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DECISION MAKING,

LEARNING, CREATIVITY &


ENTREPRENEURSHIP
LECTURE BY: MISS HAREEM SIDDIQUI
CHAPTER # 4
CHAPTER OBJECTIVES
This Chapter would enable you to

1 Understand Decision and Decision Making

2 Types of Decisions

3 Bounded Rationality

4 Understand Decision making Process

5 Understand Organizational Learning and Creativity

6 Identify the need for Entrepreneurship

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DECISION

A selection from two or more alternatives.

It seems so simple but its actually not.


So what is that which makes it more complicated?

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DECISION MAKING

A process of choosing the best alternative for


reaching objectives.

The process by which managers respond to


opportunities and threats by analyzing
options and making determinations about
specific organizational goals and courses of
action.

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WHAT TYPE OF DECISIONS
MANAGERS MAKE?
TOP FIRST
MIDDLE
LEVEL LINE
MANAGE
MANAGE MANAGE
RS
RS RS
Decide about Decide about Setting daily or
organizations setting production weekly production
goals. schedule. schedule.
Where to locate Handling problems
Allocating pay
manufacturing that arise.
facilities?
raises.
Deciding about
What new markets
Disciplining machines and
to move into? employees. equipments
What products/ maintenance
services to offer? schedules.

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TYPES OF DECISIONS
1. PROGRAMMED DECISIONS

A routine and repetitive type of decision.


The problem is familiar, information about the
problem is clearly defined.
A well structured problem.
Standard decisions are made according to
established management guidelines.
EXAMPLE:
How to satisfy a customer incase the server spills a
drink on the customers coat.

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TYPES OF DECISIONS

2. NON-PROGRAMMED DECISION:

A unique or unusual kind of decision.


Poorly structured problem.
A non programmed decision is required here to
have a unique solution.
EXAMPLE:
Starting up business in a new geographical
location.

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DECISION MAKING MODELS
CLASSICAL MODEL
A prescriptive approach to decision making based
on the assumption that the decision maker can
identify and evaluate all possible alternatives and
their consequences and rationally choose the most
appropriate course of action.

Optimum Decision Most appropriate decision


in light of what managers believe to be
the most desirable
consequences for the organization.

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DECISION MAKING MODELS
CLASSICAL MODEL

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DECISION MAKING MODELS
ADMINISTRATIVE MODEL
An approach to decision making that explains why
decision making is inherently uncertain and risky
and why managers usually make satisfactory
rather than optimum decisions.

But still the managerial decision making has to be


rational.

Rational Decision making describes choices that


are value maximizing and consistent within
specified constraints.

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DECISION MAKING MODELS
ADMINISTRATIVE MODEL
Based on 3 concepts:
Bounded rationality
Incomplete Information
Satisficing

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DECISION MAKING MODELS
ADMINISTRATIVE MODEL
Bounded Rationality Behavior that is
rational within the parameters of a
simplified decision making process, which
is limited (or bounded) by an individuals
ability to process information.

Since managers cant


possibly analyze all
alternatives, managers
Satisfice rather than
maximize.
Acceptance of
solutions that are
good enough.

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DECISION MAKING MODELS
ADMINISTRATIVE MODEL
Incomplete Information

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DECISION MAKING PROCESS
Recognize the need for a
Decision

Generate Alternatives

Analysis of Alternatives
Legal Ethical Economical
Practical

Selection of an Alternative

Implementation of an Alternative

Evaluation of Decision
Effectiveness/ Learn from
Feedback
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DECISION MAKING HEURISTICS
AND BIASES

Heuristics refers to Rule of Thumb.

Bias refers to departures from rational theory that


produce suboptimal decisions.

The more decisions are made through intuition


based on heuristics and biases, the more they will
be flawed.

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DECISION MAKING HEURISTICS
AND BIASES
Overconfidence
Prior Hypothesis Bias
Representativeness
Illusion of Control
Escalation of Commitment

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ORGANIZATIONAL LEARNING
AND CREATIVITY
The process through which managers seek to
improve employees desire and ability to
understand and manage the organization and its
task environment.

Creativity Ability to discover original and novel


ideas that lead to feasible alternative
courses of action.

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ORGANIZATIONAL LEARNING
AND CREATIVITY
Promoting Individual Creativity
Promoting Group Creativity
Brainstorming
Nominal Group Technique
Delphi Technique

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ENTREPRENEURSHIP AND
CREATIVITY
ENTREPRENEURSHIP & INTRAPRENEUR
Entrepreneur Who notices opportunities and
decides how to mobilize the
resources necessary to produce new and improved
goods and services.

Intrapreneur A manag Scientist, or researcher


who works inside an organization and
notices opportunities to develop new or
improved products and better ways to make them.

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ENTREPRENEURSHIP AND
CREATIVITY
CHARACTERISTICS OF ENTREPRENEUR
Openness to experience
Internal Locus of Control
High Level of Self-Esteem
High Need for Achievement
Stress Management

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ENTREPRENEURSHIP AND
CREATIVITY
ENTREPRENEURSHIP AND MANAGEMENT
Entrepreneurship is NOT the same as Management.

Management encompasses all the decisions


involved in planning, organizing, leading, and
controlling resources.

Entrepreneurship is noticing an opportunity to


satisfy a customer need and then deciding how to
find and use resources to make a product that
satisfies that need.

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