OB: Decisions

The lecture delves into decision-making processes, differentiating between programmed and nonprogrammed decisions, emphasizing the importance of the latter in management. It explores the rational choice decision process and the challenges in maintaining rationality due to biases and heuristics like perceptual defense and satisficing. The discussion highlights the role of creativity and employee involvement in enhancing decision quality, advocating for participative management to foster better problem identification and solution generation. It underscores the value of hiring creative individuals, leveraging their potential even when immediate creativity isn't required, to ensure future organizational success.

• Managers are responsible for making both programmed and nonprogrammed decisions, with nonprogrammed decisions being more complex and requiring unique solutions.
• Effective decision-making is crucial for success in both personal and professional life.
• The rational choice decision process involves using logic and available information to make decisions that maximize value.

"Managers are paid to make decisions. Some decisions are tougher than others; some are programmed, and some are nonprogrammed."

• Managers must distinguish between routine (programmed) and unique (nonprogrammed) decisions.

"Effective decision-making can be the hallmark of a successful life and career."

• Decision-making is integral to achieving success across various aspects of life.

• The rational choice decision process aims for logical decision-making using all available information.
• The process involves identifying problems or opportunities, choosing a decision-making process, developing a list of choices, making the choice, implementing it, and evaluating the decision.

"If we could do that, we'd try and abide by the rational choice decision process, which is a paradigm that suggests that in decision-making, people should and typically do use logic and all available information to choose the alternative with the highest value."

• Ideal decision-making follows a logical, informed process to choose the best alternative.

"Next, we have to choose a decision-making process. Should we make the decision ourselves? Should we let others give their input?"

• Decision-making involves selecting an appropriate process based on the context and stakeholders involved.

• Perceptual defense, mental models, decisive leadership, solution-focused problems, and stakeholder framing are barriers to rational decision-making.
• Perceptual defense involves consciously blocking out negative information to protect self-esteem.
• Mental models can limit solutions if problems don't fit existing frameworks.
• Decisive leadership may lead to hasty decisions without full analysis.
• Solution-focused problems involve defining issues based on preferred solutions rather than actual needs.
• Stakeholder framing can skew problem perception based on vested interests.

"Perceptual defense can get in the way of seeing and identifying problems. This involves consciously blocking out bad news as a coping mechanism."

• Consciously ignoring negative information can hinder accurate problem identification.

"Mental models are a road map to a solution. If a problem or an issue does not fit the existing model, then the problem is inconsequential."

• Rigid mental models can prevent the recognition of valid problems that don't fit preconceived notions.

"Decisive leadership is a problem. This is zeroing in on a solution without analyzing all the facts in order to appear decisive."

• Leaders may make premature decisions to project decisiveness, neglecting thorough analysis.

• Heuristics are shortcuts or rules of thumb used in decision-making when rational processes are challenging.
• The anchoring and adjustment heuristic involves being influenced by an initial anchor point, affecting subsequent judgments.
• The availability heuristic prioritizes information that is easily recalled, often due to emotional experiences.

"The anchoring and adjustment heuristic suggests that we are easily influenced by an initial anchor point and that we rarely move far from it."

• Initial information heavily influences subsequent decisions, even if it's not optimal.

"The availability heuristic suggests that objects assign higher priority if they are easier to recall."

• Decisions may be biased by easily remembered past experiences, influenced by emotions.

These comprehensive notes capture the key themes and ideas discussed in the transcript, providing a detailed overview of decision-making processes and challenges in management.

• Emotions significantly influence our recall, affecting decision-making processes.
• The availability heuristic relies on recall, which can be biased by emotional experiences.

"Sometimes the total heartache of the experience... shows that emotions influence our recall."

• Emotions can skew our memory, impacting the decisions we make based on recalled information.

• This heuristic suggests that the probability of an event is perceived as higher if it resembles another event.
• Commonly seen in gambling, where people believe in "hot streaks" despite randomness.

"For example, gamblers tend to believe in hot streaks... consecutive roles of the dice are unrelated to each other."

• People often misjudge probabilities based on perceived patterns, leading to flawed decisions.

• Satisficing involves choosing a "good enough" option due to constraints like time and resources.
• Often used in hiring when immediate needs outweigh the ideal candidate search.

"Sometimes we choose the first solution that is good enough... because our decision making faces constraints like time and money."

• Practical constraints force decision-makers to settle for satisfactory rather than optimal solutions.

• Bounded rationality refers to the limits of human decision-making processes due to imperfect information.
• These limitations can lead to suboptimal choices.

"In some, we make suboptimal decisions because of bounded rationality... there are boundaries to human beings' rational decision-making processes."

• Understanding the constraints of our decision-making can help mitigate their impact.

• People often continue with failing decisions due to self-justification, perceptual blinders, and sunk costs.
• Escalation occurs when the cost of abandoning a decision is perceived as too high.

"Sometimes we cannot abandon decisions... because of Pride... or we've already blown a ton of money on it and can't detour now."

• Recognizing these tendencies can help in making more rational decisions.

• Individuals dislike losing a specific amount more than they enjoy winning the same amount.
• This aversion affects decision-making in scenarios involving risk.

"People dislike losing a particular amount of money more than they like winning the same amount."

• The fear of loss often outweighs potential gains, skewing rational decision-making.

• This model emphasizes the benefits of participative management in decision-making.
• Involving employees can lead to better problem identification and increased solution diversity.

"The goal of giving others input on the decision is that often there is a better problem identification."

• Engaging employees in decision-making can enhance outcomes through diverse perspectives.

• The success of employee involvement depends on specific contingencies, such as decision type and leader expertise.
• Nonprogrammed decisions and lack of leader expertise often benefit from group involvement.

"The contingencies moderate the relationship between employee involvement and decision outcomes."

• Understanding when and how to involve others can optimize decision-making processes.

• Factors influencing the choice between solo and group decision-making include decision quality, leader expertise, and subordinate information.
• Goal congruence between leaders and subordinates is crucial in determining the decision-making approach.

"If the decision quality requirement is low, then the decision is sometimes best made alone."

• The decision-making method should align with the specific needs and context of the decision at hand.

• Leadership decisions can vary based on the alignment of goals between leaders and subordinates.
• Incongruent goals between leaders and subordinates can lead to critical decision-making challenges.
• Decision-making can be categorized into programmed and non-programmed decisions, affecting whether leaders decide alone or involve others.

"If the subordinates' goals are lined up with the leader, then the problem is easily solved by all, but if the group congruency is off, then maybe the leader should make the decision alone."

• Alignment between leader and subordinate goals simplifies decision-making processes.
• When goals are misaligned, leaders may need to make unilateral decisions.

• Normative Decision Theory explores scenarios where subordinates have different levels of input in decision-making.
• Autocratic decisions (A1 and A2) involve minimal to no input from subordinates.
• Consultative decisions (C1 and C2) involve gathering input from subordinates, either individually or in group settings.
• Group decisions (G2) require consensus from all group members, with the leader facilitating the process.

"In the autocratic decision, there are two subtypes: A1 where no input is gathered from the subordinate team, and A2 where there is an announcement to the team that a problem exists, but the leader will solve it alone."

• Autocratic decisions limit subordinate involvement and are leader-driven.

"The last scenario is a group decision where the leader puts the problem up for input in a group meeting. The group makes the decision, and the leader simply moderates the meeting in a facilitative role."

• Group decisions emphasize collective input and consensus, with the leader acting as a facilitator.

• The Normative Decision Model uses a decision tree to determine the best decision style based on various nodes.
• Key nodes include Quality Requirement (QR), Commitment Requirement (CR), Leader Information (I), Problem Structure (St), Commitment Probability (CP), Goal Congruence (GC), and Subordinate Information (SI).
• The model helps identify the appropriate decision-making style, such as G2, where employees decide on policies like uniforms.

"The first node is the QR quality requirement node. We ask the question of ourselves: how important is the technical quality of the decision?"

• The Quality Requirement node assesses the importance of decision quality.

"Here, we see the different scenarios where subordinates are allowed to play some role in decision making. This is called normative decision theory."

• Normative Decision Theory outlines various scenarios for subordinate involvement in decision-making.

• Creative individuals often possess higher intelligence and perseverance.
• They have extensive knowledge in their area of work and are highly imaginative.
• Traits such as openness to experience contribute to their creativity.

"There are some common characteristics that many, if not most, creative people share. They tend to be slightly smarter than the rest of us; they never give up."

• Creative people exhibit intelligence, persistence, and deep knowledge in their fields.

"They also tend to be quite imaginative, often way outside of what others would imagine."

• Imagination and openness to experience are key traits of creative individuals.

• Creative individuals often have a low need for affiliation and are comfortable being alone, akin to the image of a "lonely artist."
• Creativity is an internal process that is highly self-directed, originating from within rather than external influences.
• Openness to experience is a key trait in creative individuals, with a strong appreciation for music, color, architecture, and other sensory experiences.

"Stimulation they tend to be comfortable when they're alone, so they have a moderately low need for affiliation. One need only think of the lonely artist toiling away in their studio to picture this."

• This quote highlights the comfort creative individuals find in solitude, emphasizing their low need for social affiliation.

"Creativity comes from within, not from without or outside us. It's an internal thing, and channeling that self-direction into a productive capacity is very important."

• The essence of creativity is self-direction, an internal process that requires channeling into productivity.

• Companies can foster creativity by establishing a learning orientation where mistakes are acceptable.
• Encouraging a high volume of new ideas, even if many are not successful, is a common practice in creative workplaces.
• Some firms implement policies like "20% time," allowing employees to work on projects of their choice for a portion of their workweek.
• Intrinsic motivation is enhanced by allowing employees autonomy and emphasizing the significance of their tasks.

"In order to foster creativity in the workplace, companies try and leverage several things within their control. They establish a learning orientation in which mistakes are not such a big deal."

• A learning orientation in the workplace encourages creativity by reducing the fear of making mistakes.

"Some firms will even require a large number of new ideas, knowing full well that only some of them will be successful."

• Emphasizes the importance of generating numerous ideas, accepting that not all will succeed.

• Providing employees with the latest tools and resources enhances their ability to be creative.
• Open communication within firms is crucial for effective collaboration and idea generation.

"When we have the latest greatest tools to do the job, we can be more creative."

• Access to advanced tools and resources is crucial for fostering creativity.

"Firms have to foster open communication. In order to do our jobs creatively, we can usually benefit by swapping ideas with others who are doing similar jobs."

• Open communication is essential for creative collaboration and idea exchange.

• Redefining problems and exploring them from different angles can lead to creative solutions.
• Associative play and morphological analysis are structured activities that stimulate creativity.
• Cross-pollination involves diverse teams and internal information exchange to gain new perspectives.

"By redefining a problem, we look at it from a different angle."

• Redefining problems allows for new perspectives and creative solutions.

"Sometimes it's as simple as taking a different look at the problem by redefining a problem we look at it from a different angle."

• Encourages looking at problems from different angles to stimulate creativity.

• Hiring individuals who are more creative and smarter than oneself is crucial for realizing a company's potential.
• Allowing employees to have a say in decisions builds psychological ownership and encourages hard work.
• Recognizing different perceptions and valuing creativity, even if not immediately needed, is important for long-term success.

"It is critical that we hire people who are smarter and more creative than us."

• Hiring creative and intelligent individuals is essential for a company's growth and success.

"Let people have a say in most decisions; that builds psychological ownership where they cannot disavow the decision if it does not go well."

• Involving employees in decision-making fosters ownership and accountability.