Chapter 7: Decision Making and Creativity
Decision Making: the conscious process of making choices among alternatives with the intention of moving
toward some desired state of affairs.
Rational Choice Paradigm of Decision Making
Rational Choice Paradigm: 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.
Subjective Expected Utility: the probability (expectation) of satisfaction (utility) resulting from choosing a
specific alternative in a decision.
Rational Choice Decision Making Process
1. Identify problem or opportunity
Problem: deviation between the current and the desired situation.
Opportunity: deviation between current expectations and a potentially better situation.
2. Choose the best decision process
Programmed Decisions: follow standard operating procedures, optimal solution already been
identified and documented based on previous events.
Non-programmed Decisions: requires all steps in the model because the problems are new or
3. Discover/develop alternative solutions
4. Choose the best alternative
5. Implement the selected alternative
6. Evaluate decision outcomes
Problems with the Rational Choice Paradigm
- it’s logical, yet it is impossible to apply in reality.
- focuses on logical thinking and completely ignores the fact that emotions also influence the decision making
Identifying with Problem Identification
Stakeholder Framing - Stakeholders often unintentionally filter information to amplify or supress seriousness of
the situation of bad or good news. By framing the situation, they throw a spotlight on specific causes of
symptoms and away from other possible causes.
Mental Models –Visual or relational images in our mind of the external world; they fill in the information that we
don’t immediately see, helping us understand and navigate in our surrounding environment. These mental
models also blind us from seeing unique problems or opportunities because they produce a negative evaluation
of things that are dissimilar to the mental model.
Decisive Leadership – Being decisive includes quickly forming an opinion of whether an event signals a
problem or opportunity. Consequently, eager to look effective, many leaders quickly announce problems or
opportunities before having a change to logically assess the situation.
Solution-Focused Problems – Decision makers engage in solution-focused problem identification because it
provides comforting closure to the otherwise ambiguous and uncertain nature of problems. For example, “Problem is that we need more control over our suppliers” – doesn’t describe the problem, just a rephrased
solution of an ill-defined problem.
Perceptual Defence – people block out bad news as a coping mechanism.
Searching For, Evaluating, and Choosing Alternatives
Bounded Rationality: the view that people are
bounded in their decision-making capabilities,
including access to limited information, limited
information processing, and tendency toward
satisficing rather than maximizing when making
• Rational Choice Paradigm is based on a
system of beliefs and assumptions
(paradigm) that people make rational
• This diagram helps up distinguish
between rational choice paradigm's
assumptions and what OB researchers
have observed in the "real world”.
Problems with Information Processing
• Rational choice paradigm makes several assumptions about the human capacity to process information.
• Assumes decision makers can process all info about alternatives and their consequences, which is
impossible in reality. As new alternatives come along, it is compared to an implicit favourite, which
undermines effective decision making.
• Implicit Favourite: a preferred alternative that the decision maker uses repeatedly as a comparison with
Biased Decision Heuristics
• Anchoring and Adjustment 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.
• Availability 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 nonprobability factors (e.g. emotional
response, recent events).
• Representativeness Heuristic: a natural tendency to evaluate probabilities of events or objects by the
degree to which they resemble (are representative of) other events or objects rather than on objective
probability information. Example: If 1/5 are engineers in your class, the rest business majors, you might
assume someone who acts like a stereotype of an engineer, is in fact an engineer (although really isn’t). Problems with Maximization
• Rational choice paradigm assumes people want to choose the alternative with the highest payoff
(maximizing), although people engage in satisficing with a satisfactory option because alternatives present
themselves over time.
• Satisficing: selecting an alternative that is satisfactory or “good enough,” rather than the alternati