McGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 5
Decision Making, Learning,
Creativity, and Entrepreneurship

McGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 The Nature of Managerial
Decision Making
Decision Making
The process by which managers respond to
opportunities and threats by analyzing
options, and making determinations about
specific organizational goals and courses
of action

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 Decision Making
Programmed Decision
Routine, virtually automatic decision making
that follows established rules or guidelines.
Managers have made the same decision many
times before.
There are rules or guidelines to follow based on
experience with past decisions.
Little ambiguity involved.

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 Decision Making
Non-Programmed Decisions
Nonroutine decision making that occurs in
response to unusual, unpredictable
opportunities and threats.

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 The Classical Model
Classical Model of Decision Making
A prescriptive model of decision making that
assumes the decision maker can identify and
evaluate all possible alternatives and their
consequences and rationally choose the most
appropriate course of action

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 The Administrative Model
Administrative Model of Decision
Making
An approach to decision making that explains
why decision making is inherently uncertain
and risky and why managers usually make
satisfactory rather than optimum decisions

5-7
 Causes of Incomplete
Information
Satisficing
Searching for and choosing an acceptable, or
satisfactory response to problems and
opportunities, rather than trying to make the
best decision
Managers explore a limited number of options
and choose an acceptable decision rather
than the optimum decision

5-8
 Decision Making Steps
Step 1. Recognize Need for a Decision
Sparked by an event such as environment
changes.
Managers must first realize that a decision
must be made.

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 Decision Making Steps
Step 2. Generate Alternatives
Managers must develop feasible
alternative courses of action
If good alternatives are missed, the resulting
decision is poor
It is hard to develop creative alternatives, so
managers need to look for new ideas

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 Decision Making Steps
Step 3. Evaluate Alternatives
What are the advantages and
disadvantages of each alternative?
Managers should specify criteria, then
evaluate.

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 Decision Making Steps

Step 4. Choose Among Alternatives

Rank the various alternatives and make a
decision
Tendency is for managers to ignore critical
information, even when available

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 Decision Making Steps
Step 5. Implement Chosen Alternative
Managers must now carry out the
alternative
Often a decision is made and not
implemented

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 Decision Making Steps
Step 6. Learn From Feedback
Compare what happened to what was
expected to happen
Explore why any expectations for the
decision were not met
Derive guidelines that will help in future
decision making

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 Group Decision Making
Superior to individual making
Choices less likely to fall victim to bias
Able to draw on combined skills of group
members
Improve ability to generate feasible
alternatives

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 Group Decision Making
Allows managers to process more
information
Managers affected by decisions agree to
cooperate

5-16
 Organizational Learning and
Creativity
Organizational Learning
The process through which managers seek to
improve a employees desire and ability to
understand and manage the organization and
its task environment so as to raise
effectiveness

5-17
 Organizational Learning and
Creativity
The Learning Organization
An organization in which managers try to
maximize the peoples ability to behave
creatively to maximize organizational learning.

5-18
 Organizational Learning and
Creativity
Creativity
A decision makers ability to discover original
and novel ideas that lead to feasible
alternative courses of action

5-19
 Entrepreneurship and
Creativity
Entrepreneurs
an individual who notices opportunities and
decides how to mobilize the resources
necessary to produce new and improved
goods and services

5-20
 Entrepreneurship and
Creativity
Entrepreneurship
Mobilization of resources to take advantage of
an opportunity to provide customers with new
and improved goods and services

5-21