12 Langton Ob 4ce ch12

Chapter 12
Decision Making, Creativity, and Ethics
Chapter 12, Nancy Langton and Stephen P. Robbins, Organizational Behaviour, Fourth Canadian Edition Copyright 2007 Pearson Education Canada
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Chapter Outline
How Should Decisions Be Made? How Do Individuals Actually Make Decisions? Improving Decision Making Through Knowledge Management The Influence of the Leader on Group Decision Making Creativity in Organizational Decision Making What About Ethics in Decision Making? Corporate Social Responsibility
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1. Is there a right way to make decisions? 2. How do people actually make decisions? 3. How can knowledge management improve decision making? 4. What factors affect group decision making? 5. Should the leader make the decision, or encourage the group to participate?
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6. How can we get more creative decisions? 7. What is ethics, and how can it be used for better decision making? 8. What is corporate social responsibility?
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Exhibit 12-1 Steps in the Rational Decision-Making Model

1. Define the problem 6. 2. Identify the criteria
Select the best alternative
Making a Decision
5. Evaluate the alternatives 4. Develop alternatives 3. Allocate weights to the criteria
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Assumptions of the Rational Decision-Making Model

Problem clarity The problem is clear and unambiguous. Known options The decision maker can identify all relevant criteria and viable alternatives. Clear preferences Rationality assumes that the criteria and alternatives can be ranked and weighted.
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Assumptions of the Rational Decision-Making Model

Constant preferences Specific decision criteria are constant and the weights assigned to them are stable over time. No time or cost constraints Full information is available because there are no time or cost constraints. Maximum payoff The choice alternative will yield the highest perceived value.
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Problem Identification
Problems that are visible tend to have a higher probability of being selected than ones that are important. Why?
It is easier to recognize visible problems. Decision makers want to appear competent and on top of problems. Decision makers self-interest affects problem selection because it is usually in the decision makers best interest to address problems of high visibility and high payoff. This demonstrates an ability to perceive and attack problems.
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Bounded Rationality
Bounded Rationality
Limitations on ones ability to interpret, process, and act on information.
Satisficing
Identifying a solution that is good enough.
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Intuitive Decision Making

A subconscious process created out of distilled experience. When used:
High level of uncertainty. Little precedent. Variables are less scientifically predictable. Facts are limited. Facts dont clearly point the way. Analytical data are of little use. Several plausible alternative solutions. Time is limited.
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Heuristics or Judgment Shortcuts

Framing
The selective use of perspective.
Statistical Regression to the Mean

Failure to recognize that performances tend towards the average, rather than extremes.
Availability Heuristic
The tendency of people to base their judgments on information readily available to them.
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Heuristics or Judgment Shortcuts

Representative Heuristic
The tendency to assess the likelihood of an occurrence by trying to match it with a pre-existing category.
Ignoring the Base Rate

Ignoring the statistical likelihood of an event when making a decision.
Escalation of Commitment
An increased commitment to a previous decision in spite of negative information.
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Exhibit 12-2 Scenario 1

Answer part A before reading part B.
A: Threatened by a superior enemy force, the general faces a dilemma. His intelligence officers say his soldiers will be caught in an ambush in which 600 of them will die unless he leads them to safety by one of two available routes. If he takes the first route, 200 soldiers will be saved. If he takes the second, theres a one-third chance that 600 soldiers will be saved and a two-thirds chance that none will be saved. Which route should he take?
B: The general again has to choose between two escape routes. But this time his aides tell him that if he takes the first, 400 soldiers will die. If he takes the second, theres a one-third chance that no soldiers will die, and a two-thirds chance that 600 soldiers will die. Which route should he take?
(continued)
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Exhibit 12-2 Scenario 2

Linda is 31, single, outspoken, and very bright. She majored in philosophy in university. As a student, she was deeply concerned with discrimination and other social issues, and participated in antinuclear demonstrations. Which statement is more likely:
a. Linda is a bank teller. b. Linda is a bank teller and active in the feminist movement.
Source: K. McKean, Decisions, Decisions, Discover, June 1985, pp. 22-31.
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Reducing Biases in Decision Making

Focus on goals. Look for information that disconfirms your beliefs. Dont create meaning out of random events. Increase your options.
Source: S. P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164-168.
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Knowledge Management
The process of organizing and distributing an organizations collective wisdom so the right information gets to the right people at the right time.
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Why its important:
Organizations can use it to outsmart their competition. Baby boomers are taking their knowledge with them when leaving the workforce. A well-designed KM system reduces redundancy and makes the organization more efficient.
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Recording knowledge and expertise:
Develop computer databases of pertinent information that employees can readily access. Create a culture that promotes, values, and rewards sharing knowledge. Develop mechanisms that allow employees who have built up valuable expertise and insights to share them with others.
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Group Decision Making

Strengths of Group Decision Making
Generates more complete information and knowledge.
Weaknesses of Group Decision Making

More time consuming. Conformity pressures in groups. Discussion can be dominated by one or a few members.
Offers increased diversity of views.

Generates higher-quality decisions. Leads to increased acceptance of a solution.
Decisions suffer from ambiguous responsibility.

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Exhibit 12-3 Group vs. Individual Decision Making

Criteria of Effectiveness Accuracy Speed Creativity Degree of acceptance Efficiency Groups Individuals
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Groupthink and Groupshift

Groupthink
Phenomenon in which the norm for consensus overrides the realistic appraisal of alternative courses of action.
Groupshift
Phenomenon in which the initial positions of individual members of a group are exaggerated toward a more extreme position.
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Symptoms of Groupthink
Illusion of invulnerability Assumption of morality Rationalized resistance Peer pressure Minimized doubts Illusion of unanimity
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Minimizing Groupthink
Encourage group leaders to play an impartial role. Appoint one group member to play the role of devils advocate. Stimulate active discussion of diverse alternatives.
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What Causes Groupshift?

Discussion creates familiarization among group members. Group discussion motivates individuals to take risks. Group diffuses responsibility.
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Group Decision-Making Techniques

Interacting Groups Brainstorming Nominal Group Technique Electronic Meetings
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Exhibit 12-4 Nominal Group Technique

Individual Activity
Team members receive description of problem. Individuals silently write down possible solutions.
Group Activity
Individuals take turns describing solutions to each other; Group then discusses and evaluates ideas.
Individual Activity
Individuals silently rank (or vote on) each solution presented.
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Exhibit 12-5 Evaluating Group Effectiveness

Type of Group Effectiveness Criteria Interacting Brainstorming Nominal Electronic
Number of ideas
Quality of ideas Social pressure Money costs Speed Task orientation Potential for interpersonal conflict Feelings of accomplishment Commitment to solution Develops group cohesiveness
Low
Low High Low Moderate Low High High to low High High
Moderate
Moderate Low Low Moderate High Low High Not applicable High
High
High Moderate Low Moderate High Moderate High Moderate Moderate
High
High Low High High High Low High Moderate Low
Source: Based on J. K. Murnighan, Group Decision Making: What Strategies Should You Use? Academy of Management Review, February 1981, p. 61.
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Leader Behaviours with Groups

AI
You solve the problem or make a decision yourself using whatever facts you have at hand.
AII
You obtain the necessary information from subordinates and then decide on the solution to the problem yourself.
CI
You share the problem with relevant subordinates one-onone, getting their ideas and suggestions. However, the final decision is yours alone.
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Leader Behaviours with Groups

CII You share the problem with your subordinates as a group, collectively obtaining their ideas and suggestions. Then you make the decision that may or may not reflect your subordinates influence. GII You share the problem with your subordinates as a group. Your goal is to help the group concur on a decision. Your ideas are not given any greater weight than those of others.
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Exhibit 12-6 Revised LeadershipParticipation Model

QR Quality requirement: CR Commitment requirement: LI Leader's information: ST Problem structure: CP Commitment probability: GC Goal congruence: CO Subordinate conflict: SI Subordinate information: How important is the technical quality of this decision? How important is subordinate commitment to the decision? Do you have sufficient information to make a high-quality decision? Is the problem well structured? If you were to make the decision by yourself, is it reasonably certain that your subordinate(s) would be committed to the decision? Do subordinates share the organizational goals to be attained in solving this problem? Is conflict among subordinates over preferred solutions likely? Do subordinates have sufficient information to make a high-quality decision? CP GC CP LI No ST CP No GC CO CR GC GC LI State the QR problem ST No CO Yes Yes Yes AI
SI
Yes
GII CII
SI
GII CII AII CI CII AI Source: Adapted and reprinted from Leadership and Decision-Making, by Victor H. Vroom and Philip W. Yetton, by permission of the University of Pittsburgh Press. Copyright 1973 by University of Pittsburgh Press.
CR
CP
No
GII
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Creativity in Organizational Decision Making

The process of creating products, ideas, or procedures that are novel or original, and are potentially relevant or useful to an organization.
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De Bonos Six Thinking Hats

White hat
Impartial thinking, focusing strictly on the facts.
Red hat
Expression of feelings, passions, intuitions, emotions.
Black hat
A critical, deliberate, evaluating outlook.
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De Bonos Six Thinking Hats

Yellow hat
An optimistic, upbeat, positive outlook.
Green hat
Creativity, inspiration, imagination, and the free flow of new concepts.
Blue hat
Control, an overall managerial perspective of the process.
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Organizational Factors Affecting Creativity

Challenge Freedom Resources Work-group features Supervisory encouragement Organizational support
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Creativity Blocks
Expected evaluation Surveillance External motivators Competition Constrained choice
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Four Criterion for Making Ethical Choices

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.
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 expresses care in protecting the special relationships that individuals have with each other.
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Exhibit 12-7 Factors Affecting Ethical Decision-Making Behaviour

Stage of moral development Ethical decision-making behaviour
Organization environment
Locus of control
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Exhibit 12-8 Stages of Moral Development

Principled
6. Following self-chosen ethical principles even if they violate the law. 5. Valuing rights of others and upholding absolute values and rights regardless of the majoritys opinion.
Conventional
4. Maintaining conventional order by fulfilling obligations to which you have agreed. 3. Living up to what is expected by people close to you.
Preconventional
2. Following rules only when doing so is in your immediate interest. 1. Sticking to rules to avoid physical punishment.
Source: Based on L. Kohlberg, Moral Stages and Moralization: The Cognitive-Developmental Approach, in Moral Development and Behaviour: Theory, Research, and Social Issues, ed. T. Lickona (New York: Holt, Rinehart and Winston, 1976), pp. 34-35.
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Exhibit 12-9 Is a Decision Ethical?

Unethical
Ethical
s Ye
Question 3
Is the decision fair and equitable?
s Ye
Question 1
Is the decision motivated by self-serving interests?
Question 2
No
es Y
No
Does the decision respect the rights of the individuals affected?
Unethical
No
Unethical
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Corporate Response to Ethics Demands

Explosion in demand for more ethical behaviour.
Ethics specialists Ethics officers Codes of ethics Ethics auditors
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Developing a Meaningful Code of Ethics

Clearly state basic principles and expectations. Realistically focus on potential ethical dilemmas that employees face. Distribute the code to all employees. Enforce violations of the code.
Source: Based on W. E. Stead, D. L. Worrell, and J. G. Stead, An Integrative Model for Understanding and Managing Ethical Behavior in Business Organizations, Journal of Business Ethics 9, no. 3 (March 1990), pp. 233-242.
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Corporate Social Responsibility

An organizations responsibility to consider the impact of its decisions on society.
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Summary and Implications

1. Is there a right way to make decisions?
The rational decision making model describes six steps: define the problem, identify the criteria, allocate weights to the criteria, develop alternatives, evaluate alternatives, select the best alternative.
2.
How do people actually make decisions?

Decision makers may rely on bounded rationality, satisficing, and intuition. There are also shortcuts that are used.
By electronically storing information that employees have, organizations make it possible to share collective wisdom.
3.
How can knowledge management improve decision making?
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4. What factors affect group decision making?
Group decisions are time-consuming, lead to conformity pressures, can be dominated by one or few members, and suffer from ambiguous responsibility.
5.
Should the leader make the decision, or encourage the group to participate?
According to the revised leadership-participation model, the leaders role in the decision depends on the quality of the decision required, the degree of commitment needed from participants, and the time available.
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6. How can we get more creative decisions?
Employees are more creative when they are motivated by intrinsic interest, challenge, task satisfaction, and self-set goals.
7.
What is ethics and how can it be used for better decision making?
Ethics is the study of moral value or principles that guid our behaviour and inform us whether actions are right or wrong. Is defined as an organizations responsibility to consider the impact of its decision on society.
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8.
What is corporate responsibility?
OB at Work
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For Review
1. What is the rational decision-making model? Under what conditions is it applicable? 2. Describe organizational factors that might constrain decision makers. 3. What role does intuition play in effective decision making? 4. What is groupthink? What is its effect on decision-making quality?
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For Review
5. What is groupshift? What is its effect on decisionmaking quality? 6. Identify five organizational factors that block creativity at work. 7. Describe the four criteria that individuals can use in making ethical decisions. 8. Are unethical decisions more a function of the individual decision maker or the decision makers work environment? Explain.
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For Critical Thinking

1. For the most part, individual decision making in organizations is an irrational process. Do you agree or disagree? Discuss. 2. What factors do you think differentiate good decision makers from poor ones? Relate your answer to the six-step rational decision-making model.
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For Critical Thinking

3. Have you ever increased your commitment to a failed course of action? If so, analyze the follow-up decision to increase your commitment and explain why you behaved as you did. 4. If group decisions are of consistently better quality than individual decisions, how did the phrase a camel is a horse designed by a committee become so popular and ingrained in our culture?
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Breakout Group Exercises

Form small groups to discuss the following:
1. 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? 2. 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? 3. Youve seen a classmate cheat on an exam or an assignment. Do you do something about this or ignore it?
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Ethical Dilemmas: What Would You Do?

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-expensespaid cruise to the Caribbean. You know the representatives 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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You have the opportunity to steal $100 000 from your company with absolute certainty that you would not be detected or caught. Would you do it?
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Your company policy on reimbursement for meals while travelling on company business is that you will be repaid for your out-ofpocket costs, which are not to exceed $50 a day. You dont need receipts for these expensesthe company will take your word. When travelling, you tend to eat at fast-food places and rarely spend in excess of $15 a day. Most of your colleagues submit reimbursement requests in the range of $40 to $45 a day regardless of what their actual expenses are. How much would you request for your meal reimbursements?
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You want to get feedback from people who are using one of your competitors products. You believe you will get much more honest responses from these people if you disguise the identity of your company. Your boss suggests you contact possible participants by using the fictitious name of the Consumer Marketing Research Corporation. What would you do?
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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?
Source: Several of these ethical dilemma scenarios are based on D. R. Altany, Torn Between Halo and Horns, IndustryWeek, March 15, 1993, pp. 15-20.
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12 Langton Ob 4ce ch12

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Chapter 12

Decision Making, Creativity, and Ethics

Decision Making, Creativity, and Ethics

Decision Making, Creativity, and Ethics

Exhibit 12-1 Steps in the Rational Decision-Making Model

Select the best alternative

Assumptions of the Rational Decision-Making Model

Assumptions of the Rational Decision-Making Model

Intuitive Decision Making

Heuristics or Judgment Shortcuts

Statistical Regression to the Mean

Heuristics or Judgment Shortcuts

Ignoring the Base Rate

Exhibit 12-2 Scenario 1

Exhibit 12-2 Scenario 2

Reducing Biases in Decision Making

Group Decision Making

Weaknesses of Group Decision Making

Offers increased diversity of views.

Decisions suffer from ambiguous responsibility.

Exhibit 12-3 Group vs. Individual Decision Making

Groupthink and Groupshift

What Causes Groupshift?

Group Decision-Making Techniques

Exhibit 12-4 Nominal Group Technique

Exhibit 12-5 Evaluating Group Effectiveness

Leader Behaviours with Groups

Leader Behaviours with Groups

Exhibit 12-6 Revised LeadershipParticipation Model

Creativity in Organizational Decision Making

De Bonos Six Thinking Hats

De Bonos Six Thinking Hats

Organizational Factors Affecting Creativity

Four Criterion for Making Ethical Choices

Exhibit 12-7 Factors Affecting Ethical Decision-Making Behaviour

Exhibit 12-8 Stages of Moral Development

Exhibit 12-9 Is a Decision Ethical?

Does the decision respect the rights of the individuals affected?

Corporate Response to Ethics Demands

Developing a Meaningful Code of Ethics

Corporate Social Responsibility

Summary and Implications

How do people actually make decisions?

How can knowledge management improve decision making?

Summary and Implications

Summary and Implications

What is corporate responsibility?

For Critical Thinking

For Critical Thinking

Breakout Group Exercises

Ethical Dilemmas: What Would You Do?

Ethical Dilemmas: What Would You Do?

Ethical Dilemmas: What Would You Do?

Ethical Dilemmas: What Would You Do?

Ethical Dilemmas: What Would You Do?

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