Chapter 12 Decision Making Creativity and Ethics Organizational

Chapter 12: Decision Making, Creativity, and Ethics Organizational Behaviour 5 th Canadian Edition Langton / Robbins / Judge Copyright © 2010 Pearson Education Canada 12 -1

Chapter Outline • How Should Decisions Be Made? • How Do Individuals Actually Make Decisions? • Improving Decision Making Through Knowledge Management • Group Decision Making • Creativity in Organizational Decision Making • What About Ethics in Decision Making? • Corporate Social Responsibility Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -2

Decision Making, Creativity, and Ethics 1. Is there a right way to make decisions? 2. How do people actually make decisions? 3. How can knowledge management improve decision making? 4. What factors affect group decision making? 5. How can we get more creative decisions? 6. What is ethics, and how can it be used for better decision making? 7. What is corporate social responsibility? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -3

How Should Decisions Be Made? • Rational Decision-Making – The “perfect world” model assumes complete information, all options known, and maximum payoff. – Six step decision-making process 12 -4

Exhibit 12 -1 Steps in the Rational Decision-Making Model 1. Define the problem 6. Select the best alternative 2. Identify the criteria Making a Decision 5. Evaluate the alternatives 3. Allocate weights to the criteria 4. Develop alternatives Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -5

Assumptions of the Rational Decision-Making Model • Problem clarity – The problem is clear and unambiguous. • Known options – The decision maker can identify all relevant criteria and viable alternatives. • Clear preferences – Rationality assumes that the criteria and alternatives can be ranked and weighted. 12 -6

Assumptions of the Rational Decision-Making Model • Constant preferences – Specific decision criteria are constant and the weights assigned to them are stable over time. • No time or cost constraints – Full information is available because there are no time or cost constraints. • Maximum payoff – The choice alternative will yield the highest perceived value. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -7

How Do Individuals Actually Make Decisions? • Bounded Rationality – Limitations on one’s ability to interpret, process, and act on information. • Satisficing – Identifying a solution that is “good enough. ” • Intuition – A non-conscious process created from distilled experience that results in quick decisions • Relies on holistic associations • Affectively charged – engaging the emotions Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -8

Common Biases in Decision Making • 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 Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -9

More Common Biases in Decision Making • 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 • Winner’s Curse – Highest bidder pays too much due to value overestimation – Likelihood increases with the number of people in auction • Hindsight Bias – After an outcome is already known, believing it could have been accurately predicted beforehand Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -10

Knowledge Management • The process of organizing and distributing an organization’s collective wisdom so the right information gets to the right people at the right time. • Why it’s important: – Organizations can use it to “outsmart” their competition. – Baby boomers are taking their knowledge with them when leaving the workforce. – A well-designed KM system reduces redundancy and makes the organization more efficient. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -11

Knowledge Management • Recording knowledge and expertise: – Develop computer databases of pertinent information that employees can readily access. – Create a culture that promotes, values, and rewards sharing knowledge. – Develop mechanisms that allow employees who have built up valuable expertise and insights to share them with others. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -12

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. • Generates higher-quality decisions. • Leads to increased acceptance of a solution. • Conformity pressures in groups. • Discussion can be dominated by one or a few members. • Decisions suffer from ambiguous responsibility. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -13

Exhibit 12 -2 Group vs. Individual Decision Making Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -14

Effectiveness and Efficiency • Measures of Effectiveness – – Accuracy Speed Creativity Acceptance • Efficiency – groups almost always stack up as a poor second to the individual decision maker – With few exceptions, group decision making consumes more work hours than if an individual were to tackle the same problem alone. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -15

Groupthink and Groupshift • Groupthink – Phenomenon in which the norm for consensus overrides the realistic appraisal of alternative courses of action. • Groupshift – Phenomenon in which the initial positions of individual members of a group are exaggerated toward a more extreme position. 12 -16

Symptoms of Groupthink • Illusion of invulnerability • Peer pressure • Minimized doubts • Assumption of morality • Illusion of unanimity • Rationalized resistance 12 -17

Minimizing Groupthink • Encourage group leaders to play an impartial role. • Appoint one group member to play the role of devil’s advocate. • Stimulate active discussion of diverse alternatives. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -18

What Causes Groupshift? • Discussion creates familiarization among group members. • Group discussion motivates individuals to take risks. • Group diffuses responsibility. 12 -19

Group Decision-Making Techniques • Interacting Groups • Brainstorming • Nominal Group Technique • Electronic Meetings 12 -20

Exhibit 12 -3 Nominal Group Technique Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -21

Exhibit 12 -4 Evaluating Group Effectiveness Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -22

Creativity in Organizational Decision Making • The process of creating products, ideas, or procedures that are novel or original, and are potentially relevant or useful to an organization. • Creativity is important because – It allows the decision maker to more fully understand appraise the problem Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -23

Creative Potential • Who has the greatest creative potential? – Those who score high in Openness to Experience – People who are intelligent, independent, self-confident, risk-taking, have an internal locus-of-control, tolerant of ambiguity, low need for structure, and who persevere in the face of frustration 12 -24

Exhibit 12 -5 The Three Components of Creativity Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -25

Creativity Blocks • Expected evaluation • Surveillance • External motivators • Competition • Constrained choice 12 -26

Four Criterion for Making Ethical Choices • 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. • 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. ” 12 -27

Exhibit 12 -6 Factors Affecting Ethical Decision-Making Behaviour Stage of moral development Organization environment Ethical decision-making behaviour Locus of control 12 -28

Exhibit 12 -7 Stages of Moral Development Principled Conventional Preconventional 2. Following rules only when doing so is in your immediate interest. 1. Sticking to rules to avoid physical punishment. 4. Maintaining conventional order by fulfilling obligations to which you have agreed. 3. Living up to what is expected by people close to you. 6. Following self-chosen ethical principles even if they violate the law. 5. Valuing rights of others and upholding absolute values and rights regardless of the majority’s opinion. Source: Based on L. Kohlberg, “Moral Stages and Moralization: The Cognitive-Developmental Approach, ” in Moral Development and Behaviour: Theory, Research, and Social Issues, ed. T. Lickona (New York: Holt, Rinehart and Winston, 1976), pp. 34 -35. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -29

Exhibit 12 -8 Is a Decision Ethical? Unethical Ethical Question 3 s e Y Is the decision fair and equitable? Question 1 Is the decision motivated by self-serving interests? s e Y Question 2 N o Does the decision respect the rights of the individuals affected? s e Y N o Unethical Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -30

Organizational Response to Demands for Ethical Behaviour • Explosion in demand for more ethical behaviour: – – Ethics specialists Ethics officers Codes of ethics Ethics auditors • In addition, many companies are creating mechanisms that encourage employees to speak up when they see wrongdoing Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -31

Developing a Meaningful Code of Ethics • Clearly state basic principles and expectations. • Realistically focus on potential ethical dilemmas that employees face. • Distribute the code to all employees. • Enforce violations of the code. Source: Based on W. E. Stead, D. L. Worrell, and J. G. Stead, “An Integrative Model for Understanding and Managing Ethical Behavior in Business Organizations, ” Journal of Business Ethics 9, no. 3 (March 1990), pp. 233 -242. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -32

Corporate Social Responsibility • An organization’s responsibility to consider the impact of its decisions on society. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -33

Summary and Implications 1. Is there a right way to make decisions? – The rational decision making model describes six steps: define the problem, identify the criteria, allocate weights to the criteria, develop alternatives, evaluate alternatives, select the best alternative. 2. How do people actually make decisions? – Decision makers may rely on bounded rationality, satisficing, and intuition. There also shortcuts that are used. 3. How can knowledge management improve decision making? – By electronically storing information that employees have, organizations make it possible to share collective wisdom. 4. What factors affect group decision making? – Group decisions are time-consuming, lead to conformity pressures, can be dominated by one or few members, and suffer from ambiguous responsibility. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -34

Summary and Implications 6. How can we get more creative decisions? – Employees are more creative when they are motivated by intrinsic interest, challenge, task satisfaction, and self-set goals. 7. What is ethics and how can it be used for better decision making? – Ethics is the study of moral value or principles that guide our behaviour and inform us whether actions are right or wrong. 8. What is corporate responsibility? – Is defined as an organization’s responsibility to consider the impact of its decision on society. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -35

OB at Work Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -36

For Review 1. What is the rational decision-making model? Under what conditions is it applicable? 2. Describe organizational factors that might constrain decision makers. 3. What role does intuition play in effective decision making? 4. What is groupthink? What is its effect on decision-making quality? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -37

For Review 5. What is groupshift? What is its effect on decision -making quality? 6. Identify five organizational factors that block creativity at work. 7. Describe the four criteria that individuals can use in making ethical decisions. 8. Are unethical decisions more a function of the individual decision maker or the decision maker’s work environment? Explain. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -38

For Critical Thinking 1. “For the most part, individual decision making in organizations is an irrational process. ” Do you agree or disagree? Discuss. 2. What factors do you think differentiate good decision makers from poor ones? Relate your answer to the sixstep rational decision-making model. 3. Have you ever increased your commitment to a failed course of action? If so, analyze the follow-up decision to increase your commitment and explain why you behaved as you did. 4. If group decisions are of consistently better quality than individual decisions, how did the phrase “a camel is a horse designed by a committee” become so popular and ingrained in our culture? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -39

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. You’ve seen a classmate cheat on an exam or an assignment. Do you do something about this or ignore it? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -40

Ethical Dilemmas: What Would You Do? • You are negotiating a contract with a potentially very large customer whose representative has hinted that you could almost certainly be assured of getting his business if you gave him and his wife an all-expenses-paid cruise to the Caribbean. You know the representative’s employer would not approve of such a “payoff, ” but you have the discretion to authorize such an expenditure. What would you do? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -41

Ethical Dilemmas: What Would You Do? • You have the opportunity to steal $100 000 from your company with absolute certainty that you would not be detected or caught. Would you do it? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -42

Ethical Dilemmas: What Would You Do? • Your company policy on reimbursement for meals while travelling on company business is that you will be repaid for your out-of-pocket costs, which are not to exceed $50 a day. You don’t need receipts for these expenses—the company will take your word. When travelling, you tend to eat at fast-food places and rarely spend in excess of $15 a day. Most of your colleagues submit reimbursement requests in the range of $40 to $45 a day regardless of what their actual expenses are. How much would you request for your meal reimbursements? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -43

Ethical Dilemmas: What Would You Do? • Assume that you’re the manager at a gaming company, and you’re responsible for hiring a group to outsource the production of a highly anticipated new game. Because your company is a giant in the industry, numerous companies are trying to get the bid. One of them offers you some kickbacks if you give that firm the bid, but ultimately, it is up to your bosses to decide on the company. You don’t mention the incentive, but you push upper management to give the bid to the company that offered you the kickback. Is withholding the truth as bad as lying? Why or why not? Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -44

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? Source: Several of these ethical dilemma scenarios are based on D. R. Altany, “Torn Between Halo and Horns, ” Industry. Week, March 15, 1993, pp. 15 -20. Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada 12 -45