Chapter 5

INDIVIDUAL DECISION MAKING AND CREATIVITY

A major purpose of this chapter is to present information about decision-making and creativity that will
enhance the decision-making capabilities of the reader. The chapter begins with a description of the
classical/behavioral decision-making model, which blends the two major decision-making models.
Next is a description of the factors that influence decision-making effectiveness. Attention then shifts
to understanding creativity and improving creative problem-solving ability.

Learning Objectives

1. Work through the classical/behavioral decision-making model when faced with a major
decision.

2. Identify and describe factors that influence the effectiveness of decision-making.

3. Understand the nature of creative decision making in organizations.

4. Enhance your creative problem-solving ability.

Chapter Outline and Lecture Notes

I. TYPES OF DECISIONS
A decision takes place when a person chooses among two or more alternatives in order to solve a
problem. A problem is a discrepancy between the ideal and the real.

A. Programmed Versus Nonprogrammed Decisions

The standard responses to uncomplicated problems are called programmed (or routine)
decisions. Procedures already exist for approximately how to handle the problem. Unique
responses to complex problems are called nonprogrammed (or nonroutine) decisions.
Making a nonprogrammed decision requires original or creative thinking.

B. Degree of Risk and Uncertainty Associated with Decisions

A condition of certainty exists when the facts are well known and the outcome can be
predicted accurately. A condition of risk involves incomplete certainty regarding the
outcomes of various alternative courses of action. Nevertheless, there is some awareness of
the probability associated with the alternatives. A condition of uncertainty occurs when a
decision must be based on limited or no factual information.

II. A CLASSICAL/BEHAVIORAL DECISION-MAKING MODEL

The model that emphasizes how managers should make decisions is based on the classical
decision model. The behavioral decision model, in contrast, points out that decision makers
have cognitive limitations, and act only in terms of what they perceive in a given situation.
According to the behavioral decision model, decision-making has a messy side. The seven steps
in the decision-making process, reflecting both the classical and behavioral models, are described
next.

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A. Identify and Diagnose the Problem

The first step in problem solving and decision-making is to identify a gap between desired
and actual conditions. Problem finding may be the key to managerial success. A thorough
diagnosis of the problem is important because the real problem may be different from the
one the first look suggests. To diagnose a problem properly, one must clarify its true nature.

B. Establish Decision Criteria

Decision criteria are the standards of judgment used to evaluate alternatives. The more
explicit the criteria, the better will be the decision. The decision criteria also specify the
ground rules for the decision. As Drucker says, ask “What needs to be done?” rather than
“What do I want to do?”

C. Develop Creative Alternatives

All kinds of possibilities are explored in this step even if they seem unrealistic. Good
decision makers dig for alternatives, and keep digging until the find the best solution.

D. Evaluate the Alternatives

The problem solver examines the pros and cons of each alternative and considers the
feasibility of each. Alternative solutions are compared to the decision criteria.

E. Choose One Alternative

After evaluation, a choice must be made. The degree of uncertainty associated with each
alternative influences the choice. Despite a careful evaluation of the alternatives, ambiguity
remains in most decisions.

F. Implement the Decision

Until a decision is implemented, it is not really a decision. A decision is seldom a good one
if workers resist its implementation or if it is too cumbersome to implement.

G. Evaluate and Control

Evaluate how effectively the chosen alternative solved the problem and met the decision
criteria. Controlling means ensuring that the results of the decision obtained are the ones set
forth during the identification stage.

III. BOUNDED RATIONALITY AND INFLUENCES ON DECISION MAKING

According to Herbert Simon, the bounds to rationality are the limitations of the human organism,
particularly related to the process and recall of information. Bounded rationality means that
people’s limited mental abilities, combined with external influences over which they have little or
no control, prevent them from making entirely rational decisions. Most decision makers settle for
satisficing decisions, or those that provide a minimum standard of satisfaction. Heuristics, or rules
of thumb in decision making, also stem from bounded rationality. A class discussion of heuristics
in business life, and perhaps in personal life, can be stimulating. A rule of thumb some jewelers use
is that a man should, or can afford, to spend one month’s salary on an engagement ring.

A. Intuition
A key personal characteristic that influences decision-making is intuition, an experience-
based way of knowing or reasoning in which weighing and balancing evidence are done
automatically. Intuition can be based mostly on experience, or mostly on feeling. Effective
problem solvers achieve a balance between analytical and intuitive thinking. Intuition does
have its limitations, and when the stakes are high, rational analysis including input from
many people, should be used.
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B. Personality and Cognitive Intelligence

A cautious, conservative person typically opts for low-risk solutions. Perfectionists are
usually indecisive because fewer alternatives ever seem good enough. Self-efficacy, the
feeling of being an effective and competent person, also has an influence. Rigid people have
difficulty identifying problems and gathering alternative solutions. Optimists are more likely
than pessimists to find solutions. In general, intelligent and well-educated people are more
likely to identify and diagnose problems and make sound decisions.

C. Emotional Intelligence
How effective you are in managing your feelings and reading other people can affect the
quality of your decisions. For example, if you cannot control your anger you are likely to
make decisions that are motivated by retaliation, hostility, and revenge. Also, if you
understand your own feelings, you are more likely to make better career decisions.

D. Quality and Accessibility of Information

Reaching an effective decision usually requires high-quality, valid information. Accessibility
may be even more important than quality in determining whether or not information is used.
Accessible information is sometimes treated with denial. The NASA example overlooking
potential problems with the space shuttle Columbia is instructive, but might be perceived as
politically charged.

E. Political Considerations
Many decisions are based on political considerations, such as favoritism, alliances, or the
desire of the decision maker to stay in favor with people who wield power. Political factors
sometimes influence which data are given serious consideration in evaluating alternatives.

F. Crisis and Conflict

Decision makers who are adversely affected by crisis cannot concentrate, use poor judgment,
and think impulsively. Some managers rise to peak alertness during a crisis. When conflict is
not overwhelming, and is directed at real issues rather than personalities, it can be an asset to
decision making. A study about strategic decision-making found that decision-making
quality improved with conflict, but antagonistic relationships surfaced.

G. Values of the Decision Maker

Values influence decision making at every step. Ultimately, all decisions are based on
values. Attempting to preserve the status quo is a value that can be a hidden trap in decision-
making.

H. Procrastination
Many people are poor decision makers because they procrastinate, or delay decision-making
without a valid reason. Procrastination results in decisiveness and inaction and is a major
cause of self-defeating behavior.

I. Overconfidence Bias
Biases lead to predictable mistakes because the decision maker repeats the same error
systematically. One bias is that most of us are overconfident of our ability to estimate and we
therefore do not acknowledge the true uncertainty. The overconfidence bias might lead a
manager to neglect making contingency plans.
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IV. THE NATURE OF CREATIVITY

Creativity in organizations has surged in importance, party because of the continuing need for
new ideas. Creativity is an essential part of problem solving and decision-making when dealing
with nonprogrammed decisions. Creativity is the process of developing good ideas that can be
put into action. Innovation emphasizes the action part of creativity, such as developing an
innovative product.

A. Steps in the Creative Process

An old but well-accepted model of creativity can be applied to organizations. Step 1 is
opportunity or problem recognition. Step 2 is immersion in the problem. Step 3 is
incubation, whereby the subconscious mind takes over and arranges the information. Step 4
is insight (the Aha! Experience). Step 5 is verification and application (proving that the idea
has merit and getting it implemented).

B. Characteristics of Creative People

The characteristics of creative people, including creative leaders, can be grouped into three
key areas. Robert Sternberg says that one consistent attribute of creative people stands out—
the decision to be creative.
1. Knowledge. Creative problem solving requires a broad background of information,
including facts and observations. Creativity is often a combination of ideas.
2. Intellectual abilities. Brightness rather than brilliance is required, with the creative type
of intelligence being obviously important. Generating alternative solutions rapidly is
important, and a sense of humor helps. A youthful curiosity and openness to experience
favor creativity, and does thinking divergently. Creativity can stem from both fluid
intelligence (the raw kind) and crystallized intelligence (accumulated knowledge).
3. Personality. Creative people tend to have a positive self-image without being blindly
self-confident. The type of self-confidence particularly helpful for creativity is creative
self-efficacy, the belief that one can be creative in a work role. (Supervisory encourage-
ment is helpful here.) Creative people are persistent, can tolerate isolation, are frequently
nonconformists, are thrill seekers, and enjoy ambiguity.

C. Conditions Necessary for Creativity

Certain individual and organizational conditions are necessary for, or at least enhance, the
production of creative ideas.
1. Expertise, creative-thinking skills, and internal motivation. Based on the research of
Amabile and others, creativity takes place when three conditions come together.
Expertise based on knowledge is necessary. Creative-thinking skills, such as digging for
alternatives and persistence, are essential. Motivation in the form of passion for the task
rather than extrinsic motivation is important, leading to the experience of flow. It is an
experience so engrossing and enjoyable that the task becomes worth doing for its own
sake regardless of the external consequences. (Also, being in the zone.)
2. Environmental need. An environmental need must stimulate setting a goal; enough
conflict and tension must be present to put people on edge; and a permissive
environment helps.
3. Conflict and tension. Enough conflict and tension must be present to keep people on
edge. Understanding opposing ideas helps you gain a new perspective.
4. Encouragement from others and having creative coworkers. Encouragement includes a
permissive idea that welcomes new ideas. Research suggests that encouragement from
family and friends as well as from the supervisor enhances creative thinking on the job.
Two studies of professional units in a university found that when creative workers were
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present, and the less supervisor engaged in close monitoring, the more creativity the
workers exhibited.
5. Mood. A positive mood contributes to creative job performance, even if a positive mood
is not a condition for creativity.
6. Moderate time pressures. Feeling crunched for time leads to a creativity drop for most
people. Yet when workers believed they are faced with an urgent mission, the negative
effects of time pressure are reduced.

V. ENHANCING AND IMPROVING CREATIVITY

Creative problem solving requires an ability to overcome traditional thinking. The central task in
becoming creative is to break down rigid thinking that blocks new ideas. Another way of framing
the ability to overcome traditional thinking is that a creative person thinks outside the box—a
term that has reached cliché status. The conditions for creativity have built-in suggestions for
improving creativity. In addition, five other methods merit consideration:

1. Brainstorming is the best-known technique for enhancing employee creativity. (It is worth
mentioning in class that many people think that brainstorming alone is more effective than
brainstorming in groups.)
2. Idea quotas are a straightforward technique whereby the company demands a certain number
of creative suggestions.
3. Heterogeneous groups facilitate creativity because of the diverse viewpoints possible. Key
diversity factors are professional discipline, job experiences, and demographic factors.
4. Financial incentives often foster creativity in work environments, although many creativity
researchers disagree. IBM leads in patents, and pays cash bonuses to employees who win
patents.
5. Architecture and physical layout contribute to creativity in that any configuration of the
physical environment that decreases divergence, incubation, and convergence might
stimulate the flow of creative thinking. Note, however, that creative people still need private
space for some of the time for heavy concentration. The establishment of innovation
laboratories is another approach to enhancing creativity and making use of physical layout.
6. Inspiration. Inspiring creativity encompasses a wide range of behaviors including
establishing a permissive atmosphere.
7. Creativity training. Some of the ideas and exercises already presented in this chapter would
be part of creativity training. A variety of techniques are used to encourage more flexible
thinking such as engaging in child play, squirting each other with water guns, scavenger
hunts, depriving participants of food and rest for 24 hours to weaken their defense and
make them “think differently.”

VI. IMPLICATIONS FOR MANAGERIAL PRACTICE

A widely recommended decision tool for finding the root cause of a problem is to ask a variety
of questions, called the “Seven Whys” or the “Five Whys.” By asking why seven (or five) times
you are likely to get the core issue of a problem. Learning to be more creative is like learning
other skills: patience and time are required. A desirable goal is for the manager to find a way to
tap the creativity of everyone for whom he or she is responsible.
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