Lecture 6: Chapter 7: Decision Making & Creativity Flashcards
What is decision making?
The conscious process of making choices among alternatives with the intention of reaching the desired state
What is the rational choice paradigm?
People choose by logical thinking and under the consideration of the available information for the best alternative that has the highest value for them
What are the 6 steps of the rational choice paradigm?
- Recognizing problem/chance
- Choosing for best decision-making process
- Making a list of possibilities
- Choosing for choice with highest expected utility
- Executing selected choice
- Evaluating outcome
What is the biggest problem with the rational choice decision making paradigm?
Assumption that people are always rational in decision making, which is not always true
What is the most important step of the rational decision making paradigm?
Identifying problems and chances
They are based on ambiguous and contradicting information
What are 6 important problems of identification of problems/chances?
- Solution focused problems
- Decisive leadership
- Stakeholder framing
- Perceptual defense
- Mental models
What is the problem of being solution focused?
Decisionmakers jump to a solution before understanding te problem.
Making veiled solution (we need to be more like apple)
What are 2 main elements of rational choice?
Calculating best alternative & decision-making process
What is a problem with decisive leadership?
Leaders can quickly determine that a situation is a problem, opportunity or nothing worth their attention
This leads to many leaders announcing problems or opportunities before having logically assessed the situation
What is the issue with stakeholder framing in problem identification?
Employees, customers and other stakeholders provide or hide info in ways that make the decision maker see the situation as a problem or opportunity
Employees point to external factors instead of own imperfections
This results in constructed realities
What is the problem of perceptual defense in problem identification?
Decision makers fail to recognize or forget info that signals existence of serious problem
It’s a coping mechanism and occurs in decision makers with higher neuroticism
What is the issue with mental models in problem identification?
Decision makers are victims of their own problem framing due to existing mental models.
Many mental models are ideal conditions, but these can blind us from recognizing unique problems or opportunities
How do we cope more effectively with the issues in problem identification? Give 4 ways
- Be aware of problem identification bias
- Resist temptation to look decisive
- Develop a norm of divine discontent
- Discuss the situation with colleagues
What is a norm of divine discontent?
Not being satisfied with current state of affairs, no matter how successful the situation is. They more actively search for problems and opportunities
This improves problem identification
What did Herbert Simon say about the rational choice paradigm? What is the name of the category of theory this idea belongs to?
People’s rationality is bounded, so people are limited in their decision making capabilities
= imperfect rationality theory
What are 4 aspects of bounded rationality?
- Limited in decision making capacity
- Limited information
- Ability to process info is limited
- Tendency to satisfice instead of maximize when making choices
People don’t have enough capacity to weigh all alternatives and outcomes equally. Why? Give 3 aspects
Problems with information processing
1. Implicite favorite: favorite choice before thinking
2. Confirmation bias: looking for things that supports implicit favorite
3. Cognitive dissonance: decisions need to be consistent with their strong beliefs about implicit favorite
What is an implicit favorite?
Preferred alternative that the decision maker uses repeatedly as a comparison with other choices
What does it mean that people have a tendency to satisfice and not to maximize?
Seek to satisfy certain criteria and take the first option that suffices
Maximize = find the best solution
Satisfice = find a good enough solution
What are heuristics? What is the relation with decision-making?
Cognitive shortcuts, mental rules of thumb, used to simplify things and help make quick decisions
Heuristics aren’t good enough for complex decisions in uncertain situations. This leads to errors
What are the 3 built-in decision heuristics that bias evaluation of alternatives?
- Anchoring and adjustment heuristic
- Availability heuristic
- Representativeness heuristic
What is the anchoring and adjustment heuristic?
Adjusting expectations and standards around an initial anchor point (e.g. opening bid )
People are influenced by the initial info they’ve been given
What is the availability heuristic?
People assign higher probabilities/chances to the options that can easier be retrieved from the long-term memory
What is the representative heuristic?
Estimating the probability of something by its similarity to known others rather than by more precise statistics
What is maximizing?
Searching for the best possible outcome in decision making
In what 3 ways can emotions impact our decision-making process?
- Emotions from early experiences: we attach emotions to options before we consciously evaluate
- Emotions change the decision evaluation process: mood influences how people evaluate
- Emotions as information: emotions often provide guidance
What is intuition? On what does it rely?
the ability to know when a problem or opportunity exists and to choose a course of action without conscious evaluation
= Gut-feeling
It relies on action scripts of routines for certain situations that speed up decisional responses
What are action scripts?
Programmed decisions that shorten decision making process. Intuition relies on it
What is the relationship between intuition and emotion?
Emotions are always part of intuition –> intuition relies on emotion
But: not all emotions are intuitions
What is scenario planning? What is the benefit?
Disciplined method for imagining possible futures
Benefit: alternative courses are assessed without the pressure and emotions that occur during real emergencies
On what 4 problematic heuristics does evaluating decisions rely?
- Confirmation bias
- Self-justification effect
- Self-exaltation effect
- Escalation of commitment
What is the confirmation bias?
Only considering info that confirms existing beliefs
What is the self-justification effect?
People want to show themselves in the most positive way by appearing rational and competent.
They want to have successful decisions, so that’s why they insist on their decisions nevertheless
What is the self-exaltation effect?
People are interpreting info differently because they want to feel good about themselves
What is escalation of commitment?
Tendency to make bad decisions repeatedly in regard to a failing project
What are the 4 main explanations why escalation of commitment happens?
- Self-justification effect (conscious)
- Self-enhancement effect (unconscious)
- Prospect theory effect
- Sunk costs effect
What is the self-enhancement effect?
Individuals continue to invest in a failing project because they overestimate the probability of rescuing the project
What is the prospect theory effect?
Individuals have stronger tendency to experience more negative emotions when losing something valuable than to experience positive emotions when gaining something valuable
Motivation to avoid loss and risk gain –> individuals may persue a failing project
What is the sunk costs effect?
Individuals are more motivated to invest more resources in projects with high sunk costs
= projects that already got a lot of money and time
Name 3 ways to making choices more effectively?
- Systematically evaluate alternatives against relevant factors
- Be aware of effects emotions on decision preferences, revisit problems at another time
- Scenario planning
What are 4 ways to evaluate decisions more effectively?
- Separate decsion maker from evaluators
- Publicly establish preset level to abandon the project
- Find sources of systematic and clear feedback
- Change decision maker’s mindset
Escalation of commitment is seen as bad decisionmaking. But, sometimes persistence can help. In what 3 ways?
- When costs overruns are small relative to project’s costs
- Advantages of success are high
- Rewards are received quickly
What is creativity? What is its relationship with decision making?
The development of original ideas that deliver a socially acceptable outcome
It’s essential for decision making, helps recognizing problems and develop alternatives
What are 4 phases of creativity according to Helmholtz and Wallas?
- Preparation: look at problem from different angles
- Incubation: reflective thought, divergent thinking
- Illumination: having a sudden unique idea (insight)
- Verification:
What is divergent thinking? What stage of creativity does it belong to?
Reframing problem in a unique way and generating different approaches
Incubation stage
Which 4 characteristics increase the potential of some individuals to be creative?
- Cognitive/practical intelligence
- Assertiveness/persistence
- Knowledge and experience
- Independent imagination
What do we mean with independent imagination?
high openness to experience, strong self-direction and strong stimulation value
What do we mean with high cognitive and practical intelligence? Name 2 things
- Ability to synthesize, analyze and apply ideas
- Ability to evaluate potential usefulness of ideas
What do we mean with persistence in creativity?
High need for achievement, strong task motivation and high self-esteem/optimism
Why is knowledge and experience important for creativity?
People require foundation of knowledge to discover new knowledge.
But you mustn’t be locked into a fixed knowledge mindset
One of the most important conditions for creativity is a learning orientation. What is a learning orientation?
People are encouraged to question past practices, learn new ideas, experiment putting ideas into practice and view mistakes as part of the learning process
- Encourage experimentation
- Tolerate mistakes
What are 4 types of activities that build creativity in the workplace? Describe each
- Redefining the problem
–> Revisit abandoned projects - Associative play
–> Playful activities, creative challenges, morphological analysis - Cross-pollination
–> Exchange ideas from new people and different areas in organization - Design thinking
–> Involve people, re-design, preserve ambiguity, prototype
Which part of the MARS model does a creative work environment belong to?
Situational
How do you study creativity?
- Find a general word that fits ‘drops-dance-umbrella’
- Incubation: do something else
Control: directly to step 3 - Give answer to question 1
Results: incubation lead to more solutions
What is design thinking?
Process applying intuition and analytical thinking to making a guideline for employee decision-making
What are the 4 rules of design thinking? What are they?
- Human rule: design thinking is team activity
- Ambiguity rule: Preserve ambiguity, don’t seek clarity too quick
- Re-design rule: review past solutions and understand how they solved problems then
- Tangible rule: less time planning more time doing
What is employee engagement in decision making?
The degree to which employees influence how their work is organized and executed
Employees should be consulted during the process of decision making
In what 4 ways can employee engagement impact decision making?
- Better identification of problems and chances
- More and better outcomes
- Better evaluation due to different perspectives
- More support for final decision
What are 5 contingencies (conditions) of the employee involvement model?
- Decision structure: programmed decisions need more involvement
- Source of decision knowledge:
- Decision commitment: participation improves employee commitment to the decision
- Risk of conflict among employees: involvement depends on employees agreeing with one another on a solution –> more likely conflict = less involvement
- Employee-firm goal congruence: high level involvement if employee goals match with organization
Describe the 4 levels of employee involvement
High: entire decision making process
Medium high: develop recommendations, knowing the problem
Medium low: asked for info to the problem, knowing the problem
Low: asked individually for info but no description of problem
Describe the employee involvement model
Employee — (contingencies) –> potential involvement outcomes
