decision making-a broader d ecisionerspective -a b
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DECISION MAKING-A BROADERPERSPECTIVEA comprehensive summary of 4 critical articles on Decision
Making
INTRODUCTION
Human have perpetually sought new tools and
techniques to help them make better decisions since the
dawn of time. For a millennia, human decisions were guided
primarily by faith, religion and myths. The Chinese relied on
poetic wisdom and divinations compiled in I-Ching, the
Greeks consulted the Oracle of Delphi and others seek
prophets and clairvoyants to peer into the future or interpret
dreams. Since then countless studies and research have been
conducted on the subject of decision making and out of the
many 4 critical articles were selected in this study.
In Looking beneath the surface: The impact of
psychology on corporate decision making, the article
examines the ways business decisions can be affected by
emotions (particularly negative emotions) and by our
unconscious state of mind.
Management decision making, ethical issues and
emotional intelligence, is a paper that expands and
updates an existing model of approach to ethical decision
making by Holian (2002).
DECISION MAKING-A BROADER
PERSPECTIVE
A comprehensive summary of 4 critical articles on
Decision Making
Ding Wei Yee (1071200152)
BOB 6024 Organisational Behaviour and Design
10/29/2007
Life is the sum of all your choices, Albert Cadmus
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The article, Anxiety and defective decision making: an elaboration of
the groupthink model, revisits Janis groupthink theory and updates it with
some new recent findings on the underlying causes behind concurrence
seeking behaviour.
The final article, Decisions without blinders is an interesting one on
the phenomena of bounded rationality where complex circumstances,
limited time frame, and insufficient mental computational power can reduce
even the best of decision makers to a state of bounded awareness.
LOOKINGBENEATHTHESURFACE: THEIMPACTOFPSYCHOLOGYON
CORPORATEDECISIONMAKING
(Kath Hall (2007), Looking beneath the surface: The impact of psychology on
corporate decision making, Managerial Law, Vol. 49 No. 3, pp. 93-105)
The main objective of this article is to look into the common ways in
which decision making in the corporate setting can be affected by cognitive
biases. It also delves into how flaws in decision making can manifest when
executives are under pressure, over-confident or part of a group. The
potential effect of cognitive biases can be show by drawing upon a range of
research in cognitive and organizational psychology. In order to develop a
better understanding on decision making or to that effect, good and sound
decision making it is necessary to first develop a deeper understanding as to
what affects decision making in the first place. It is now an undeniable fact
that cognitive biases do indeed affect the quality of decision making but to
what extent? The article then suggests that although the many aspects of
decision making processes operate outside of ones conscious awareness, the
flaws may be easier to monitor and control when one is fully aware of the
potential impact of the decisions on their livelihood.
The legal regulation of corporate decision making is the ultimate
decision making power that lies with the board of directors. The main
function of the board is to overlook the management, monitor the financial
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position of the company and provide guidance and advice to management on
operational issues. Therefore, it has become clear that the key to corporate
governance is investor confidence and board effectiveness, a point that has
been taken into serious consideration by corporations. This is evident by the
increase in the number and role of independent directors. Although it is
apparent that there might be a link between the presence of independent
directors and improved corporate governance, there is still a need to prove
that the presence of independent directors has a direct influence on
corporate success. The assumption on which the legal regulation of corporate
governance is based is not consistent with common human behaviour and
might be a subject that warrants some looking into.
The study of how business decisions are made has been a subject of
great interest to many. After analysing 400 strategic decisions made by top
managers in private, public and non-profit organizations; the key finding is
that the majority of all business decisions are destined to fail (Nutt, 2002).
Disney Corporations decision on the location to build Euro Disney was called
into question and used as a demonstrative example on how some business
propositions that may seem promising at first can turn out into catastrophic
disasters. Because of the success of Tokyo Disney, the executives were
excited to replicate its success in Europe. Bolstered by their recent success,
overconfidence dominated their decision making damaging Disneys sterling
reputation and charting losses of nearly USD400 million. Poor decision
making factors such as these can adversely affect any corporate decision
making process regardless of how confident an individual is in their decision
making capacity in an organization. Tversky and Kahnemann suggested that
people rely on a number of simplifying strategies in decision making called
heuristics. They showed that heuristics serve as a mechanism for coping
with harsh environments that surround decisions although there are
situations when these strategies can backfire on us.
On 9th of May 1996 two highly experienced mountaineers Rob Hall and
Scott Fischer took 2 teams of 20 clients who were a mix of experienced and
inexperienced high altitude climbers. But by 11th May 1996, both Hall and
Fischer and 3 other climbers were dead. The others barely managed to
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escape with their lives. In retrospect, when analysing the factors influencing
what happened that day, it was the poor quality of their decision making that
was at fault. Both Hall and Fischer were affected by shortcuts in their decision
making. These included 3 common shortcuts that are; commitment bias,
confirmation bias and assumed reality bias.
The flaws of decision making are many and what difficult about it is
their invisibility. These processes have become so routine to our thinking
process that we fail to understand that some of these shortcuts that allow us
to make decisions under pressure can also cause great errors of judgement.
These errors are predictable, systemic and unconscious. In order to better
understand the nature of these shortcuts and how they affect corporate
decision making, first there is a need to understand the different ways people
make decisions.
In 2002 researchers from Sweden and USA decided to test the
accuracy of 250 participants with different levels of knowledge about football
in predicting results of the World Cup (Andersson, et al., 2003). Based on the
results it was conclusive that there are at least 2 processes we use to make
decisions. The first is rational decision making which involves using problem
solving techniques to arrive at the best conclusion because the nature of the
problem is usually logical and definitive. The second process is called
intuitive or automatic decision making; this is something that operates below
the level of conscious awareness and is sometimes referred to as the gut.
Intuitive decisions can be overridden by deliberate and rational thought but
only if triggered. The key to good corporate decision making is to correctly
use the rational and intuitive decision making processes to our own corporate
advantage.
Basically all regulations in Corporate Law are based upon the
assumption that the decision making in companies are performed by rationaldecision makers. Yet psychological research on decision making seems to
prove otherwise as cognitive biases can blind individuals and especially
groups in their decision making.
Groupthink is a particularly influential theory on how dysfunction can
occur in group decision making. Janis and Mann argue that strongly cohesive
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groups can be drawn in by group blindness, group pressure and self-interest
(Janis and Mann, 1977). Conditions leading toward cohesiveness include a
strong sense of belonging to a powerful and protective group, similarity in
members backgrounds and principles, loyalty to group leader and insular
group practices. That is why companies are increasing the number of
independent directors in a company as a solution to this problem. However,
when decision making processes become distorted and dysfunctional, even
independent directors may be drawn into these dynamics and become
limited in their ability to speak their minds.
In conclusion, it is important to look beneath the surface of corporate
decision making as it reveals to us facets of our thinking that even we are not
aware or conscious of. The key to making quality decisions is to become fully
aware of our rational and intuitive decision making processes. With this
decision makers in companies can become better equipped at dealing with
corporate problems even under pressure.
MANAGEMENTDECISIONMAKING, ETHICALISSUESAND
EMOTIONAL INTELLIGENCE
(Rosalie Holian (2006), Management decision making, ethical issues and
emotional intelligence, Management Decision, Vol. 44 No. 8, pp. 1122-
1138)
This article focuses on the expansion of a model of approaches to
decision making on ethical issues in an organization (Hollian, 2002). Two
broad categories of decision making were identified as individual perceptions
that are either black and white or shades of gray. Bounded by these
perceptions are: The Legalistic mode which relies on laws, which can be
regarded as objectives standards of behaviour that are explicit, impartial andinclude predetermined punishments. However, this approach may ignore
ethical dilemmas. The Narcissistic mode on the other hand is a subjective
black and white where a person possesses a certain narrow-mindedness on
ethical issues and acts without conscience or concern for others. The
remaining 3 modes represent the views of shades of gray- Navigation,
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Entrepreneurial and Worried. The 4 modes of Navigation,
Entrepreneurial, Worried and Legalistic all describe approaches to
ethical decision making that take into consideration the legal and/or moral
issues. A fifth mode was added later to cover unethical and illegal
approaches, the Narcissistic mode.
The research is based on a study of practising managers in Australia.
The data collected in 2 phases: Phase (I) was a 12 month case study of over
200 managers, and Phase (II) involved in-depth interviews with 39
managers/management consultants from 32 organizations. The data
obtained was thoroughly analyzed to explore the underlying knowledge, skills
or abilities that are associated with decision making on ethical issues in an
organisational context.
There are 4 main categories of underlying skill and characteristics that
are associated with different styles of ethical decision making- Judgement,
Integrity, Courage and Humanity. Judgement and Integrity were usually
applied to ethical decision making but Courage will be necessary when
Judgement and Integrity are conflicted or when insufficient information was
provided. Humanity is that something extra that will tell a good decision
from just a satisfactory one.
The 4 key categories of skills: Judgement, Integrity, Courage and
Humanity are associated with the 5 decision making modes. Judgement is the
identification of the level and extent required about a situation and then
choosing between the options while taking into account the risks and
priorities associated. It is a skill that is generally obtained through observing
role models and feedback. Integrity can be described as having conscious
personal values and the desire to act in accordance to their own set of
values. Courage is the ability to act knowingly and willingly accept risks. And
last but not least, Humanity which is described as the capacity to understandand forgive, resilience and appreciation of the lack of control over the
unpredictable events.
To date the literature on ethics are few with only brief mentions on the
subject of ethics in the many articles on emotional intelligence. Narcissism
on the other hand is a subject that has been discussed vehemently over the
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years within the organisational context. Aspects of pathological behaviour in
organizations have been a topic that has demanded a great deal of attention.
Industrial psychopaths, Snakes in suits and Bully bosses are just the
many names given by scholars that show the abuse of power by a narcissist
in an organization. Narcissistic behaviour is defined here in an organizational
context as remorseless, without conscience or concern for others, lacking
empathy and human values, self-absorbed with an inflated self-image, cold
and exploitative with a strong need to be in control and not criticised. As such
we can assume that a narcissist makes decisions that are not in the best
interest of the corporation. It is easy to mistake high-level of self-confidence
with selfish arrogance because it has always been the common
misconception that when a person is highly optimistic or confident, he or she
is also emotionally intelligent. The reality of the matter is that even with the
presence of self-confidence as a trait, it doesnt guarantee that the same
person is also emotionally intelligent.
Over the years there has been considerable debate over whether or
not emotional intelligence can be further developed at a later stage in life
and so far the results have been inconclusive. At the time being, it is
determined that the most effective way to reinforce ethical decision making
may be role models. Ethical decision making can be inculcated by observing
role models negative and positive, real or even fictional. These also included
primary and secondary influences in a persons life like childhood, adolescent
and adulthood experiences. Role models in an organization are typically seen
as people in the senior management positions or media personalities.
Ethical decision making can be reinforced and enhanced if an organization
pays attention to the development of skills associated with Judgement,
Integrity in addition to the newer less developed areas of Humanity and
Courage. Decision makers with the ability to utilize all 4 of these skills would
be equipped with a greater range of options when faced with ethical issues
within an organization. There are 6 tools and techniques involved with the
development of these skills highlighted in the article:
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1. Developing a sense of humour: may be the most important tool yet as
humour can be used to diffuse tension around a sensitive subject when
discussing ethical issues.
2. Developing courage: may be useful for those who constantly find
themselves in the Worried mode. Learning how to discuss the
undiscussable (Argyris, 1986, 1990), questioning group norms are
some of the many ways to develop courage but it needs to begin
gradually by taking only small risks.
3. Rock, Paper, Scissors: is an exercise to explore thoughts and feelings
about risk.
4. Ethical Issues Card Sort: an exercise to examine the nature of
perceptions about ethical decisions. This explores where individuals
draw the line between what is morally right and wrong.
5. A Mythical Model: an analogy to the Greek legend, Straits of Messina
where the model is used to represent the 5 different decision modes in
an organization.
6. Learning how to interpret gray areas: because ethical choices are
usually a mixture of components of right and wrong which can be
difficult to separate; shades of gray.
Judgement, Integrity, Courage and Humanity are skills that can contribute
to a managers flexibility in their approaches to ethical decision making.
Learning these skills can be done in a variety of ways either at an individual
level or in groups, and could include experiences in formal organisational or
academic programmes.
In conclusion, Humanity is a valuable personal attribute that can be used
to help reduce the impacts of errors in judgement in an organization and
assist in the learning and development of other skills. Humanity is the holistic
factor that lifts decision making from satisfactory to good. Therefore decision
makers may be required to develop a range of skills in order to maximize
their ability in dealing with ethical problems. The task of inculcating these
skills is not a simple additive process. While the tedious daily decisions can
be addressed with the use of Judgement and Integrity, Humanity and
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of the groupthink model and other theories that include the impact of both
negative and positive emotions on decision making.
In a management context, groupthink is still a term that is not fully
understood by corporations and can sometimes be mistaken for other causes
for poor decision making. Managers need to understand the underlying
causes and consequences of concurrence seeking as a step in reducing
human error in their decision making routine.
There are many reasons why managers sometimes make poor
decisions and concurrence seeking is but one of them. Groupthink as a
problem is almost universally recognized by managers. Confusion can
sometimes occur when decisions are made when rationality is limited due to
the many complexities in organisational life. Other factors such as
organisational politics and culture can also contribute to the aggravation of
groupthink.
In conclusion, there are several recommended measures to prevent
groupthink from emerging such as instituting impartial leadership and
developing more systematic ways of evaluating options in decision making.
Managers need to equip themselves with the ability to recognise negative
emotions in oneself and others, and the willingness to discuss and deal with
these issues. They would also need to be constantly vigilant of the defence
mechanisms triggered by groupthink such as blindness to the existence of a
developing problem, underestimating the risks or deflecting attention
elsewhere. Either way the result is a crisis that should have been avoided.
Better group leadership and methodical decision making procedures are only
part of the solution. There is also a need to developand instill a capacity for
self knowledge and good communication skills for managers.
DECISIONS WITHOUT BLINDERS
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(Max H. Bazerman, Dolly Chugh (2006), Decision without blinders, Harvard
Business Review Special Issue on Decision Making, pp. 88-97)
In this article, the phenomenon of bounded awareness will be
examined. Bounded awareness or bounded rationality (Simon, 1956) is a
phenomena where decision makers unconsciously ignore certain valuable
information in the critical process of decision making.
Most executives are not aware of the specific ways in which their
awareness is bounded and failure to recognize those limitations can lead to
catastrophic consequences. Note that bounded awareness is not the same as
information overload, or having to make decisions where too much
information is available with too little time. In the case of bounded
awareness, even when provided with sufficient time and information, most
individuals still fail to bring the right information into their awareness at the
right time. This phenomena can occur at various points in the decision
making process. 4 key points were highlighted in this article are as follows:
1. Failure to see information: studies have shown that when a person is
too focussed on a particular task he or she will fail to notice the other
things that are happening in their peripheral view. This can explain
how the Enron and WorldCom scandals grew to such monumental
proportions.
2. Failure to seek information: the Challenger space shuttle disaster was
used to demonstrate this point. Failure to seek information becomes a
real problem when the decision makers are motivated to favour a
particular outcome. Here some references were made on the Bush
administrations decision to invade Iraq and how the 9/11 disaster
could have been averted had the people involved sought out the right
information at the time.
3. Failure to use information: Citibanks failure in Japanese markets was
taken as a case in point to represent how failure to use the right
information obtained can spell disaster.
4. Failure to share information: the 9/11 incident was again used to
exemplify this point. Had the White House, CIA, FBI and other
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government agencies worked together to collectively gather and
process the information, the disaster could have easily been
prevented.
If any of these factors occur at any point of the decision making process,
the effects may be detrimental to the quality of decision making. There are a
few techniques executives can use as a measure for bounded awareness;
that is to increase levels of awareness in the 4 key areas as described in the
above paragraph.
5. See information: get a birds eye view of every situation; know what
youre looking for. Training the eyes to see what usually escapes the
notice of others.
6. Seek information: receiving recommendations or proposals without any
contradictory data should raise a red flag indicating that the group has
succumbed to bounded awareness. Always assign someone to play the
role of devils inquisitor. Extensive research on a given problem and
options is a wise strategy.
7. Use information: always focus on a wider perspective, that way one
can avoid ignoring critical information.
8. Share information: everyone has some unique information to
contribute, always ask for it explicitly. Important individual information
should be shared. Create an organisational structure where
information sharing is default in every level of the organization.
The key solution to the problem of bounded awareness is to increase
awareness in areas that were previously out of focus. The important thing is
to take toll of the whole situation before proceeding to evaluating the options
and then deciding on a solution. Executives should also be cautious of
becoming hyperaware of their own limitation and as a result lose valuable
time and resources collecting too much information. People normally accept
a status quo as a given but by contrast the most creative solutions usually
emerge when people question common assumptions. Executives have to
learn to locate useful information that lies outside of the bounds of their
awareness by simply questioning common assumptions about how things
work.
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CONCLUSION
Decision making is an important aspect to the lives of many, as Albert
Cadmus reminds us, Life is the sum of all your choices. It is evident that
good decision making skills will not only bring rewards in the organisational
context but also life in general. Decision making is affected by cognitive
biases, anxiety and a range of other factors. It is therefore imperative to
understand these effects and increase awareness in these areas to avoid
succumbing to the state to bounded rationality. In a management context,
when ethical issues are being discussed managers have to remember that
being emotionally intelligent and developing the skills such as Judgement,
Integrity, Courage and Humanity is the key to the creative solving of ethical
problems that arise in an organization.
Consensus is good, unless it is achieved too easily, in which case it
becomes suspect (Buchanan, OConnell, 2006). Irving Janis (1972) coined
the term groupthink to describe a mode of thinking that people engage in
when they are deeply involved in a cohesive in-group, when the members
strivings for unanimity override their motivation to realistically appraisealternative courses of action. Groupthink is a term that is widely used in
corporations but there is a need to properly define it so as to not mistake it
for other reasons for defective decision making. Being emotionally intelligent
and consciously aware of things that are happening in the environment
surrounding the decision are just some of the aspects that need further
developing in senior personnel within organizations.
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ACKNOWLEDGEMENTS
I would like to express my sincere appreciation and gratitude towards Prof. V.
Anantaraman for his infinite patience and guidance.
REFERENCES
Kath Hall (2007), Looking beneath the surface: The impact of psychology on
corporate decision making, Managerial Law, Vol. 49 No. 3, pp. 93-105
Rosalie Holian (2006), Management decision making, ethical issues and
emotional intelligence, Management Decision, Vol. 44 No. 8, pp.
1122-1138
Judith Chapman (2006), Anxiety and defective decision making: An
elaboration of the groupthink model, Management Decision, Vol. 44 No.
10, pp. 1391-1404
Max H. Bazerman, Dolly Chugh (2006), Decision without blinders, Harvard
Business Review (January 2006) Special Issue on Decision Making, pp.
88-97
Leigh Buchanan, Andrew OConnell (2006), A brief history of decision
making, Business Review (January 2006) Special Issue on Decision
Making, pp. 32-41
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