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Flashcards in Week 6 Decision Making and Creativity Deck (70):

Rational choice paradigm of decision making

Decision making: the _____ process of making _____ among with the intention of moving towards some desired state of affairs.

conscious, choices, alternatives


There are Two key elements of rational choice paradigm:

Subjective expected utility - determines choice with highest value (maximisation)
Decision-making process - systematic application of stages of decision making


Rational choice paradigm of decision making

Definition: the view in decision making that people should – and typically do – use logic and all available information to choose the alternative with the highest value

Rational choice paradigm:


Rational choice paradigm of decision making

Definition: Ultimate principle of rational choice paradigm is to choose the alternative with the highest _____ _____ _____ – the probability (expectation) of satisfaction (utility) resulting from choosing a specific alternative in a decision.

subjective expected utility


There are 7 steps in the Rational Choice Decision-Making Process

1. Identify problem or opportunity - Symptom vs problem
2. Choose the best decision process
3. Discover or develop possible choices.
4. Discover or develop possible choices
5. Select the choice with the highest value
6. Implement the selected choice
7. Evaluate the selected choice


What are 3 Problems with rational choice paradigm

1. Assumes that people are efficient and logical information processing machines
2. Focuses on logical thinking and completely ignores emotions.
3 People have difficulty recognising problems and failures and cannot simultaneously process huge volumes of information.


Identifying Problems and Opportunities - Problems with problem identification

What are the 5 most widely recognised concerns

Stakeholder framing
Mental models
Decisive leadership
Solution-focused problems
Perceptual defence


Name that problem

_______ ______: The process where ______ filter information to amplify or suppress the seriousness of the situation, which highlights/hides specific problems and opportunities.

Stakeholder framing: stakeholders


Name that problem

_____ _____: inhibit recognition of unique problems or opportunities because they product a negative evaluation of things that are dissimilar to the mental model

Mental models


Name that problem

_____ _____: Even though employees rate this type of person as more affective, due to being able to quickly form an opinion about a problem or opportunity, studies have found that quicker decisions don’t always allow for logical assessment

Decisive leadership


Name that problem

_____ _____ _____: Occurs when all problems seen as solutions that have worked well in the past, even though circumstances are different

Situation-focused problems


Name that problem

_____ _____ _____: Occurs when a person blocks out bad news as a defence/coping mechanism

Perceptual defence


1. Be aware of perceptual and diagnostic limitations
2. Fight against pressure to look decisive
3. Maintain ‘divine discontent’ (aversion to complacency)
4. Discuss the situation with colleagues—see different perspectives.

These are all ways of:

Identifying problems and opportunities more effectively


Evaluating and choosing alternatives

Which Nobel Prize winner argued that

People engage in bounded rationality – the view that people are bounded in their decision-making capabilities, including access to limited information, limited information processing and a tendency to practice satisficing rather than maximising when making choices.

Herbert Simon


Rational choice paradigm assumptions vs.

Goals are clear, compatible and agreed upon

Observations from organisational behaviour

Goals are ambiguous, in conflict and lack full support


Rational choice paradigm assumptions vs.

Decision makers can calculate all alternatives and their outcomes

Observations from organisational behaviour

Decision makers have limited information-processing abilities


Rational choice paradigm assumptions vs.

Decision makers evaluate all alternatives simultaneously

Observations from organisational behaviour

Decision makers evaluate alternatives sequentially


Rational choice paradigm assumptions vs.

Decision makers use absolute standards to evaluate alternatives

Observations from organisational behaviour

Decision makers evaluate alternatives against implicit favourite


Rational choice paradigm assumptions vs.

Decision makers use factual information to choose alternatives

Observations from organisational behaviour

Decision makers process perceptually distorted information


Rational choice paradigm assumptions vs.

Decision makers choose the alternative with the highest pay-off

Observations from organisational behaviour

Decision makers choose the alternative that is good enough (satisficing)


Problems with information processing

Decision makers typically evaluate alternatives sequentially rather than simultaneously. Each alternative is compared to an _____ _____

implicit favourite


Problems with information processing

Definition: a preferred alternative that the decision maker uses repeatedly as a comparison with other choices.

implicit favourite


What are non-conscious modes of reasoning or rules of thumb

Biased decision heuristics


Name 3 widely studied heuristics biases

Anchoring and adjustment heuristic
Availability heuristic
Representativeness heuristic


a natural tendency for people to be influenced by an initial anchor point such that they do not sufficiently move away from that point as new information is provided

Anchoring and adjustment heuristic


Decision quality will often be enhanced by the use of systematic evaluation, where relevant factors are listed and alternatives scored against each one. Why is this so?

Humans are not able to process all the information in their heads


Name that Biased decision heuristic

A natural tendency to assign higher probabilities to objects or events that are easier to recall from memory, even though ease of recall is also affected by non-probability factors (e.g. emotional response, recent events)

Availability heuristic


Name that Biased decision heuristic

It has natural tendency to evaluate probabilities of events of objects by the degree to which they resemble (are representative of) other events or objects rather than on objective probability information

Representativeness heuristic


Problems with maximisation

_____: selecting an alternative that is satisfactory or ‘good enough’ rather than the alternative with the highest value (maximisation)



Problems with maximisation

_____ _____: Decision makers do not evaluate alternatives when they find an opportunity because they see the opportunity as the solution

Evaluating opportunities


Emotions influence our evaluation of alternatives when they are used as information.

T or F



Mental models hinder which step in the decision-making process?

Identifying problems and opportunities

A mental model colours the way in which a person looks at the world; this can inhibit the ability to see opportunities which are unusual or outside the range of normal activity. Mental models make it hard to abandon views of the world which no longer apply in changed circumstances, thus hiding problems and opportunities. Mental models also produce a negative evaluation of things that are dissimilar to the mental model.


Emotions affect the evaluation of alternatives in three ways.

1. Emotional markers influence our preference for certain alternatives
2. More attention is given to alternatives when we are in a negative mood
3. Anger can encourage the choice of risky alternatives


Which feature of intuition is most likely to be helpful in making good decisions

Access to tacit knowledge


Intuition is just another word for emotion


The key distinction is that intuition involves rapidly comparing our observations with deeply held patterns learned through experience. These templates represent tacit knowledge that has been implicitly acquired over time. They are mental models that help us to understand whether the current situation is good or bad, depending on how well that situation fits our mental model. When a template fits or doesn't fit the current situation, emotions are produced that motivate us to act.


After the best solution has been chosen, what is the next step in the rational choice decision-making process?

Implement the selected alternative


Emotions and making choices

1. Emotions form early _____ before we can _____ evaluate those choices
2. _____ and _____ influence how well the decision making process is followed
3. Emotions serve as information when _____ are evaluated – We listen in our emotions and use that info to assist in making choices

perceptions, consciously, Moods, emotions, alternatives


When a problem is defined as 'we need more control over our suppliers' it reflects

Solution focused problems


Subjective expected utility is characterised by its:

Expectation of satisfaction
Maximisation of happiness
Highest returns and satisfaction for stakeholders


Definition: the ability to know when a problem or opportunity exists and to select the best course of action without conscious reasoning


It is both an emotional response and a rapid, unconscious, analytic process, but not all emotional signals are intuition


Making choices more effectively
1. _____ evaluate alternatives against relevant factors
2. Remember that decisions are influenced by both _____ and _____ processes
3. _____ _____: a systematic process of thinking about alternative futures and what the organisation should do to anticipate and react to those environments

Systematically, rational and emotional, Scenario planning


Implementing decisions and evaluating decision outcomes

Decision makers aren’t completely honest with themselves when evaluating effectiveness of decisions. One problem associated with this is _____ _____ (also known as post-decisional justification) which is selectivity in the acquisition and use of evidence.

confirmation bias


Implementing Decisions

This is one of the most important and challenging tasks of leaders

Execution—translating decisions into action—


Evaluating Decision Outcomes

Post-decisional justification - is the tendency to inflate the quality of the selected option, and forget or downplay rejected alternatives. Caused by???

Caused by need to maintain a positive self-concept
Initially produces excessively optimistic evaluation of decision


Escalation of Commitment

The tendency to repeat an apparently bad decision or allocate more resources to a failing course of action

There are Four main causes of escalation:

Prospect theory effect
Perceptual blinders
Closing costs


Name that cause of escalation.

_____ _____: This cause of justification in in the demonstration the importance of a decision by continuing to invest in it



Name that cause of escalation.

_____ _____ _____A natural tendency to feel more dissatisfaction from losing a particular amount than satisfaction from gaining an equal amount

Prospect theory effect:


Name that cause of escalation.

_____ _____: non-conscious screening out/explaining away negative information

Perceptual blinders:


Name that cause of escalation.

Closing costs: terminating a project may incur financial penalties

Closing costs:


4 Ways of Evaluating Decisions More Effectively

Separate decision choosers from evaluators
Establish a preset level to abandon the project
Find sources of systematic and clear feedback
Involve several people in the evaluation process



Creativity is defined as:

The development of original ideas that make a socially recognised contribution


The creative process model

There are 4 steps in the creative process

1. Preparation
2. Incubation
3. Illumination
4. Verification

1. Preparation: process of investigating the problem or opportunity in many ways
2. Incubation: assists divergent thinking – reframing a problem in a unique way and generating different approaches to the issue; contrasts with convergent thinking – calculating the conventionally accepted ‘right answer’ to a logical problem
3. Illumination: also known as insight
4. Verification: ideas are subjected to logical evaluation


Characteristics of creative people

Four of the main characteristics represent a person’s creative potential that give individuals more creative potential are

1. Independent Imagination
2. Cognitive and Practical Intelligence
3. Persistance
4. Knowledge and experience


Organisational conditions supporting creativity

Intelligence, persistence, knowledge and experience, and independent imagination represent a person’s creative potential, but the extent to which this translates into more creative output depends on work environment:

- Learning orientation: leaders recognise reasonable mistakes as part of the creative process
- Motivation: more creative when employees believe job benefits organisation
- Authority to experiment
- Open communication and sufficient resources
- Reasonable level of job security
- Support from leaders and co-workers
- Creating intrinsically motivating jobs


Activities that encourage creativity

1. Hiring people with strong _____ potential
2. Providing work environment that supports creative _____
3. Various activities that help employees to think more creatively:
a. _____ the problem: revisit abandoned projects, explore issue with other people
b. _____ play: storytelling, artistic activities,
c. Morphological analysis: listing different dimensions and elements of each dimension and then looking at different combinations
d. Cross-_____: diverse teams, information sessions, internal tradeshows

creative, thinking, Redefining, Associative, pollination

Learning orientation in the organisation
Forgiveness for mistakes
Creating intrinsically motivating jobs
Open communication and sufficient resources
A reasonable level of job security
Support from leaders and co-workers


Employee involvement in decision making

Definition: the degree to which employees influence how their work is organised and carried out

Employee involvement


Main levels (from lowest to highest) of Employee involvement in decision making include:

- Decide alone
- Receive information from others
- Consult with individuals
- Consult with the team
- Facilitate the team’s decision


Benefits of employee involvement

Improves decision-making quality and commitment
Faster alerting of problems re customer expectations
Improve number and quality of generated solutions
Improves evaluation of alternatives


Contingencies of employee involvement

Contingencies of employee involvement --> Employee Involvement --> Outcomes of employee involvement


The 4 Contingencies of employee involvement

Decision structure
Knowledge source
Decision commitment
Risk of conflict


Name that Contingencies of employee involvement

: benefits of employee involvement increase with novelty/complexity of problem or opportunity

Decision structure


Contingencies of employee involvement

_____ _____: employees may have more relevant knowledge than leader

Knowledge source


Contingencies of employee involvement

_____ _____: employees lack commitment when not involved

Decision commitment


Contingencies of employee involvement

_____ of _____: goals and norms (individual) should support organisational goals; employee agreement should be likely in high involvement situations.

Risk of conflict


Bounded rationality challenges the assumptions of rational decision making

- Information is often limited and imperfect and people process information imperfectly
- Goals are often unclear
- Some decisions are more difficult than others
- People are content to satisfice rather than maximise

Information is often limited and imperfect and people process information imperfectly


What is the name for a procedure which involves thinking about the implications of a significant environmental change and what could be done to anticipate this

Scenario Planning


The tendency to recommit resources to a project which seems to be failing is known as:

Escalation of Commitment


More diverse perspectives, better solutions and quicker recognition of problems are all evidence of:

Employee involvement


In models of creativity, in problem solving and decision making, there is one common critical step

Obtaining Information


Everyone is creative. Which of these is an element of the work environment that supports the creative process

Learning orientation