After studying this chapter, students should be able to explain concepts related to creative problem solving and decision making, including listing the six steps in the decision-making model and describing differences between programmed and nonprogrammed decisions. The document provides frameworks for classifying problems, setting objectives and criteria, generating alternatives, and analyzing options. It also discusses techniques like brainstorming, cost-benefit analysis, and participative decision models.

1. Creative Problem Solving and Decision Making

2. Learning Outcomes Explain the relationship among objectives, problem solving, and decision making. Explain the relationship among the management functions, decision making, and problem solving. List the six steps in the decision-making model. Describe the differences between programmed and nonprogrammed decisions and among the conditions of certainty, uncertainty, and risk. Describe when to use the rational decision-making model versus the bounded rationality model and group versus individual decision making. State the difference between an objective and “must” and “want” criteria. After studying this chapter, you should be able to:

3. Learning Outcomes (cont’d) State the difference between innovation and creativity. List and explain the three stages in the creative process. Describe the differences among quantitative techniques, the Kepner-Tregoe method, and cost-benefit analysis for analyzing and selecting an alternative. Define the key terms listed at the end of the chapter. After studying this chapter, you should be able to:

4. IDEAS ON MANAGEMENT at Nike What type of decision did Nike make to sign a large endorsement contract with the young, unproven NBA basketball player LeBron James? What objectives does Nike meet through its star athlete endorsements? How does Nike demonstrate creativity and innovation? Which techniques could Nike use to analyze the alternatives in contract decisions? Does the amount of contracts given to young, unproven athletes pose a serious financial risk to Nike? Of what unethical and socially irresponsible labor practices have critics accused Nike? Which version of Vroom’s participative decision-making model should Nike have used to make the decision to sign young, unproven athletes to contracts?

5. The Relationship among Objectives, Problem Solving, and Decision Making Problem Exists whenever objectives are not being met. What is happening vs. what is wanted to happen. Problem Solving The process of taking corrective action to meet objectives. Decision Making The process of selecting a course of action that will solve a problem. The first decision is whether or not to take corrective action.

6. Problem Solving and Decision Making The Relationship among the Management Functions, Decision Making, and Problem Solving Managers need to make proficient decisions while performing the functions of management.

7. Exhibit 3 – 1 ● The Decision-Making Model

9. Decision-Making Styles Reflexive Style Makes quick decisions without taking the time to get all the information that may be needed and without considering all the alternatives. Reflective Style Takes plenty of time to make decisions, gathering considerable information and analyzing several alternatives. Consistent Style Tends to make decisions without either rushing or wasting time.

10. Decision Making in the Global Village U.S.-based decision-making styles are different from the decision-making styles in other cultures due to differences in: Time orientation The use of participative decision making Orientation toward problem solving rather than acceptance of the status quo

11. Classify and Define the Problem Decision Structure Programmed Decisions Arise in recurring or routine situations, for which the decision maker should use decision rules or organizational policies and procedures to make the decision. Nonprogrammed Decisions Arise in significant and nonrecurring and nonroutine situations, for which the decision maker should use the decision-making model.

12. Exhibit 3 –2 ● Decision Structure Continuum

13. Decision-Making Conditions Certainty Each alternative’s outcome is known in advance. Risk Probabilities can be assigned to each outcome. Uncertainty Lack of information or knowledge makes the outcome of each alternative unpredictable such that no probabilities can be determined.

14. Exhibit 3 –3 ● Continuum of Decision-Making Conditions

16. Decision-Making Models Rational Model (Classical Model) The decision maker attempts to use optimizing—selecting the best possible alternative. Bounded Rationality Model The decision maker uses satisficing —selecting the first alternative that meets the minimal criteria for solving the problem.

17. Exhibit 3 –4 ● Potential Advantages and Disadvantages of Using Group Decision Making

18. Exhibit 3 – 5 ● Continua for Classifying a Problem

19. Define the Problem Distinguish Symptoms from the Cause of the Problem List the observable and describable occurrences (symptoms) that indicate a problem exists. Determine the cause of the problem. Removing the cause should cause the symptoms to disappear or cease. Symptom: Customer dissatisfaction Cause: Poorly trained employees Solution: Implement customer relations training program for employees

20. Set Objectives and Criteria Setting Objectives Involves establishing clear objectives that will make for better decisions. Objectives state what the decisions should accomplish in solving a problem or taking advantage of an opportunity. Setting Criteria Involves setting standards that an alternative must meet to be selected as the decision that will accomplish the objective.

21. Generate Creative Alternatives Innovation The implementation of a new idea. Product innovation (new things) Process innovation (new way of doing things) Creativity A way of thinking that generates new ideas. The Creative Process Preparation Incubation and illumination Evaluation

22. Join the Discussion Ethics & Social Responsibility Stem-Cell Research Can Advanced Cell and other companies that are pursuing stem-cell research behave ethically with so much at stake financially? What can such companies do to help maintain their ethical standards? Is the decision to use stem-cell research to treat diseases an ethical one? Is the objective of reproductive stem-cell research ethical? Should the federal government even be considering funding stem-cell research? What criteria for funding stem-cell research should funding sources (either the government or private funding sources) set?

23. Exhibit 3 –6 ● Stages in the Creative Process

24. Exhibit 3 –7 ● Group Decision-Making Techniques That Foster Creativity and Innovation

25. Generating Creative Alternatives Brainstorming The process of suggesting many possible alternatives without evaluation. Synectics The process of generating novel alternatives through role playing and fantasizing. Nominal Grouping The process of generating and evaluating alternatives using a structured voting method that includes listing, recording, clarification, ranking, discussion, and voting to select an alternative.

26. Generating Creative Alternatives (cont’d) Consensus Mapping ( Ringi ) The process of developing group agreement on a solution to a problem. Delphi Technique The process of using a series of confidential questionnaires to refine a solution.

27. Responses That Kill Creativity “It can’t be done.” “We’ve never done it.” “Has anyone else tried it?” “It won’t work in our department (company/industry).” “It costs too much.” “It isn’t in the budget.” “Let’s form a committee.”

29. Exhibit 3 –8 ● Decision Tree

30. Analyze Alternatives and Select the Most Feasible Quantitative Techniques Break-even analysis Capital budgeting Payback Average rate of return Discounted cash flow Linear programming Queuing theory Probability theory

32. The Kepner-Tregoe Method Assess each alternative with regard to the “must” criteria. Rate the importance of each “want” criterion on a scale of 1 to 10 (10 being the most important). Determine how well each alternative meets the “want” criterion. Compute the weighted score (WS) for each alternative on each criterion. Select the alternative with the highest total weighted score.

33. Exhibit 3 –9 ● The Kepner-Tregoe Method for Analyzing Alternatives *Indicates importance [on a scale of 10 (high) to 1 (low)] assigned to each criterion as a weight.

34. Cost-Benefit (Pros and Cons) Analysis Cost-Benefit Analysis A technique for comparing the cost and benefit of each alternative course of action using subjective intuition and judgment along with math. Pros and Cons Analysis A technique for identifying the advantages, which can be considered the benefits, and the disadvantages, which can be considered the costs, of each alternative.

35. Exhibit 3 – 10 ● Continuum of Analysis Techniques

36. Join the Discussion Ethics & Social Responsibility Importing Medicines Is it ethical to break the law? Are cities and states being ethical and socially responsible in making the decision to purchase medicines illegally from Canada and Europe? Is the federal government being ethical and socially responsible in making it illegal to buy medicines from Canada and Europe? Are Canadian and European companies being ethical and socially responsible by selling medicines to American customers, even though the U.S. federal government has deemed it to be illegal?

37. Plan, Implement the Decision, and Control Plan Develop a plan of action and a schedule of implementation. Implement the Plan Communicate and delegate for direct action. Control Use checkpoints to determine whether the alternative is solving the problem. Avoid escalation of commitment to a bad alternative.

38. Participation Decision Styles Decide Consult Group Facilitate Delegate Consult Individuals

39. Source: Reprinted from Organizational Dynamics , Volume 28 (4), Victor H. Vroom, “Leadership and the Decision-Making Process,” p. 87, Copyright © 2000, with permission from Elsevier. Time-Driven The model is a decision tree that works like a funnel. Define the problem statement; then move from left to right and answer each question by responding either high (H) or low (L), skipping decisions that are not appropriate to the situation and avoiding crossing any horizontal lines. The last column indicates the appropriate leadership decision-making style for that situation. Exhibit 3 – 11 ● Participative Decision-Making Model

40. Source: Reprinted from Organizational Dynamics , Volume 28 (4), Victor H. Vroom, “Leadership and the Decision-Making Process,” p. 87, Copyright © 2000, with permission from Elsevier. Development-Driven Exhibit 3 – 11 ● Participative Decision-Making Model (cont’d)

41. Time-Driven versus Development-Driven Model Time-Driven Development-Driven Value Orientation Focus Making effective decisions through maximum development of group members Making effective decisions with minimum cost Emphasizes group development Emphasizes timely decision making Has a long-term horizon, as group development takes time Has a short-term time horizon

43. KEY TERMS problem problem solving decision making decision-making model programmed decisions nonprogrammed decisions decision-making conditions criteria innovation creativity creative process devil’s advocate approach brainstorming synectics nominal grouping consensus mapping participative decision-making model