Decision Making and Creativity in Decision Making - Review Notes

Organizational behavior revision article series

Decision Making - Introduction

Decision making is almost universally defined as choosing between alternatives. It is closely related to all the management functions, planning, organizing and control. Chester Barnard started a meaningful analysis of the decision making process in organizations.  He pointed out that the process of making decision uses techniques for narrowing choices. Herbert A. Simon conceptualized three major phases in the decision-making process:

1. Intelligence activity
2. Design activity:  developing possible courses of action
3. Choice activity: Choosing an alternative from set of courses developed.

Mintzberg proposed three phases.

1. The identification phase
2. The development phase
3. The selection phase

Behavioral Aspects and Theory of Decision Making

Classical management theory developed the procedures for decision making  under the assumption of rationality.  But behavioral decision theory is developed on the assumption that individuals have cognitive limitations and also because of the complexity of organizations and the world in general, they act in situations where uncertainty prevails and information is often ambiguous and incomplete.

Models of Behavioral Decision Making

The models can be represented as a discrete points on a range that starts from fully rational decision making to fully irrational decision making.

The Rational Decision Making Models

Economics develops its analysis under the assumption of fully rational individual who uses the best available information (under the assumption that information is available to all) and the best analytical tools (tools are also available to all). Economist find evidence in their research studies that their models have utility to predict real world in significant number of cases to add value to the society.

Irrational Decision Making Models

It is termed the social model by Luthans. The irrational model is implied by Sigmund Freud's view of a man.  Sigmund Freud viewed humans as bundles of feelings, emotions, and instincts, and their behavior was guided largely by their unconscious desires. Many contemporary psychologists would take issue with Freudian description of humans, but almost all would agree that psychological influences have a significant impact on decision-making behavior. Elton Mayo also supported and discussed irrational decision making and behavior by workmen.  Further more, social pressures may  also cause managers to make irrational decisions.

Simon's Bounded Rationality Model

According to Simon's model

1. Managers look for and stop when they arrive at a solution that is satisfactory or 'good enough."
2. They are happy with simplified models of reality to understand analyze real world problems.
3. Because they are satisfying, they will not make effort and develop all alternatives possible.
4. They use simple rules of thumb, or tricks of trade, or force of habit and take decisions that they are satisfied and their groups are satisfied.

There are many socially based obstacles that prevent maximization in practice. They are resistance to change in organizations, desire for status, concern for image and organizational politics.

Judgmental Heuristics and Biases Model

Simplified decision thumb rules can lead to decision biases. Kahneman and Tversky, cognitive decision theorists, developed on the Simon's thought that simplifying strategies are used for decision making. Such judgemental heurtistics reduce the information demands on the decision maker. The development of Kahneman and Tversky and others following their direction for thinking have identified three important biases due to heuristics

1. The availability heuristic bias
2. The representativeness heuristic bias
3. The anchoring and adjustment heuristic bias.

1. The availability heuristic bias

A judgement about probability is made by their memory. An event that evokes emotion and is vivid is easily remembered and is available from memory.

But this will result in bias,when the ease of recall is influenced by factors unrelated to the frequency of an event's occurrence. 

2. The representativeness heuristic bias

The decision makers cannot recognize the possible patterns in short term results of a random process from long term results. They do not recognize all possible random patterns and only recognize some of them based on their thinking of a stereotype.

3. The anchoring and adjustment heuristic bias.

Decision makers take an available initial value and start making adjustment. When a manager gives his subordinates an initial estimate as given by his staff assistant, they make some adjustments and give their estimate. It is observed that when one group is given low estimate and the other group is given a higher estimate, the group members estimates differed. Thus a bias enters into the decision making.

Subsequent researches find that these biases that occur at individual level become cumulative and become big errors at bigger economy level.

Decision Making Styles

Directive style

Low tolerance for ambiguity and orientation toward task and the technical concern. The decision makers like to exercise power, want to be in control, and in general display an autocratic leadership style.

Analytical style

Analytical decision makers have a high tolerance for ambiguity and a strong task and technical orientation

Conceptual style
The style combines high tolerance for ambiguity with strong people and social concerns.

Behavioral style
Low tolerance for ambiguity is combined with strong people and social concerns.

(Reference for decision styles: M.J. Dolinger and W. Danis, "Preferred Decision-Making Styles: A Cross-Cultural Comparison," Psychological Reports, 1998, pp. 255-261.)

Participative Decision-Making Techniques

Problem of Pseudoparticipation: Some managers ask for participation, but whenever subordinates make a suggestion or try to provide some input into a decision, they are put down. If managers claim to want participation from their people but never let them become intellectually and emotionally involved and never use their suggestions, the results may be negative.

Creativity in Decision Making

The process of creativity
According to noted creativity researcher Teresa Amabile, creativity is a function of three major components: expertise, creative-thinking skills, and motivation.

Expertise consists of knowledge: technical, procedural, and intellectual.
Creative thinking skills determine how flexibly and imaginatively people can deal with problems and make effective decisions.
Motivation is the inner passion to solve the problem at hand.

Creative people are better able to do things such as abstracting, imaging, synthesizing, recognizing patterns, and empathizing. They are also good intuitive thinkers. Intuitive thinking is coming out with ideas to solve problems where logical and known procedures are not giving any valid solution.

Psychological Definition and Analysis of Creativity

Psychological definition of creativity is that it involves combining responses or ideas of individuals or groups in novel ways.

Two widely recognize dimensions of creativity that help in explaining the creative process.

1. Divergent thinking: Ability to generate novel, but still appropriate, responses to questions and problems.

2. Cognitive complexity: This refers to a person's use of and preference for elaborate, intricate, and complex stimuli and thinking patterns.

Creativity techniques for Management Decision Making

A survey found that top managers are using creativity enhancing techniques like guided imagery, self-hypnosis, journal keeping, and lateral styles of thinking.

In some Japanese companies, employee creativity is managed or developed through deliberate structural means to develop the employee's motivation, job satisfaction and teamwork.

A recent technique called empathic design was used by certain companies. In this customers were photographed and studied to interpret their reactions in using existing products and services as well as proposed products, services and product and service features.

Group Decision Making

The Delphi Technique

The Nominal Group Technique

Silent generation of ideas in writing. Although more research is needed, there is some evidence that NGT-led groups come with many more ideas than traditional interacting groups.

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Updated 19 May 2019,  12 May 2019,  10 July 2014, 4 Dec 2011