Management Chapter 5 Homework Limitations The Rational Mo deli Managers May Fail Identify The Problem Correctly The

Unlock access to all the studying documents.

View Full Document

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

Lecture Notes

Chapter 5: Perception, Decision-Making, and Problem-Solving

Learning Objectives

5.1: Illustrate common perceptual biases with examples.

5.2: Explain how self-fulfilling prophecies affect job performance.

5.3: Provide two examples of how decision-making affects organizational performance.

5.4: Explain the rational decision-making model and bounded rationality.

Chapter Summary

Chapter summary here.

Annotated Chapter Outline

I. Would You Be Happier if You Were Richer?

A. This question was investigated in a survey of working women, asking them to

estimate the amount of time they were in a bad mood the previous day as well as

an estimated percentage of time people in high-/low-income situations were in a

bad mood on a given day.

i. Average woman’s estimate for those with an income below $20,000: 58%

of the day spent in a bad mood.

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

iv. Actual percentage of time spent in a bad mood for high-income women:

20% of the day.

v. Focusing illusion: The tendency to overestimate the effect of a single

factor on one’s life satisfaction

B. Perception: The process through which people organize and interpret their

sensory information (what they hear and see) to give meaning to their world

i. Unlike individual differences such as personality traits, perceptions can

change.

C. Leaders should remember that perceptions are the reality experienced by

followers.

II. Understanding Why Perceptual Biases Exist

A. Perceptual errors: Flaws in perception because of mental shortcuts people make

to simplify information that is processed.

i. Affect interpretations of leaders’ and coworkers’ behavior

ii. Affect how job applicants are seen in interviews

iii. Affect performance appraisals

B. PRACH acronym:

i. Primacy

ii. Recency

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

a. Accountability influences a person’s vigilance and improves

processing of all information presented.

b. Imagine that you would have to justify a decision to your boss or

even a group of strangers.

c. Try to “reset” and view the situation as if you had no prior exposure

D. The Recency Effect

i. Recency effect: The tendency to remember the information presented most

recently in a series of information

ii. Combating the recency effect:

a. Rehearsal: Repetition of information

b. Coding: Linking information you need to remember to something

familiar and easily retrievable. (Ex: remembering passwords by

creating combinations of your pet’s name with other characters)

E. The Availability Bias

i. Availability bias: The tendency to make judgments based upon what most

readily comes into the mind

a. People tend to overestimate the number of words that begin with the

letter r, but underestimate the number of words with r as the third

letter.

b. The general fear of plane crashes is greater than the actual danger of

plane crashes because of the high-profile news reports associated

with them.

ii. Combating availability bias:

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

F. Contrast Effects

i. Contrast effect: Judgments are strongly affected by reference objects (for

example, when a leader evaluates a series of poor performers, an average-

performing subordinate is then likely to receive a high evaluation).

ii. Recognizing and combating contrast effect in the interviewing process:

a. Applicants may be rated more favorably if they follow a sequence

of poor applicants.

b. Use standard and numerical score sheets

G. Halo Error

i. Halo error: Occurs when the rater’s overall positive impression or

ii. Horns error: The opposite of the halo error, where an overall negative

impression impacts ratings

III. Employability: Self-Fulfilling Prophecies During the Application Process

A. Employability: An attribution employers make about the probability that job

candidates will make positive contributions to their organization

i. Factors of employability:

a. Social or interpersonal compatibility: leads to perception that

candidate will have positive interactions with others on a daily

basis

ii. After hiring, employability explains who gets mentored and experiences

career success/promotions.

IV. Individual Decision-Making

A. Decision Processes and Organizational Performance

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

i. Good information and analysis are more important than politics for

effective decision-making.

ii. Mintzberg reported that managers have four decisional roles:

a. Entrepreneur: A decisional role in looking for new ideas and

opportunities

b. Disturbance handler: A decisional role in resolving conflicts and

selecting strategic alternatives

B. Why Some People Cannot Make Decisions

i. Indecisiveness: the quality of being unable to prioritize activities in the

order of importance

ii. Causative factors that lead to indecisiveness include:

a. Feeling out of control

b. Pessimism

c. Low self-esteem

d. Attributing events to external causes

iii. Career indecision: The difficulties preventing individuals from making a

career decision

C. Constraints on Individual Decision-Making

i. Another factor influencing indecision is the complex nature of leadership

decisions in a modern, rapidly changing environment.

a. Lack of information

V. The Rational Decision-Making Model

A. A series of logical steps decision-makers follow to determine the optimal choice:

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

i. Problem/opportunity defined.

ii. Information gathered and analyzed.

iii. Broad set of alternatives or possible courses of action is identified.

B. Limitations of the Rational Model

i. Managers may fail to identify the problem correctly at the outset.

ii. Some may consider a narrow range of alternatives, often the most obvious

and least creative.

C. Bounded Rationality

i. Satisfice: To make a decision that is satisfactory but perhaps not optimal.

ii. Decision-makers simplify complex problems to limit the amount of

information processing needed, but behave rationally within the confines of

this simplified model.

a. Tend to limit the number of alternatives considered and accept the

first tolerable alternative rather than pursuing an optimal

alternative

VI. Prospect Theory

A. Prospect theory: The idea that people are willing to settle for a reasonable gain,

but are willing to engage in risk-seeking behaviors where they can limit their

losses.

i. Losses loom larger than gains.

B. The Importance of How Decisions are Framed

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

i. People emphasize gains over losses and make decisions that increase gain

while avoiding loss.

ii. Loss and gain are treated completely differently from one another, which

may result in irrational decisions based on a subjective calculation of

expected utility.

iii. Framing: Whether questions are presented as gains or losses

a. Decisions are strongly affected by how options are presented

because of the typical risk aversion in most people.

VII. Intuition

A. Four characteristics comprise intuition:

i. Nonconscious process

ii. Involves holistic assumptions

iii. Judgments produced rapidly

iv. Results in affectively charged judgments

B. Intuition is not the same as common sense, although they can seem similar.

i. Intuition ranges from a simple “gut feeling” to complicated judgments such

as a physician’s quick diagnosis.

ii. Simon believes they are “analyses frozen into habit.”

iii. Common sense is a simplified thought process, often based on perceived

social consensus, while intuition is more individual.

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

ii. Wicked organizational problems: Complex and changing decision

scenarios that leaders face with increasing frequency

D. Wicked Organizational Problems

i. Heuristic: Cognitive shortcuts that produce a quick and often satisfactory

result at the cost of accuracy

ii. Characteristics of wicked organizational problems:

a. Unclear boundaries

b. Many actors

c. Connected with other problems

d. Require holistic strategies (not piecemeal solutions)

iii. Big data analytics: A complex process of examining large diverse data

sets (“big data”) looking for patterns, correlations, trends, and preferences

that can help leaders make informed business decisions

a. Can assist in solving wicked organizational problems

VIII. Decision Traps

A. Hindsight Bias

i. Hindsight bias (I-knew-it-all-along effect): The tendency for individuals

with outcome knowledge (hindsight) to claim they would have estimated a

probability of occurrence for the reported outcome that is higher than they

would have estimated in foresight (without the outcome information)

ii. Underlying processes of hindsight bias:

a. Person recalls the old event and consistently responds with the

memory of it.

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

B. Overconfidence

i. Overconfidence bias: An inflated confidence in the accuracy of a person’s

knowledge or estimates, sometimes referred to as hubris

ii. British Petroleum (BP)’s Deepwater Horizon oil well in the Gulf of

Mexico:

a. Officials repeatedly assured government regulators that an accident

was almost impossible.

b. Months later, an oil rig exploded, killing 11 and injuring 17. The

leak spread to over a mile, causing an ecological disaster.

iii. Leaders with more power possibly exhibit this bias, and hired experts can

be just as likely to make errors as novices (because of their

overconfidence).

C. Escalation of Commitment

i. Escalation of commitment: Occurs when individuals continue a failing

course of action after receiving feedback that shows it is not working.

a. People want to recoup losses and show they were right all along.

ii. Antidotes to escalation of commitment:

a. Separate the initial decision-maker from the decision evaluator

IX. Creative Problem-Solving

A. Creativity is the production of a novel and appropriate response, product, or

solution to an open-ended task.

B. Going With the “Flow”

i. Flow: When a person experiences a challenging opportunity aligned with

their skills

ii. When both challenges and skills are high, a person may learn more during

an experience.

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

iii. Most flow experiences are reported when working, and not during leisure

time.

C. Three-Component Model of Creativity

i. Developed by Teresa Amabile of Harvard University

ii. Three intersecting components:

a. Expertise: technical, process, and academic knowledge

X. Leadership Implications: Making Ethical Decisions

A. Referencing one’s moral compass can help guide ethical decisions in

organizations:

i. Utilitarianism: The consideration of decisions that do the most good for

the most people; “the ends justify the means.”

B. Bounded ethicality: Systematic and predictable ethical errors because of the

limited capacity to process information

i. May lead to unintended unethical decisions

ii. People then proceed to self-justification to explain their unethical

behavior.

C. Guidelines for creating awareness and encouraging ethical decisions:

i. Make ethics a focus of your workplace culture

ii. Publish your guiding principles

Instructor Resource

Scandura, Essentials of Organizational Behavior, 3e

SAGE Publishing, 2022

viii. Invite external review by an ethics audit team

ix. Establish a set of criteria to evaluate your own actions and share those

with others

x. Encourage, model, and help others establish a method to discuss actions

and increase alertness to the ethical issues in everyday decisions