CHAPTE

12
Decision Making,
Creativity, and Ethics

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Chapter Outline
How Should Decisions Be Made?
The Rational Decision-Making Process

How Do Individuals Actually Make

Decisions?
Bounded Rationality in Considering Alternatives
Intuition
Judgment Shortcuts

Group Decision Making

Group vs. the Individual
Groupthink and Groupshift
Group Decision-Making Techniques
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Learning Outcomes
1. Discuss how decisions can be made
using the rational-decision making
model versus the bounded rationality
process.
2. Describe how intuition affects decisions.
3. Discuss the implications of using various
decision-making shortcuts.
4. Discuss how knowledge-management
improves decision-making.
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Learning Outcomes
5.

Describe techniques to improve group

decision-making by indentifying factors that
affect group decision-making.
6. Explain the role of ethics in decision-making
by considering the four ethical decision
criteria.
7. Explain how decision-making can be
influenced by culture, corporate and social
responsibility and, global factors.
8. Apply a case analysis/decision-making
methodology to solve an organizational
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Inc.

How Should Decisions Be Made?

Decision: Choice made from two or more
alternatives
Rational: Choices that are consistent and
value-maximizing within specified constraints
Rational Decision-Making
Six step decision-making process
Describes how individuals should behave in order
to maximize some outcome
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Exhibit 12-1 Steps in the Rational

Decision-Making Model

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Assumptions of the Rational DecisionMaking Model

Complete information
The problem is clear and unambiguous.

Known options
The decision maker is able to identify all
relevant options in an unbiased manner.

Chooses the option with the highest

utility
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How Do Individuals Actually Make

Decisions?
Bounded Rationality
Limitations on ones ability to interpret, process,
and act on information.
Satisficing
Identifying a solution that is good enough.
The first acceptable option rather than the optimal
one
Intuition
A non-conscious process created from distilled
experience that results in quick decisions
Relies on holistic associations
Affectively charged engaging the emotions

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Judgment Shortcuts
Overconfidence Bias
Believing too much in our own ability to make good
decisions especially when outside of own expertise
Anchoring Bias
Using early, first received information as the basis for
making subsequent judgments
Confirmation Bias
Selecting and using only facts that support our decision
Availability Bias
Emphasizing information that is most readily at hand
Recent
Vivid

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Judgment Shortcuts
Escalation of Commitment
Increasing commitment to a decision in spite of
evidence that it is wrong especially if responsible
for the decision!
Randomness Error
Creating meaning out of random events superstitions
Risk Aversion
tendency to prefer a sure thing over a risky outcome
Hindsight Bias
After an outcome is already known, believing it could
have been accurately predicted beforehand
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Group Decision Making

Strengths of Group
Decision Making

Weaknesses of
Group Decision
Making

More complete information

and knowledge.

More time consuming.

Increased diversity of
views.

Conformity pressures in
groups.

Generates higher-quality
decisions.

Discussion can be
dominated by one or a few
members.

Leads to increased
acceptance of a solution.

Decisions suffer from

ambiguous responsibility.

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Exhibit 12-2 Group vs. Individual

Decision Making

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Groupthink and Groupshift

Groupthink
Phenomenon in which the norm for conformity
prevents the group from critically appraising
unusual, minority, or unpopular views

Groupshift
Phenomenon in which the initial positions of
individual members of a group are
exaggerated because of the interactions of
the group
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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
Monitor group size
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 to
encourage dissenting views and more objective
evaluations

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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 12-3 Nominal Group Technique

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Exhibit 12-4 Evaluating Group

Effectiveness

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Creativity in Organizational Decision

Making
The ability to produce novel (original)
and useful ideas.
Creativity is important because
It allows the decision maker to more
fully understand and appraise the
problem

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Creative Behaviour
Problem Formulation
Information Gathering
Idea Generation
Idea Evaluation
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Creative Potential
Who has the greatest creative
potential?
Those people who

Are intelligent
Score high in Openness to Experience (Chapter 2)
Have proactive personality
Have high self-confidence
Are risk-takers
Are tolerant of ambiguity
Are able and willing to persevere
Have expertiseCopyright
in the
area
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Creative Environment
We need to be in an environment
where creative potential can be
realized
Environment which
Creates motivation
Rewards and recognizes creative work
Freedom from excessive rules
Good leadership
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Creative Outcomes (Innovation)

Ideas or solutions judged to be novel
and useful by relevant stakeholders
Ideas are useless unless used
Creative ideas are more likely to be
used when
The individual was motivated to translate
the idea into practice
Conducive organizational climate
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Ethics
The study of moral values or
principles that guide our behaviour
and inform us whether actions are
right or wrong
Help us do the right thing
Ethical considerations should be an
important criterion in organizational
decision making.
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Four Ethical Decision Criteria

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.
Protects whistle-blowers
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Four Ethical Decision Criteria

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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Making Ethical Decisions

Broken Windows Theory: Idea that
decayed and disorderly urban environments
may facilitate criminal behaviour because
they signal antisocial norms
Ethical behaviour can be affected by signals
signs of status and money of high importance
rather than ethics
Managers should encourage conversations
about moral issues
We should be aware of our own moral blind
spots
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Exhibit 12-6 Is a Decision Ethical?

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Corporate Social Responsibility

An organizations responsibility to
consider the impact of its decisions
on society.
45 percent of Canadians believe
individual shareholders, not the
company, should make personal
decisions about giving to charity.
35 percent of Canadians, however, felt
corporations should donate to charities.
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Global Implications
Cultural background can have a significant
influence on decision making. Cultures differ:
in their time orientation
the importance of rationality
their belief in the ability of people to solve
problems
their preference for collective decision making.

No global ethical standards

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OB at Work: For Managers

Adjust your decision-making approach
to the national culture you are
operating in and to the criteria your
organization values.
If you operate in a country that does
not value rationality, dont feel
compelled to follow the rational
decision-making model or to try to
make your decisions appear rational.
Adjust your decisionmaking approach to
ensure compatibility with the
organizational culture.
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OB at Work: For Managers

Be aware of biases. Then try to minimize their
impact. OB in ActionReducing Biases and Errors in
Decision Making on page 426 offers some
suggestions.
Combine rational analysis with intuition. These are
not conflicting approaches to decision making. By
using both, you can actually improve your decisionmaking effectiveness.
Try to enhance your creativity. Actively look for novel
solutions to problems, attempt to see problems in
new ways, use analogies, and hire creative talent.
Try to remove work and organizational barriers that
might impede your creativity.
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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 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?
Copyright 2016 Pearson Canada
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