Decision making involves identifying and choosing alternative solutions that lead to a desired
state of affairs. Three models of decision making are the rational model, Simon’s normative
model, and the garbage can model. The rational model assumes managers use a rational, four-
step sequence: identifying the problem, generating alternative solutions, evaluating and
selecting a solution, and implementing and evaluating the solution. The rational model
assumes that managers optimize (produce the best possible solution) when they make
decisions. The rational model of decision making attempts to explain how decisions should be
made, while nonrational models, including the normative model and the garbage can model,
attempt to explain how decisions are actually made.

The normative model is based on the assumption of bounded rationality—the idea that
decision makers are restricted by a variety of constraints. According to the normative model,
decision making is characterized by the tendency to acquire manageable rather than optimal
amounts of information and contends that decision makers will satisfice. Satisficing consists of
choosing a solution that meets a minimum qualification or is “good enough” rather than
searching for the one optimal solution. The garbage can model is based on the assumption that
decision making is sloppy and haphazard. Decisions result from an interaction between four
independent streams of events: problems, solutions, participants, and choice opportunities.
Consultants David Snowden and Mary Boone developed their own approach to decision making
that combines elements of rational and nonrational models. With this approach, they describe
simple, complicated, complex and chaotic decision environments and identify an effective
method of decision making for each decision environment.

Decision making is prone to biases when people rely on judgmental heuristics—shortcuts that
people use to reduce information-processing demands. Heuristics can help decision makers
reduce the uncertainty in the decision-making process, but they can lead to systematic errors
that erode the quality of decisions. Eight decision-making biases are discussed in this chapter:
availability heuristic, representativeness heuristic, confirmation bias, anchoring bias,
overconfidence bias, hindsight bias, framing bias, and escalation of commitment bias. The
availability heuristic occurs when decisions are based on readily available data. The
representativeness heuristic is the tendency to assess the likelihood of an event occurring
based on one’s impressions about similar occurrences. With the confirmation bias, we seek
information that confirms our expectations and discount information that does not. With the
anchoring bias, our estimates are biased by relevant or irrelevant anchors. The overconfidence
bias represents a tendency to overestimate our accuracy. The hindsight bias occurs when
knowledge of an outcome influences our belief about the probability that we could have
predicted the outcome earlier. The way information is presented impacts how it is perceived
with framing effects. Finally, escalation of commitment bias occurs when we continue to
irrationally invest in an ineffective course of action due to sunk costs.

Evidence-based decision making (EBDM) is a process of conscientiously using the best available
data and evidence when making managerial decisions.
Five-step model of EBDM.
Step 1 is to identify the problem or opportunity.
Step 2 is to gather internal data about problem while
Step 3 is to gather external data. In
Step 4, this information is integrated with views from stakeholders and ethical implications are
considered. Finally in
Step 5, the information is integrated and critically appraised to make a final decision.

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This process helps ensure managers use relevant and reliable data from different sources and
avoid their personal biases when making decisions. Jeffrey Pfeffer and Robert Sutton offer
implementation principles to help companies integrate EBDM into an organization’s culture,
including the need to treat the organization as an unfinished prototype and the need to see the
organization as outsiders do, but there are reasons why it is challenging to use EBDM, including
the fact there may be too much evidence or not enough good evidence.

Decision-making styles reflect the combination of how an individual perceives and

comprehends stimuli and the general manner in which he or she chooses to respond to such
information. The model of decision-making styles is based on the idea that styles vary along
two different dimensions: value orientation and tolerance for ambiguity. When these two
dimensions are combined, they form four styles of decision making: directive, analytical,
conceptual, and behavioral. Each style is associated with its own set of advantages and
disadvantages. Knowledge of these decision-making styles can help you understand your own
strengths and weaknesses as a decision maker and increase your ability to influence others by
being aware of style differences.

Intuition represents judgments, insights, or decisions that come to mind on their own, without
explicit awareness of the evoking cues and without explicit evaluation of the validity of these
cues. There are two types of intuition: holistic hunches and automated experiences. There are
two sources of intuition: expertise and feelings. Intuition can speed up the decision process,
but it can also lead to judgmental biases.

A decision tree is a graphical representation of the process underlying decision making and a
decision tree can be used as an aid in decision making. The decision tree can help managers to
make more ethical decisions. The first branch in the tree is to decide if the proposed action is
legal. If it is, then the decision maker must consider if it maximizes shareholder value. It is
does, the decision maker must determine if the proposed action is ethical by considering the
effect of the decision on other stakeholders. If a proposed action does not maximize
shareholder value, the decision maker must consider if it would be ethical not to take the
action. If costs to other constituents exceed the cost to the firm’s shareholders, the action
should be taken, but the effect of the action should be disclosed to the shareholders.

In order to maximize the value of group decision making, it is important to create an

environment in which group members feel free to participate and to express their opinions.
Group decision making is enhanced if there are high levels of minority dissent and participation
in decision making. It is important that group members feel comfortable disagreeing with other
group members and that there is discussion among the group members. Groups contain a
greater pool of knowledge, provide varied perspectives, create greater comprehension of
decisions, increase decision acceptance, and provide a training ground for less experienced
employees. Research supports the notion that group performance is qualitatively and
quantitatively superior to that of the average individual. However, groups are prone to social
pressure, domination by a vocal few and can suffer from groupthink. Politics and goal
displacement can also negatively impact the effectiveness of group decision making.

Group decision-making generally requires that a consensus is reached. Consensus does not
require unanimous agreement because group members may still disagree with the final
decision as long as dissenters feel that their concerns were “heard” and are willing to work
toward its success. Three group problem-solving techniques are brainstorming, the nominal
group technique (NGT), and the Delphi technique. The goal of the brainstorming technique is
to generate a large quantity of ideas and alternatives. However, it is not appropriate for
evaluating alternatives or selecting solutions. The NGT technique emphasizes both idea
generation and solution evaluation. By separating brainstorming from evaluation and
promoting balanced participation among group members, the NGT reduces the roadblocks to
group decision making. The Delphi technique anonymously generates ideas from physically
dispersed experts. Experts’ ideas are obtained from questionnaires or via the Internet as
opposed to face-to-face group discussions. Finally, computer-aided decision making includes
chauffeur-driven systems and group-electronic meetings. Research indicates that computer-

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 aided decision making produces greater quality and quantity of ideas than either the
brainstorming or nominal group techniques.

Employee involvement
Employee involvement refers to the degree that employees influence how their work is
organized and carried out. The level of participation may range from an employee providing
specific information to management without knowing the problem or issue, to complete
involvement in all phases of the decision process. Employee involvement may lead to higher
decision quality and commitment, but several contingencies need to be considered, including
the decision structure, source of decision knowledge, decision commitment, and risk of conflict

Creativity is the process of using intelligence, imagination, and skill to develop a new or novel
product, object, process, or thought. Creativity involves making remote associations between
unconnected events, ideas, information, or physical objects. There are five stages of the
creative process: preparation, concentration, incubation, illumination, and verification.
Creativity starts from a base of tacit and explicit knowledge and trying to focus too much on
trying to come up with creative solutions can actually block creativity. Creativity can be
enhanced by effectively managing the creative process and by fostering a positive and
supportive work environment. Managers are encouraged to establish an organizational culture
that emphasizes innovation, to establish innovation goals, and to allocate rewards and
resources to innovative activities.
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TEST OF CREATIVE THINKING

1. There is one word in the English language that is always pronounced incorrectly. What is it?
2. A man gave one son 10 cents and another son was given 15 cents. What time is it?
3. A boat has a ladder that has six rungs, each rung is one foot apart. The bottom rung is one
foot from the water. The tide rises at 12 inches every 15 minutes. High tide peaks in one hour.
When the tide is at its highest, how many rungs are under water?
4. There is a house with four walls. Each wall faces south. There is a window in each wall. A bear
walks by one of the windows. What color is the bear?
5. What can go up a chimney down, but can't go down a chimney up?
6. What is it that goes up and goes down but does not move?

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Creativity Brainbusters
1. Double-circle problem. Draw two circles, one inside the other, with a single line and with
neither circle touching the other (as shown below). In other words, you must draw both of
these circles without lifting your pen (or other writing instrument).

2. Nine-dot problem. Below are nine dots. Without lifting your pencil, draw no more than four
straight lines that pass through all nine dots.

3. Word search. In the following line of letters, cross out five letters so that the remaining letters,
without altering their sequence, spell a familiar English word. CFRIVEELATETITEVRSE

SOLUTIONS
Double Circle Problem. I have found that students are usually dumbfounded and don’t even
try. How can you draw two circles with one line and no connection between them? Here’s the
answer: Draw the outer circle anywhere on the page. When finished, fold a corner of the paper
over so that it lies on top of the circle and the paper edge is beside your pencil (see exhibit (a)

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 below). Move the pencil across this folded over edge to a point inside the circle you just drew.
Move the corner back to its original position and complete the second circle.

Nine Dot Problem. (Note: This is sometimes known as the Eskimo puzzle because Inuit people
apparently have less trouble solving them. The reason is that they have no fences, so their brain
doesn’t restrict their solutions within the area of the dots.) There are many ways to solve this
puzzle. The first solution below (Exhibit (b)) is the most common. Solution (c) is somewhat
questionable because the pencil doubles back across existing lines. Some might say that there
are more than four lines, although we see only four lines.

Word Search Problem. The trick here is to correctly interpret the meaning of the instructions.
May people tend to look for five letters that they can cross out. Instead, they should cross out
the words “five letters” that are embedded in the row of letters. This leaves the word
“creative.” [Note: This exercise is fairly new, so it may be possible that students can cross out
any five letters in the sequence to form a single word. However, we have not yet found this
option.]
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CREATIVITY QUIZ
1) There is one word in the English language that is always pronounced incorrectly. What is it?
Incorrectly
2) A man gave one son 10 cents and another son was given 15 cents. What time is it?
1:45. The man gave away a total of 25 cents. He divided it between two people. Therefore,
he gave a quarter to two.
3) 10. What can go up a chimney down, but can't go down a chimney up?
An umbrella.
4) A boat has a ladder that has six rungs, each rung is one foot apart. The bottom rung is one foot
from the water. The tide rises at 12 inches every 15 minutes. High tide peaks in one hour.
When the tide is at its highest, how many rungs are under water?
None, the boat rises with the tide.
5) There is a house with four walls. Each wall faces south. There is a window in each wall. A bear
walks by one of the windows. What color is the bear?
White. If all the walls face south, the house is at the North Pole, and the bear, therefore, is a
polar bear.
6) What is it that goes up and goes down but does not move?
The temperature.

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