12-1 chapter 12: decision making, creativity, and ethics organizational behaviour 5 th canadian...

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Chapter 12:Chapter 12: Decision Decision Making, Making,

Creativity, and Creativity, and Ethics Ethics

Organizational Organizational BehaviourBehaviour 5th Canadian Edition

Langton / Robbins / JudgeCopyright © 2010 Pearson Education

Canada

Langton, Robbins and Judge, Organizational Behaviour, Fifth Cdn. Ed. Copyright © 2010 Pearson Education Canada

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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


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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?


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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


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Exhibit 12-1 Steps in the Rational Decision-Making Model

Making a Decision

Define the problem

Identify thecriteria

Develop alternatives

Allocate weights to the criteria

Evaluate thealternatives

Select the best alternative

1.

2.

3.

4.

5.

6.


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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.


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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.


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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


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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


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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


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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.


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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.


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Group Decision Making

Strengths of Group Decision Making

• More complete information and knowledge.

• Increased diversity of views.

• Generates higher-quality decisions.

• Leads to increased acceptance of a solution.

Weaknesses of Group Decision Making

• More time consuming.

• Conformity pressures in groups.

• Discussion can be dominated by one or a few members.

• Decisions suffer from ambiguous responsibility.


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Exhibit 12-2 Group vs. Individual Decision Making


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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.


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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.


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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

• 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.


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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 12-4Evaluating Group Effectiveness


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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

and appraise the problem


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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


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Exhibit 12-5 The Three Components of Creativity


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Creativity Blocks

• Expected evaluation

• Surveillance

• External motivators

• Competition

• Constrained choice


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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.”


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Exhibit 12-6 Factors Affecting Ethical Decision-Making Behaviour

Stage of moraldevelopment

Organizationenvironment

Locus ofcontrol

Ethicaldecision-making

behaviour


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Exhibit 12-7 Stages of Moral Development

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.

4. Maintaining conventional order by fulfilling obligations to which you have agreed.3. Living up to what is

expected by people close to you.

2. Following rules only when doing so is in your immediate interest.1. Sticking to rules to avoid physical punishment.

Conventional

Principled

Preconventional

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.


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Exhibit 12-8 Is a Decision Ethical?

Unethical

Unethical

Unethical

Ethical

oN

oN

oN

seY

seY

seY

Does the decision respect the rights of the individuals affected?

Is the decision motivated by self-serving interests?

Is the decision fair and equitable?

Question 1

Question 2

Question 3


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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


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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.


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Corporate Social Responsibility

• An organization’s responsibility to consider the impact of its decisions on society.


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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 are 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.


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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.


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OB at Work


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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?


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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.


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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 six-step 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?


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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. You’ve 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 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?


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• 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?


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• 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?


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• 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?


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• 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,” IndustryWeek, March 15, 1993, pp. 15-20.

12-1 chapter 12: decision making, creativity, and ethics organizational behaviour 5 th canadian...

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