ENTREPRENEURIAL LEADERSHIP IN AN ORGANIZATION

RECITATION NO. 3 (ORAL)

Understanding Decision Making

QUESTIONS:

1. Give 2 Ideas for Enhancing Organizational Creativity and explain each.

2. Identify the dimensions of creativity and briefly explain.
3. What is Rational Decision making. Explain
4. Explain intuitive decision-making model
5. Identify and explain the steps in Creative Decision-making Process
6. What is Decision Making? Why is it important in an organization?

ANSWERS:

1)
Decision making refers to making choices among alternative courses of action— which may also
include inaction. While it can be argued that management is decision making, half of the decisions made by
managers within organizations fail.

Therefore, increasing effectiveness in decision making is an important part of maximizing your

effectiveness at work. This chapter will help you understand how to make decisions alone or in a group while
avoiding common decision-making traps. Individuals throughout organizations use the information they gather
to make a wide range of decisions. These decisions may affect the lives of others and change the course of an
organization. For example, the decisions made by executives and consulting firms for Enron ultimately resulted
in a $60 billion loss for investors, thousands of employees without jobs, and the loss of all employee retirement
funds. But Sherron Watkins, a former Enron employee and now-famous whistleblower, uncovered the
accounting problems and tried to enact change. Similarly, the decisions made by firms to trade in mortgage-
backed securities is having negative consequences for the entire U.S. economy. Each of these people made a
decision, and each person, as well as others, is now living with the consequences of his or her decisions.
Because many decisions involve an ethical component, one of the most important considerations in
management is whether the decisions you are making as an employee or manager are ethical. Here are some
basic questions you can ask yourself to assess the ethics of a decision. Is this decision fair?

• Will I feel better or worse about myself after I make this decision?
• Does this decision break any organizational rules?
• Does this decision break any laws?
• How would I feel if this decision was broadcast on the news?

2)

Ideas for Enhancing Organizational Creativity

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We have seen that organizational creativity is vital to organizations. Here are some guidelines for
enhancing organizational creativity within teams.

Team Composition (Organizing/Leading)

 Diversify your team to give them more inputs to build on and more opportunities to create functional
conflict while avoiding personal conflict.
 Change group membership to stimulate new ideas and new interaction patterns.
 Leaderless teams can allow teams freedom to create without trying to please anyone up front.

Team Process (Leading)

 Engage in brainstorming to generate ideas - remember to set a high goal for the number of ideas the
group should come up with, encourage wild ideas, and take brainwriting breaks.
 Use the nominal group technique in person or electronically to avoid some common group process
pitfalls. Consider anonymous feedback as well.
 Use analogies to envision problems and solutions.

Leadership (Leading)

 Challenge teams so that they are engaged but not overwhelmed.

 Let people decide how to achieve goals, rather than telling them what goals to achieve.
 Support and celebrate creativity even when it leads to a mistake. But set up processes to learn from
mistakes as well.
 Model creative behavior.
Culture (Organizing)

 Institute organizational memory so that individuals do not spend time on routine tasks.
 Build a physical space conducive to creativity that is playful and humorous—this is a place where ideas
can thrive.
 Incorporate creative behavior into the performance appraisal process.
3)

Researchers focus on three factors to evaluate the level of creativity in the decision-making process. Fluency
refers to the number of ideas a person is able to generate. Flexibility refers to how different the ideas are from
one another. If you are able to generate several distinct solutions to a problem, your decision-making process is
high on flexibility. Originality refers to an idea’s uniqueness. You might say that Reed Hastings, founder and
CEO of Netflix, is a pretty creative person. His decision-making process shows at least two elements of
creativity. We do not exactly know how many ideas he had over the course of his career, but his ideas are fairly
different from one another. After teaching math in Africa with the Peace Corps, Hastings was accepted at
Stanford University, where he earned a master’s degree in computer science. Soon after starting work at a
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software company, he invented a successful debugging tool, which led to his founding the computer
troubleshooting company Pure Software in 1991. After a merger and the subsequent sale of the resulting
company in 1997, Hastings founded Netflix, which revolutionized the DVD rental business through online
rentals with no late fees. In 2007, Hastings was elected to Microsoft’s board of directors. As you can see, his
ideas are high in originality and flexibility.

4)

Making Rational Decisions

The rational decision-making model describes a series of steps that decision makers should consider if
their goal is to maximize the quality of their outcomes. In other words, if you want to make sure you make the
best choice, going through the formal steps of the rational decision-making model may make sense.

Let’s imagine that your old, clunky car has broken down and you have enough money saved for a
substantial down payment on a new car. It is the first major purchase of your life, and you want to make the
right choice. The first step, therefore, has already been completed—we know that you want to buy a new car.
Next, in step 2, you’ll need to decide which factors are important to you. How many passengers do you want to
accommodate? How important is fuel economy to you? Is safety a major concern? You only have a certain
amount of money saved, and you don’t want to take on too much debt, so price range is an important factor as
well. If you know you want to have room for at least five adults, get at least 20 miles per gallon, drive a car with
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a strong safety rating, not spend more than $22,000 on the purchase, and like how it looks, you’ve identified the
decision criteria. All of the potential options for purchasing your car will be evaluated against these criteria.

Before we can move too much further, you need to decide how important each factor is to your decision
in step 3. If each is equally important, then there is no need to weight them, but if you know that price and gas
mileage are key factors, you might weight them heavily and keep the other criteria with medium importance.
Step 4 requires you to generate all alternatives about your options. Then, in step 5, you need to use this
information to evaluate each alternative against the criteria you have established. You choose the best
alternative (step 6) and you go out and buy your new car (step 7).

Of course, the outcome of this decision will be related to the next decision made; that is where the
evaluation in step 8 comes in. For example, if you purchase a car but have nothing but problems with it, you are
unlikely to consider the same make and model in purchasing another car the next time!

5)

Making Intuitive Decisions

The intuitive decision-making model has emerged as an important decision-making model. It refers to
arriving at decisions without conscious reasoning. Eighty-nine percent of managers surveyed admitted to using
intuition to make decisions at least sometimes, and 59% said they used intuition often.

When we recognize that managers often need to make decisions under challenging circumstances with
time pressures, constraints, a great deal of uncertainty, highly visible and high-stakes outcomes, and within
changing conditions, it makes sense that they would not have the time to formally work through all the steps of
the rational decision-making model. Yet when CEOs, financial analysts, and healthcare workers are asked about
the critical decisions they make, seldom do they attribute success to luck. To an outside observer, it may seem
like they are making guesses as to the course of action to take, but it turns out that they are systematically
making decisions using a different model than was earlier suspected. Research on life-or-death decisions made
by fire chiefs, pilots, and nurses finds that these experts do not choose among a list of well-thought-out
alternatives. They don’t decide between two or three options and choose the best one. Instead, they consider
only one option at a time. The intuitive decision-making model argues that, in a given situation, experts making
decisions scan the environment for cues to recognize patterns.

Once a pattern is recognized, they can play a potential course of action through to its outcome based on
their prior experience. Due to training, experience, and knowledge, these decision makers have an idea of how
well a given solution may work. If they run through the mental model and find that the solution will not work,
they alter the solution and retest it before setting it into action. If it still is not deemed a workable solution, it is
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discarded as an option and a new idea is tested until a workable solution is found. Once a viable course of action
is identified, the decision maker puts the solution into motion. The key point is that only one choice is
considered at a time. Novices are not able to make effective decisions this way because they do not have enough
prior experience to draw upon.

6)

The five steps to creative decision making are similar to the previous decision-making models in some key’s
ways. All of the models include problem identification, which is the step in which the need for problem solving
becomes apparent. If you do not recognize that you have a problem, it is impossible to solve it. Immersion is the
step in which the decision maker thinks about the problem consciously and gathers information. A key to
success in creative decision making is having or acquiring expertise in the area being studied. Then, incubation
occurs. During incubation, the individual sets the problem aside and does not think about it for a while. At this
time, the brain is actually working on the problem unconsciously. Then comes illumination or the insight
moment, when the solution to the problem becomes apparent to the person, usually when it is least expected.
This is the “eureka” moment similar to what happened to the ancient Greek inventor Archimedes, who found a
solution to the problem he was working on while he was taking a bath. Finally, the verification and application
stage happens when the decision maker consciously verifies the feasibility of the solution and implements the
decision.

A NASA scientist describes his decision-making process leading to a creative outcome as follows: He
had been trying to figure out a better way to de-ice planes to make the process faster and safer. After
recognizing the problem, he had immersed himself in the literature to understand all the options, and he worked
on the problem for months trying to figure out a solution. It was not until he was sitting outside of a
McDonald’s restaurant with his grandchildren that it dawned on him. The golden arches of the “M” of the
McDonald’s logo inspired his solution: he would design the de-icer as a series of M’s!Interview by author Talya
Bauer at Ames Research Center, Mountain View, CA, 1990. This represented the illumination stage. After he
tested and verified his creative solution, he was done with that problem except to reflect on the outcome and
process.
ENTREPRENEURIAL LEADERSHIP IN AN ORGANIZATION