CHAPTER 4

Decision Making,
Learning,
Creativity, and
Entrepreneurship
(Text Chp. 7)

DECISION MAKING

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 Learning Objectives

1. Nature of Managerial Decision Making

• Programmed & Non-Programmed Decision
making
2. Steps in Decision Making Process
3. Group Decision Making

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 The Nature of Managerial
Decision Making (1 of 2)
Decision making
• The process by which managers respond to
opportunities and threats that confront them by
analyzing options and making determinations
about specific organizational goals and courses
of action

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 The Nature of Managerial
Decision Making
Decisions in response to opportunities
• This occurs when managers respond to ways
to improve organizational performance to
benefit customers, employees, and other
stakeholder groups.
Decisions in response to threats
• Events inside or outside the organization are
adversely affecting organizational
performance, and managers seek ways to
increase performance.
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 Decision Making

Programmed decision
• Programmed Decision involves Routine,
virtually automatic decision making that
follows established rules or guidelines.
• Decisions have been made so many times in
the past that managers have developed rules
or guidelines to be applied when certain
situations inevitably occur.
• Eg: Annual leave application

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 Decision Making

Nonprogrammed decisions
• Nonroutine decision making
that occurs in response to
unusual, unpredictable
opportunities and threats
• No rules because the situation
is unexpected or uncertain and
managers lack the information
they would need to develop
rules to respond to it
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 Decision Making

Intuition
• Feelings, beliefs, and hunches that come
readily to mind, require little effort and
information gathering, and result in on-the-
spot decisions
Reasoned judgment
• Decision that requires time and effort and
results from careful information gathering,
generation of alternatives, and evaluation of
alternatives
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 Figure 7.4 Six Steps in
Decision Making

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 Steps in Decision Making

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 Steps in Decision Making
Step 1. Recognize the need for a decision
•Sparked by an event such as environment changes
•Managers must first realize that a decision must be made
Step 2. Generate alternatives
•Managers must develop feasible alternative courses of action
•If good alternatives are missed, the resulting decision is poor
•It is hard to develop creative alternatives, so managers need to look
for new ideas
Step 3. Evaluate alternatives
•What are the advantages and disadvantages of each alternative?
•Managers should specify criteria, then evaluate

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 Steps in Decision Making
Step 4. Choose among alternatives
•Rank the various alternatives and make a decision
•Managers must be sure all the information available is brought to bear
on the problem or issue at hand
Step 5. Implement chosen alternative
•Managers must now carry out the alternative
•Often a decision is made and not implemented
Step 6. Learn from feedback
•Managers should consider what went right and wrong with the
decision and learn for the future
•Without feedback, managers do not learn from experience and will
repeat the same mistake over
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 Figure 7.5 General Criteria for Evaluating
Possible Courses of Action

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 Feedback Procedure

1. Compare what actually happened to

what was expected to happen as a result
of the decision.
2. Explore why any expectations for the
decision were not met.
3. Derive guidelines that will help in future
decision making.

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 Group Decision Making

Superior to individual
decision making
Choices less likely to fall
victim to bias
Able to draw on
combined skills of group
members
Improve ability to generate
feasible alternative
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 Group Decision Making

Potential disadvantages:
1. Can take much longer for groups than
individuals to make decisions
2. Can be difficult to get two or more
managers to agree because of different
interests and preferences
3. Can be undermined by biases
(advantage)

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 Group Decision Making

Groupthink
• Pattern of faulty and biased decision making
that occurs in groups whose members strive
for agreement among themselves at the
expense of accurately assessing information
relevant to a decision

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 Devil’s Advocacy and
Dialectical Inquiry

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 Promoting Group Creativity

Brainstorming
• Managers meet face-to-face to generate and debate many
alternatives.
• Group members are not allowed to evaluate alternatives until all
alternatives are listed.
• When all are listed, the pros and cons of each are discussed,
and a short list created.

Production blocking
• There might be a loss of productivity in brainstorming sessions
due to the unstructured nature of brainstorming.
• occurs because group members cannot always simultaneously
make sense of all the alternatives being generated
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 Building Group Creativity

Nominal group technique

• A decision-making technique in which group
members write down ideas and solutions,
read their suggestions to the whole group,
and discuss and then rank the alternatives

Useful when an issue is controversial and when

different managers might be expected to
champion different courses of action

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 Building Group Creativity

Delphi technique
• A decision making technique in which group
members do not meet face-to-face but
respond in writing to questions posed by the
group leader

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 Building Group Creativity

Delphi Technique
Written approach to creative problem solving
• Group leader writes a statement of the problem to which
managers respond
• Questionnaire is sent to managers to generate solutions
• Team of managers summarizes the responses and results
are sent back to the participants
• Process is repeated until a consensus is reached

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 Recap

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