Lecture 3: Appraising evidence Flashcards
(17 cards)
In a perfect world……
- Evidence of participative decision-making and being ‘democratic’
- Borrowing from the Ford Motor Company’s ‘quality control’ process (Detroit)
- Decision-making via consensus
- ‘Procedural justice’ (Kim & Mauborgne, 2002) i.e. the process of is considered fair and equitable in terms of how decisions are arrived at
What is Managerial sensemaking?
- A social activity that is that is triggered by something unusual, unexpected, or important, and in situations that are unfamiliar and not routine
- An ongoing cognitive process that involves the reciprocal interactions of information-seeking, meaning ascription, and action as actors attempt to understand and decipher the meaning of events around them.
example: Battered Child Syndrome
What is Weick’s view (fallacy of centrality)
- Sensemaking is partially dependent on the perceptions of ‘communities of believers’ who have their own ‘local rationalities’ or ‘interpretative stances’
- These local rationalities are embedded in larger ‘systems of meaning’ – some of which are individual and some of which are shared by the group.
- The important point is they predominate at the time a decision is made
If we are to explain organizational choice, we have to unpack these rationalities
What does ‘Ambiguity’ refer to?
- Where environmental conditions are difficult to discern
- Influence on indecision (deferring practices)
- Manifestation through language
- Delays and re-setting of decision timelines
- Buffering practices (‘holding off’)
- Inducing cognitive dissonance (Festinger, 1951)
Explain Managing uncertainty
- A common experience of managerial life and decision-making
- Some managers cope with uncertainty and ‘not knowing’ better than others do
- BUT – this is often context-dependent
- Some industries cannot be guided too much by persistent uncertainty and take routine programmed measures to mitigate against them
EXAMPLE: Bank of England setting the interest rate
Explain Herbert Simon
- Nobel Economics Laureate
- Few (if any) decisions are made under conditions of ‘perfect rationality’
- Issues are frequently ambiguous
- Information about alternatives are often incomplete
- The choice criteria unclear
- Political will to reconcile differences may be lacking
What does ‘Bounded rationality’ refer to?
- Rather than being rational optimizers, we operate in a ‘boundedly rational’ way
- Decision-makers can only review a limited range of factors and possibilities in making decisions because of the limitations both of the information available to them and their cognitive and temporal ability to handle its’ complexity
- Arriving at the most satisfactory decision with regards to the evidence available
- We attempt to exercise rationality within the limits of the information available and our ability to make sense of it (Carter et al, 2008: 87)
What is Satisficing?
- Decision-making is discussed as if it were a highly rational activity, where a decision is a rational choice based on a logical connection between cause and effect (Carter et al, 2008: 27)
- Instead, manager’s make decisions that just ‘do the trick’
- Satisficing = a mix of to ‘satisfy’ and to ‘suffice’
- Manager’s ‘make do’ with familiarity and what’s been done before to manage ambiguity and uncertainty
How to tell whether a practitioner has professional expertise?
accumulated experience alone does not necessarily result in expertise - we could be doing the wrong thing over and over again. In fact, only under three specific circumstances can professional expertise be considered valid and reliable:5, 6
- When there are numerous opportunities to practise.
- When practice leads to direct, objective feedback.
- Within a regular, predictable work
for example:
- doctor specialising in knee surgery
- a baker baking sourdough
Explain Heuristics and cognitive bias
- Based on over five decades of Behaviour Decision Theory (BDT)
- Highlights how managers use heuristics or ‘rules of thumb’ / ‘mental shortcuts’ in decision making
- Individual biases & professional biases
- Biases in our everyday lives and how we see the world
Types of Heuristics
Authority heuristic: ‘This man has a degree from Harvard in botany, so if he says this flower is not a dandelion but a salsify, I better trust his judgement.’
Wisdom of the crowd: ‘If this many positive reviews have been written about the hotel, and if this many people recommend it, then it must be good.’
Representativeness heuristic: ‘This woman loves to listen to New Age music and faithfully reads her horoscope each day. So, she’s more likely to be a yoga teacher than a bank cashier.’
Halo effect: ‘This candidate looks very professional – he wears a nice Italian suit and has a warm, confident smile, so he’s probably a great manager.’
Educated guess: ‘This house has a garden, so I guess it’s more expensive than the one with only a balcony.’
Familiarity heuristic: ‘When I’m on vacation and I have to buy some groceries, I always buy products from a brand I recognize.’
What are the 2 Modes of thinking?
System 1
- Fast, intuitive, associative, and emotional
- ‘Automatic thinking’
- Can risk cognitive biases that impair the quality of decisions we make
- Helpful to us in dangerous situations – its speeds up our thinking
System 2
- Slow, effortful, deliberate and rational
- Carefully processes information
- Weighs up and judges all information
- We rely on Systems 2 much less than we think we do (Barends & Rousseau, 2018: p67)
- It is the interaction between System 1 and System 2 that defines how we think.
- According to Daniel Kahneman this is because using System 2 is hard work.
What are the Measures to avoid or reduce practitioner bias?
- Were multiple options considered?
- Was the available evidence assessed blind from information that could induce bias?
- Was an attempt made to falsify views and judgements (for example, by actively seeking for contradictory evidence)?
- Was an attempt made to actively seek disagreement (for example, from other practitioners)?
- Was an opposite view brought into the judgement process (for example, a ‘devils advocate’)?
What are the Types of heuristics bias?
Bias 1
-
Availability:
judgments of the probability of easily recalled events are distorted -
Illusory correlation:
encourages the belief that unrelated variables are correlated -
Conservatism:
failure to revise sufficiently forecasts based on new information -
Law of small numbers:
overestimation to the degree to which small samples and representative of populations
Bias 2
-
Wishful thinking:
probability of desired outcomes judged to be inappropriately high -
Illusion of control:
overestimation of personal control over outcomes -
Logical reconstruction:
‘logical’ reconstruction of events which cannot be accurately recalled -
Hindsight bias:
overestimation of predictability of past events
Schwenk, C.R. (1988) The cognitive perspective on strategic decision making. Journal of Management Studies, 25, p41-55.
Types of Cognitive Biases
Patternicity and illusion of causality:
Our System 1 is predisposed to see order, pattern and causal relations in the world. As a result, we tend to see meaningful patterns, some of which are meaningful and others are but meaningless noise. However, our System 1 can easily be fooled: it also recognizes images when they are not there. That’s why we sometimes see images of animals or UFOs in clouds. However, the baseball player who forgets to shave before the game (A) and hits his first home run (B) may falsely assume that not shaving before the game made him hit a home run. This is how people become superstitious.
When a pattern or association is real, we learn something valuable from the environment, so we can make predictions that help us to survive. This process is also known as association learning and is fundamental to all human behaviour. Unfortunately, our System 1 is not very good in distinguishing false and real patterns and causal relations. In fact, human brains are inclined to believe that a perceived causal relation is real until proven otherwise.
Confirmation bias:
Due to the dominance of our System 1 thinking, we are predisposed to confirm our existing beliefs. By selectively searching for and interpreting information in a supporting fashion while ignoring information to the contrary we reinforce our existing beliefs. In other words, we ‘see what we want to see’.
In his book You Are Not So Smart, David McRaney explains that decades of research have placed confirmation bias at the top of all cognitive biases and among the most important mental pitfalls.
Group conformity
Group conformity is the tendency to conform to the others in a group, even if doing so goes against your own judgement. Human beings are very social creatures and are very aware of what people around us think. Therefore, our System 1 is strongly inclined to conform to the group: we strive for consensus and avoid confrontations, even when we don’t agree with what people are saying.
Explain Cognitive dissonance
- Too much data leads to greater confusion, anxiety and (paradoxically) uncertainty and ambiguity
- This becomes so uncomfortable we make a choice – and opt for something that might not be the ‘best’ option
- Dissonance makes us feels uncomfortable and unsettled
- Naturally, we seek to find ways that alleviates cognitive dissonance and the effects of indecision so we make attempts at dissonance reduction
Explain Escalation of commitment
- Originates in US foreign policy in Vietnam early1960s
- Tendency to ‘throw good money after bad’
- Persistent allocation of resources and faith towards a failing course of action. Many examples in more recent times e.g. building of the Scottish Parliament, Edinburgh tram system, London Millennium Dome etc.
- The public ‘irrevocability of commitment’ is the public loss of face and credibility, therefore, it’s why bad decisions continue to made and justified
