Percepción y Toma de Decisiones

Question 1

Perception

Answer 1

Perception is a process by which we organize and interpret sensory impressions in order to give meaning to our environment. What we perceive can be substantially different from objective reality. Why is perception important in the study of OB? Simply because people’s behavior is based on their perception of what reality is, not on reality itself. The world as it is perceived is the world that is behaviorally important. In other words, our perception becomes the reality from which we act.

Question 2

Factors That Influence Perception

Answer 2

• Perceiver When you look at a target, your interpretation of what you see is influenced by your personal characteristics—attitudes, personality, motives, interests, past experiences, and expectations. In some ways, we hear what we want to hear1 and we see what we want to see—not because it’s the truth, but because it conforms to our thinking. For instance, recent research indicated that supervisors perceived employees who started work earlier in the day as more conscientious and therefore as higher performers; however, supervisors who were night owls themselves were less likely to make that erroneous assumption.2 Some perceptions created by attitudes like these can be counteracted by objec-tive evaluation, but others can be insidious. Consider, for instance, observer per-ceptions of a recent shooting in New York. There were two eyewitnesses—one said a police officer chased and shot a fleeing man; the other said a handcuffed man lying on the ground was shot. Neither perceived the situation correctly: The man was actually attempting to attack a police officer with a hammer when he was shot by another officer
• Target The characteristics of the target also affect what we perceive. Because we don’t look at targets in isolation, the relationship of a target to its back-ground influences perception, as does our tendency to group close things and similar things together. We can perceive women, men, whites, African Ameri-cans, Asians, or members of any other group that has clearly distinguishable characteristics as alike in other, unrelated ways as well. Often, these assumptions are harmful, as when people who have criminal records are prejudged in the workplace even when it is known they were wrongly arrested.4 Sometimes differ-ences can work in our favor, though, such as when we are drawn to targets that are different from what we expect. For instance, in a recent study participants respected a professor wearing a T-shirt and sneakers in the classroom more than the same professor dressed traditionally. The professor stood out from the norm for the classroom setting and was therefore perceived as an individualist
• Context Context matters too. The time at which we see an object or event can influence our attention, as can location, light, heat, or situational factors. For in-stance, at a club on Saturday night you may not notice someone “decked out.” Yet that same person so attired for your Monday morning management class would certainly catch your attention. Neither the perceiver nor the target has changed between Saturday night and Monday morning, but the situation is different.People are usually not aware of the factors that influence their view of reality. In fact, people are not even that perceptive about their own abilities.6 Thank-fully, awareness and objective measures can reduce our perception distortions. For instance, when people are asked to ponder specific aspects of their ability, they become more realistic in their self-perceptions.7 Let’s next consider how we make perceptions of others

Question 3

Attribution Theory

Answer 3

• Attribution theory tries to explain the ways we judge people differently, depending on the meaning we attribute to a behavior. Attribution theory suggests that when we observe an individual’s behavior, we attempt to determine whether it was internally or externally caused. That determination depends largely on three factors: (1) distinctiveness, (2) con-sensus, and (3) consistency. Distinctiveness refers to whether an individual displays different behaviors in different situations. Is the employee who arrives late today also one who regularly “blows off” other kinds of commitments? What we want to know is whether this behavior is unusual. If it is, we are likely to give it an external attribution. If it’s not, we will probably judge the behavior to be internal.If everyone who faces a similar situation responds in the same way, we can say the behavior shows consensus. The behavior of our tardy employee meets this criterion if all employees who took the same route were also late. From an attri-bution perspective, if consensus is high, you would probably give an external attribution to the employee’s tardiness, whereas if other employees who took the same route made it to work on time, you would attribute his lateness to an internal cause.Finally, an observer looks for consistency in a person’s actions. Does the per-son respond the same way over time? Coming in 10 minutes late for work is not perceived the same for an employee who hasn’t been late for several months as for an employee who is late three times a week. The more consistent the behav-ior, the more we are inclined to attribute it to internal causes.Exhibit 6-2 summarizes the key elements in attribution theory. It tells us, for instance, that if an employee, Katelyn, generally performs at about the same level on related tasks as she does on her current task (low distinctiveness), other employees frequently perform differently—better or worse—than Katelyn on that task (low consensus), and Katelyn’s performance on this current task is con-sistent over time (high consistency), anyone judging Katelyn’s work will likely hold her primarily responsible for her task performance (internal attribution). The concept of attribution theory significantly advances our understand-ing of people perception by helping us identify why we draw certain con-clusions from people’s behavior. Having introduced person perception, let’s consider the common shortcuts we use to simplify our processing of others’ behavior
• Errors or biases distort attributions. When we make judgments about the behavior of other people, we tend to underestimate the influence of exter-nal factors and overestimate the influence of internal or personal factors.11 This fundamental attribution error can explain why a sales manager attri-butes the poor performance of her sales agents to laziness rather than to a competitor’s innovative product line. Individuals and organizations tend to attribute theirown successes to internal factors such as ability or effort, while blaming failure on external factors such as bad luck or difficult coworkers. People tend to attribute ambiguous information as relatively flat-tering, accept positive feedback, and reject negative feedback. This is called self-serving bias

The evidence on cultural differences in perception is mixed, but most sug-gests there are differences across cultures in the attributions people make.13 In one study, Asian managers were more likely to blame institutions or whole orga-nizations when things went wrong, whereas Western observers believed indi-vidual managers should get blame or praise.14 That probably explains why U.S. newspapers feature the names of individual executives when firms do poorly, whereas Asian media report the firm as a whole has failed. This tendency to make group-based attributions also explains why individuals from Asian cul-tures, which are more collectivistic in orientation, are more likely to use group stereotypes.

Question 4

Common Shortcuts in Judging Other

Answer 4

• Selective Perception : Any characteristic that makes a person, an object, or an event stand out will increase the probability we will perceive it. Why? Because it is impossible for us to assimilate everything we see; we can take in only certain stimuli. Thus, you are more likely to notice cars like your own, and your boss may reprimand some people and not others doing the same thing. Because we can’t observe everything going on around us, we use selective perception. But we don’t choose randomly: We select according to our interests, background, experience, and attitudes. Seeing what we want to see, we sometimes draw unwarranted conclusions from an ambiguous situation
• Halo Effect When we draw an impression about an individual on the basis of a single characteristic, such as intelligence, sociability, or appearance, a halo effect is operating.18 The halo effect is easy to demonstrate. If you knew someone was, say, gregarious, what else would you infer? You probably wouldn’t say the person was introverted, right? You might assume the person was loud, happy, or quick-witted, when in fact gregarious does not include those other attributes. As managers, we need to be careful not to draw infer-ences from small clues
• Contrast Effects An old adage among entertainers is “Never follow an act that has kids or animals in it.” Why? Audiences love children and animals so much that you’ll look bad in comparison. This example demonstrates how the contrast effect can distort perceptions. We don’t evaluate a person in isolation. Our reaction is influenced by other people we have recently encountered.In a series of job interviews, for instance, a candidate is likely to receive a more favorable evaluation if preceded by mediocre applicants and a less favor-able evaluation if preceded by strong applicants. Thus, interviewers can make distortions in any given candidate’s evaluation as a result of his place in the interview schedule
• Stereotyping When we judge someone on the basis of our perception of the group to which he or she belongs, we are stereotyping.19We deal with the unmanageable number of stimuli of our complex world by using stereotypes or shortcuts called heuristics to make decisions quickly. For example, it does make sense to assume that Allison from finance will be able to help you figure out a forecasting problem. The challenge occurs when we generalize inaccurately or too much. Stereotypes can be deeply ingrained and powerful enough to influence life-and-death decisions. One study, controlling for a wide array of factors (such as aggravating or mitigating circumstances), showed that the degree to which black defendants in murder trials looked “ste-reotypically black” essentially doubled their odds of receiving a death sentence if convicted.20 Another study found that students tended to assign higher scores or leadership potential and effective leadership to whites than to minorities, supporting the stereotype of whites as better leaders.21One problem with stereotypes is that they are widespread generalizations, though they may not contain a shred of truth when applied to a particular person or situation. We have to monitor ourselves to make sure we’re not unfairly applying a stereotype in our evaluations and decisions. Stereotypes are an example of the warning, “The more useful, the more danger from misuse.”It should be obvious by now that our perceptions, many of which are near-instantaneous and without conscious deliberation, color our outlook. Sometimes they have little impact on anyone, but more often our perceptions greatly influence our decisions. The first step toward increasing the effective-ness of organizational decision making is to understand the perception process on an individualized level, discussed next

Question 5

Specific Applications of Shortcuts in Organizations: People in organizations are always judging each other. Managers must appraise their employees’ performances. We evaluate how much effort our coworkers are putting into their jobs. Team members immediately “size up” a new person. In many cases, our judgments have important consequences for the organization. Let’s look at the most obvious applications

Answer 5

• Employment Interview Few people are hired without an interview. But inter-viewers make perceptual judgments that are often inaccurate22 and draw early impressions that quickly become entrenched. Research shows we form impres-sions of others within a tenth of a second, based on our first glance.23 Most interviewers’ decisions change very little after the first 4 or 5 minutes of an interview. As a result, information elicited early in the interview carries greater weight than does information elicited later, and a “good applicant” is probably characterized more by the absence of unfavorable characteristics than by the presence of favorable ones. Our individual intuition about a job candidate is not reliable in predicting job performance, so collecting input from multiple independent evaluators can be predictive
• Performance Expectations People attempt to validate their perceptions of reality even when these perceptions are faulty.25 The terms self-fulfilling prophecy and Pygmalion effect describe how an individual’s behavior is determined by others’ expectations. If a manager expects big things from her people, they’re not likely to let her down. Similarly, if she expects only minimal performance, they’ll likely meet those low expectations. Expectations become reality. The self-fulfilling prophecy has been found to affect the performance of students, soldiers, and even accountants
• Performance Evaluations We’ll discuss performance evaluations in Chapter17, but note that they very much depend on the perceptual process.27 An employee’s future is closely tied to his or her appraisal—promotion, pay raises, and con-tinuation of employment are among the outcomes. Although the appraisal can be objective (for example, a salesperson is appraised on how many dollars of sales he generates in his territory), many jobs are evaluated subjectively. Subjec-tive evaluations, though often necessary, are problematic because of the errors we’ve discussed—selective perception, contrast effects, halo effects, and so on. Sometimes performance ratings say as much about the evaluator as they do about the employee!

Question 6

The Link Between Perception and Individual Decision Making

Answer 6

the way individuals make decisions and the quality of their choices are largely influenced by their perceptions. Individual decision making is an important factor of behavior at all levels of an organization.Decision making occurs as a reaction to a problem. That is, a discrepancy exists between the current state of affairs and some desired state, requiring us to consider alternative courses of action.Unfortunately, most problems don’t come neatly labeled. One person’s problem is another person’s satisfactory state of affairs. So aware-ness that a problem exists and that a decision might or might not be needed is a perceptual issue.Every decision requires us to interpret and evaluate information. We typi-cally receive data from multiple sources that we need to screen, process, and interpret. Which data are relevant to the decision, and which are not? Our per-ceptions will answer that question. We also need to develop alternatives and evaluate their strengths and weaknesses. Again, our perceptual process will affect the outcome.

Question 7

Decision Making in Organizations

Answer 7

In OB, there are generally accepted constructs of decision making each of us employs to make determinations: rational decision making, bounded rational-ity, and intuition. Though their processes make sense, they may not lead to the most accurate (or best) decisions. More importantly, there are times when one strategy may lead to a better outcome than another in a given situation

• Rational Decision Making We often think the best decision maker is rational and makes consistent, value-maximizing choices within specified constraints.30 Rational decisions follow a six-step rational decision-making model31 (see Exhibit 6-3).The rational decision-making model assumes the decision maker has complete information, is able to identify all relevant options in an unbi-ased manner, and chooses the option with the highest utility.32 In reality though, most decisions don’t follow the rational model; people are usually content to find an acceptable or reasonable solution to a problem rather than an optimal one. We tend to limit our choices to the neighborhood of the problem’s symptom and the current alternative at hand. As one expert in decision making put it, “Most significant decisions are made by judgment, rather than by a defined prescriptive model.”33 People are remarkably unaware of making suboptimal decisions.
• Bounded Rationality Often, we don’t follow the rational decision-making model for a reason: Our limited information-processing capability makes it impossible to assimilate all the information necessary to optimize, even if the information is readily obtainable.35 Many problems don’t have an optimal solution because they are too complicated to fit the rational decision-making model, so people satisfice; they seek solutions that are satisfactory and sufficient. We tend to reduce complex problems to a level we can readily understand.Because the human mind cannot formulate and solve complex problems with full rationality, we operate within the confines of bounded rationality. We construct simplified models that extract the essential features from problems without capturing all their complexity. We can then behave rationally within the limits of the simple model.How does bounded rationality work for the typical individual? Once we’ve identified a problem, we begin to search for criteria and alternatives. The crite-ria are unlikely to be exhaustive. We identify alternatives that are highly visible and that usually represent familiar criteria and tried-and-true solutions. Next, we begin reviewing the alternatives, focusing on choices that differ little from the current state until we identify one that is “good enough”—that meets an acceptable level of performance. Thus ends our search. Therefore, the solution represents a satisficing choice—the first acceptable one we encounter—rather than an optimal one Satisficing is not always bad—a simple process may frequently be more sen-sible than the traditional rational decision-making model.36 To use the rational model, you need to gather a great deal of information about all the options, compute applicable weights, and then calculate values across a huge number of criteria. All these processes can cost time, energy, and money. If there are many unknown weights and preferences, the fully rational model may not be any more accurate than a best guess. Sometimes a fast-and-frugal process of solving problems might be your best option
• Intuition Perhaps the least rational way of making decisions is intuitive decision making, an unconscious process created from distilled experience.37 Intuitive decision making occurs outside conscious thought; relies on holistic associa-tions, or links between disparate pieces of information; is fast; and is affectively charged, meaning it engages the emotions.38 While intuition isn’t rational, it isn’t necessarily wrong. Nor does it always contradict rational analysis; the two can complement each other.Does intuition help effective decision making? Researchers are divided, but most experts are skeptical, in part because intuition is hard to measure and ana-lyze. Probably the best advice from one expert is: “Intuition can be very useful as a way of setting up a hypothesis but is unacceptable as ‘proof.’” Use hunches derived from your experience to speculate, yes, but always make sure to test those hunches with objective data and rational, dispassionate analysis.39As you can see, the more we use objective processes for decision making, the more likely we are to correct some of the problems with our perceptual process. Just as there are biases and errors in the perception process, it stands to reason there are identifiable biases and errors in our decision making, which we will outline next

Question 8

Common Biases and Errors in Decision Making:

Answer 8

Decision makers engage in bounded rationality, but they also allow systematic biases and errors to creep into their judgments.40 To minimize effort and avoid trade-offs, people tend to rely too heavily on experience, impulses, gut feelings, and convenient rules of thumb. Shortcuts can distort rationality. Following are the most common biases in decision making

• Overconfidence Bias We tend to be overconfident about our abilities and the abilities of others; also, we are usually not aware of this bias.41 For example, when people say they’re 90 percent confident about the range a certain number might take, their estimated ranges contain the correct answer only about 50 per-cent of the time—and experts are no more accurate in setting up confidence intervals than are novices.42Individuals whose intellectual and interpersonal abilities are weakest are most likely to overestimate their performance and ability.43 There’s also a nega-tive relationship between entrepreneurs’ optimism and performance of their new ventures: the more optimistic, the less successful.44 The tendency to be too confident about their ideas might keep some from planning how to avoid problems that arise.Investor overconfidence operates in a variety of ways.45 Finance professor Terrance Odean says, “People think they know more than they do, and it costs them.” Investors, especially novices, overestimate not just their skill in process-ing information, but also the quality of the information. Most investors will do only as well as or just slightly better than the market
• Anchoring Bias Anchoring bias is a tendency to fixate on initial information and fail to adequately adjust for subsequent information.46 As we discussed earlier in the chapter in relationship to employment interviews, the mind appears to give a disproportionate amount of emphasis to the first information it receives. Anchors are widely used by people in professions in which persuasion skills are important—advertising, management, politics, real estate, and law. Any time a negotiation takes place, so does anchoring. When a prospec-tive employer asks how much you made in your prior job, your answer typically anchors the employer’s offer. (Remember this when you negotiate your salary, but set the anchor only as high as you truthfully can.) The more precise your anchor, the smaller the adjustment. Some research suggests people think of making an adjustment after an anchor is set as rounding off a number: If you suggest a salary of $55,000, your boss will consider $50,000 to $60,000 a reason-able range for negotiation, but if you mention $55,650, your boss is more likely to consider $55,000 to $56,000 the range of likely values.
• Confirmation Bias The rational decision-making process assumes we objectively gather information. But we don’t. We selectively gather it. Confirmation bias represents a case of selective perception: we seek out information that reaffirms our past choices, and we discount information that contradicts them.48 We also tend to accept at face value information that confirms our preconceived views, while we are skeptical of information that challenges them. We even tend to seek sources most likely to tell us what we want to hear, and we give too much weight to supporting information and too little to contradictory. Fortunately, those who feel there is a strong need to be accurate in making a decision are less prone to confirmation bias
• Availability Bias More people fear flying more than driving in a car. But if fly-ing on a commercial airline were as dangerous as driving, the equivalent of two 747s filled to capacity would crash every week, killing all aboard. Because the media give more attention to air accidents, we tend to overstate the risk of flying and understate the risk of driving
• Availability bias is our tendency to base judgments on readily available infor-mation. A combination of readily available information and our previous direct experience with similar information has a particularly strong impact on our decision making. Also, events that evoke emotions, are particularly vivid, or are more recent tend to be more available in our memory, leading us to overesti-mate the chances of unlikely events such as being in an airplane crash, suffer-ing complications from medical treatment, or getting fired.49 Availability bias can also explain why managers give more weight in performance appraisals to recent employee behaviors than to behaviors of 6 or 9 months earlier
• Escalation of Commitment Another distortion that creeps into decisions is a tendency to escalate commitment, often for increasingly nonrational reasons.51 Escalation of commitment refers to our staying with a decision even if there is clear evidence it’s wrong. Consider a friend who has been dating someone for several years. Although he admits things aren’t going too well, he says he is still going to marry her. His justification: “I have a lot invested in the relationship!”When is escalation most likely to occur? Evidence indicates it occurs when individuals view themselves as responsible for the outcome. The fear of per-sonal failure even biases the way we search for and evaluate information so that we choose only information that supports our dedication. It doesn’t appear to matter whether we chose the failing course of action or it was assigned to us—we feel responsible and escalate in either case. Also, the sharing of deci-sion authority—such as when others review the choice we made—can lead to higher escalation.52We usually think of escalation of commitment as ungrounded. However, per-sistence in the face of failure is responsible for a great many of history’s greatest feats, the building of the Pyramids, the Great Wall of China, the Panama Canal, and the Empire State Building among them. Researchers suggest a balanced approach includes frequent evaluation of the spent costs and whether the next step is worth the anticipated costs.53 What we want to combat is thus the ten-dency to automatically escalate commitment.
• Randomness Error Most of us like to think we have some control over our world. Our tendency to believe we can predict the outcome of random events is the randomness error.Decision making suffers when we try to create meaning in random events, particularly when we turn imaginary patterns into superstitions.54 These can be completely contrived (“I never make important decisions on Friday the 13th”) or they can evolve from a reinforced past pattern of behavior (Tiger Woods often wears a red shirt during a golf tournament’s final round because he won many junior tournaments wearing red shirts). Decisions based on random occurrences can handicap us when they affect our judgment or bias our major decisions.
• Risk Aversion Mathematically speaking, we should find a 50–50 flip of the coin for $100 to be worth as much as a sure promise of $50. After all, the expected value of the gamble over a number of trials is $50. However, nearly everyone but committed gamblers would rather have the sure thing than a risky prospect.55 For many people, a 50–50 flip of a coin even for $200 might not be worth as much as a sure promise of $50, even though the gamble is mathematically worth twice as much! This tendency to prefer a sure thing over a risky outcome is risk aversion.Risk aversion has important implications. For example, to offset the inher-ent risk employees accept in a commission-based wage, companies may pay commissioned employees considerably more than they do those on straight sal-aries. Second, risk-averse employees will stick with the established way of doing their jobs rather than take a chance on innovative methods. Continuing with a strategy that has worked in the past minimizes risk, but it will lead to stagnation. Third, ambitious people with power that can be taken away (most managers) appear to be especially risk averse, perhaps because they don’t want to gamble with everything they’ve worked so hard to achieve.56 CEOs at risk of termination are exceptionally risk averse, even when a riskier investment strategy is in their firms’ best interests.57Risk preference is sometimes reversed: People take chances when trying to prevent a negative outcome.58 They may thus risk losing a lot of money at trial rather than settle for less out of court. Stressful situations can make risk pref-erences stronger. People under stress will more likely engage in risk-seeking behavior to avoid negative outcomes, and risk-averse behavior in seeking posi-tive outcome
• Hindsight Bias Hindsight bias is the tendency to believe falsely, after the outcome is known, that we would have accurately predicted it.60 When we have feedback on the outcome, we seem good at concluding it was obvious.For instance, the original home video rental industry, renting movies at brick-and-mortar stores, collapsed as online distribution outlets ate away at the market.61 Some have suggested that if rental companies like Blockbuster had leveraged their brand to offer online streaming and kiosks, they could have avoided failure. While that seems obvious now in hindsight, tempting us to think we would have predicted it, many experts failed to predict industry trends in advance. Though criticisms of decision makers may have merit, as Malcolm Gladwell, author of Blink and The Tipping Point, writes, “What is clear in hind-sight is rarely clear before the fact”

Question 9

Influences on Decision Making: Individual Differences- As we discussed, decision making in practice is characterized by bounded rationality, common biases and errors, and the use of intuition. Individual differences such as personality also create deviations from the rational model

Answer 9

• Personality Research suggests personality influences our decisions. Let’s look at conscientiousness and self-esteem.Specific facets of conscientiousness—particularly achievement-striving and dutifulness—may affect escalation of commitment.63 First, achievement- oriented people hate to fail, so they escalate their commitment, hoping to forestall failure. Dutiful people, however, are more inclined to do what they see as best for the organization, so they are less likely to escalate their commitment. Second, achievement-striving individuals appear more susceptible to hindsight bias, perhaps because they have a need to justify their actions.64 We don’t have evidence yet on whether dutiful people are immune to this bias.Self-esteem, or a general self-perception of being good enough, is a rather stable trait. People with high self-esteem are strongly motivated to maintain it, so they use the self-serving bias to preserve it. They blame others for their fail-ures while taking credit for successes.
• Gender Who makes better decisions, men or women? It depends on the situ-ation. When the situation isn’t stressful, decision making by men and women is about equal in quality. In stressful situations, it appears that men become more egocentric and make more risky decisions, while women become more empathetic and their decision making improves.66 Research on rumination, or reflecting at length, offers further insights into gender differences in decision making.67 Women spend more time than men analyzing the past, present, and future. They’re more likely to overanalyze problems before making a decision and to rehash a decision once made. This can make problems harder to solve, increase regret over past decisions, and increase depression. Women are nearly twice as likely as men to develop depression,68 but why women ruminate more than men is not clear. However, the gender difference seems to lessen with age. Differences are largest during young adulthood and smallest after age 65, when both men and women ruminate the least.
• Mental Ability We know people with higher levels of mental ability are able to process information more quickly, solve problems more accurately, and learn faster, so you might expect them to be less susceptible to com-mon decision errors. However, mental ability appears to help people avoid only some of them.70 Smart people are just as likely to fall prey to anchor-ing, overconfidence, and escalation of commitment, probably because being smart doesn’t alert you to the possibility you’re too confident or emotionally defensive. It’s not that intelligence never matters. Once warned about decision-making errors, more intelligent people learn more quickly to avoidthem
• Cultural Differences The rational model makes no acknowledgment of cultural differences, nor does the bulk of OB research literature on decision making. But Indonesians, for instance, don’t necessarily make decisions the same way Australians do. Therefore, we need to recognize that the cultural background of a decision maker can significantly influence the selection of problems, the depth of analysis, the importance placed on logic and rationality, and whether organizational decisions should be made autocratically by an individual man-ager or collectively in groups.71Cultures differ in time orientation, the value they place on rationality, their belief in the ability of people to solve problems, and their preference for collec-tive decision making. First, differences in time orientation help us understand, for instance, why managers in Egypt make decisions at a much slower and more deliberate pace than their U.S. counterparts. Second, while rationality is val-ued in North America, that’s not true elsewhere. A North American manager might make a decision intuitively but know it’s important to appear to proceed in a rational fashion because rationality is highly valued in the West. In coun-tries such as Iran, where rationality is not paramount to other factors, efforts to appear rational are not necessary.Third, some cultures emphasize solving problems, while others focus on accepting situations as they are. The United States falls in the first category; Thailand and Indonesia are examples of the second. Because problem-solving managers believe they can and should change situations to their benefit, U.S. managers might identify a problem long before their Thai or Indonesian coun-terparts would choose to recognize it as such. Fourth, decision making in Japan is much more group-oriented than in the United States. The Japanese value conformity and cooperation, so before Japanese CEOs make an important deci-sion, they collect a large amount of information to use in consensus-forming group decisions.
• Nudging Anyone who has ever seen a commercial knows about nudging. Commercials are one of the most outright forms of an organization’s attempt to influence our perceptions of a product and our decision to acquire that product. Nudging has also been used positively in the development of corporate social responsibility (CSR) initiatives to change people’s expectations for organiza-tions.72 People differ in their susceptibility to suggestion, but it is probably fair to say we are all receptive to nudging to some degree.OB researchers are on the leading edge of figuring out how organizations can nudge individuals into better decision making.73 Nudging uses psychol-ogy to circumvent our natural negative tendencies. In organizations, nudging usually involves strategic placement of facts and resources that subtly suggest a better decision. For instance, organizations that automatically enroll employees in retirement plans have greater participation than those whose employees choose from many options, including not to enroll

Question 10

Influences on Decision Making: Organizational Constraints - Organizations can constrain decision makers, creating deviations from the rational model. For instance, managers shape decisions to reflect the organiza-tion’s performance evaluation and reward systems, to comply with formal regu-lations, and to meet organizationally imposed time constraints. Precedents can also limit decisions

Answer 10

• Performance Evaluation Systems Managers are influenced by the criteria on which they are evaluated. If a division manager believes the manufactur-ing plants under his responsibility are operating best when he hears nothing negative, the plant managers will spend a good part of their time ensuring that negative information doesn’t reach him
• Reward Systems The organization’s reward systems influence decision makers by suggesting which choices have better personal payoffs. If the organization rewards risk aversion, managers are more likely to make conservative deci-sions. For instance, for over half a century (the 1930s through the mid-1980s), General Motors consistently gave promotions and bonuses to managers who kept a low profile and avoided controversy. These executives became adept at dodging tough issues and passing controversial decisions on to committees, which harmed the organization over time.
• Formal Regulations David, a shift manager at a Taco Bell restaurant in San Antonio, Texas, describes constraints he faces on his job: “I’ve got rules and regulations covering almost every decision I make—from how to make a burrito to how often I need to clean the restrooms. My job doesn’t come with much freedom of choice.” David’s situation is not unique. All but the smallest organizations create rules and policies to program decisions and get individuals to act in the intended manner. In doing so, they limit decision choices
• System-Imposed Time Constraints Almost all important decisions come with explicit deadlines. For example, a report on new-product development may have to be ready for executive committee review by the first of the month. Such conditions often make it difficult, if not impossible, for managers to gather all information before making a final choice.
• Historical Precedents Decisions aren’t made in a vacuum; they have context. Individual decisions are points in a stream of choices; those made in the past are like ghosts that haunt and constrain current choices. It’s common knowl-edge that the largest determinant of the size of any given year’s budget is last year’s budget. Choices made today are largely a result of choices made over the years

Question 11

Ethics in decision making

Answer 11

three ethical decision criteria

1. The first ethical yardstick is utilitarianism, which proposes making decisions solely on the basis of their outcomes, ideally to provide the greatest good for the greatest number.75 This view dominates business decision making and is consistent with goals such as efficiency, productivity, and high profits. Keep in mind that utilitarianism is not always as objective as it sounds. A recent study indicated that the ethicality of utilitarianism is influenced in ways we don’t realize. Participants were given a moral dilemma: The weight of five people bends a footbridge so it is low to some train tracks. A train is about to hit the bridge. The choice is to let all five people perish, or push the one heavy man off the bridge to save four people. In the United States, South Korea, France, and Israel, 20 percent of respondents chose to push the man off the bridge, in Spain, 18 percent, and in Korea, none. These might speak to cultural utilitar-ian values, but a minor change, asking people to answer in a non-native lan-guage they knew, caused more participants to push the man overboard: in one group, 33 percent pushed the man, and in another group 44 percent did.76 The emotional distance of answering in a non-native language thus seemed to foster a utilitarian viewpoint. It appears that even our view of what we consider pragmatic is changeable
2. Another ethical criterion is to make decisions consistent with fundamental liberties and privileges, as set forth in documents such as the U.S. Bill of Rights. An emphasis on rights in decision making means respecting and protecting the basic rights of individuals, such as the right to privacy, free speech, and due process. This criterion protects whistle-blowers77 when they reveal an organiza-tion’s unethical practices to the press or government agencies, using their right to free speech
3. A third criterion is to impose and enforce rules fairly and impartially to ensure justice or an equitable distribution of benefits and costs.78 Justice perspectives are sometimes used to justify paying people the same wage for a given job regardless of performance differences and using seniority as the primary determinant in layoff decisions.Decision makers, particularly in for-profit organizations, feel com-fortable with utilitarianism. The “best interests” of the organization and its stockholders can justify a lot of questionable actions, such as large layoffs. But many critics feel this perspective needs to change. Public con-cern about individual rights and social justice suggests managers should develop ethicalstandards based on nonutilitarian criteria. This presents a challenge because satisfying individual rights and social justice creates far more ambiguities than utilitarian effects on efficiency and profits. How-ever, while raising prices, selling products with questionable effects on con-sumer health, closing down inefficient plants, laying off large numbers of employees, andmoving production overseas to cut costs can be justified in utilitarian terms, there may no longer be a single measure by which good decisions are judged.

This is where corporate social responsibility (CSR) comes in to affect a posi-tive change. As we can see by looking at utilitarian ideals, organizations are not motivated to respond equitably when they are looking only at a balance sheet. However, public pressure on organizations to behave responsibly has meant sustainability issues now affect the bottom line: Consumers increasingly choose to purchase goods and services from organizations with effective CSR initia-tives, high performers are attracted to work at CSR organizations, governments offer incentives to organizations for sustainability efforts, and so forth. CSR is now beginning to make good business sense, folding ethics into utilitarian computations.Increasingly, researchers are turning to behavioral ethics—an area of study that analyzes how people behave when confronted with ethical dilemmas. Their research tells us that while ethical standards exist collectively in societies and organizations, and individually in the form of personal ethics, we do not always follow ethical standards promoted by our organizations, and we sometimes violate our own standards. Our ethical behavior varies widely from one situation to the next

Question 12

Creativity, Creative Decision Making, and Innovation in Organization -

Answer 12

Models will often improve our decisions, but a decision maker also needs creativity, the ability to produce novel and useful ideas. Novel ideas are different from what’s been done before but which are appropriate for the problem.Creativity allows the decision maker to fully appraise and understand prob-lems, including seeing problems others can’t see. Although all aspects of orga-nizational behavior are complex, that is especially true for creativity. To simplify, Exhibit 6-5 provides a three-stage model of creativity in organizations. The core of the model is creative behavior, which has both causes (predictors of creative behavior) and effects (outcomes of creative behavior). In this section, we discuss the three stages of creativity, starting with the center, creative behavior

creative behavior occurs in 4 steps
1. Problem formulation. Any act of creativity begins with a problem that the behavior is designed to solve. Thus, problem formulation is the stage of creative behavior in which we identify a problem or opportunity that requires a solution as yet unknown. For example, Marshall Carbee and John Bennett founded Eco Safety Products after discovering that even paints declared safe by the Environmental Protection Agency (EPA) emitted hazardous chemical compounds. Thus, Eco’s development of artist-safe soy-based paint began with identifying a safety problem with paints currently on the market

2. Information gathering. Given a problem, the solution is rarely directly at hand. We need time to learn more and to process that learning. Thus, information gathering is the stage of creative behavior when knowledge is sought and possible solutions to a problem incubate in an individual’s mind. Information gathering leads us to identifying innovation opportuni-ties.94 Niklas Laninge of Hoa’s Tool Shop, a Stockholm-based company that helps organizations become more innovative, argues that creative informa-tion gathering means thinking beyond usual routines and comfort zones. For example, have lunch with someone outside your field to discuss the problem. “It’s so easy, and you’re forced to speak about your business and the things that you want to accomplish in new terms. You can’t use buzz-words because people don’t know what you mean,” Laninge says.
3. Idea generation. Idea generation is the process of creative behavior in which we develop possible solutions to a problem from relevant information and knowledge. Sometimes we do this alone, when tricks like taking a walk96 and doodling97 can jumpstart the process. Increasingly, though, idea genera-tion is collaborative. For example, when NASA engineers developed the idea for landing a spacecraft on Mars, they did so collaboratively. Before coming up with the Curiosity—an SUV-sized rover that lands on Mars from a sky crane—the team spent 3 days scribbling potential ideas on whiteboards.
4. Idea evaluation. Finally, it’s time to choose from the ideas we have gen-erated. Thus, idea evaluation is the process of creative behavior in which we evaluate potential solutions to identify the best one. Sometimes the method of choosing can be innovative. When Dallas Mavericks owner Mark Cuban was unhappy with the team’s uniforms, he asked fans to help design and choose the best uniform. Cuban said, “What’s the best way to come up with creative ideas? You ask for them. So we are going to crowd source the design and colors of our uniforms.”99 Generally, you want those who evaluate ideas to be different from those who generate them, to eliminate the obvious biases

Question 13

Causes of creative behavior

Answer 13

1. Creative Potential Is there such a thing as a creative personality? Indeed. While creative genius is rare—whether in science (Stephen Hawking), performing arts (Martha Graham), or business (Steve Jobs)—most people have some of the characteristics shared by exceptionally creative people. The more of these characteristics we have, the higher our creative potential. Innovation is one of the top organizational goals for leaders (see OB Poll). Consider these facets of potential
   A. Intelligence and Creativity Intelligence is related to creativity. Smart people are more creative because they are better at solving complex prob-lems. However, intelligent individuals may also be more creative because they have greater “working memory,” that is, they can recall more informa-tion related to the task at hand.100 Along the same lines, recent research in the Netherlands indicates that an individual’s high need for cognition (desire to learn) is correlated with greater creativity.

B. Personality and Creativity The Big Five personality trait of openness to experience (see Chapter 5) correlates with creativity, probably because open individuals are less conformist in action and more divergent in think-ing.102 Other traits of creative people include proactive personality, self-con-fidence, risk taking, tolerance for ambiguity, and perseverance.103 Hope, self-efficacy (belief in your capabilities), and positive affect also predict an individual’s creativity.104 Furthermore, research in China suggests that people with high core self-evaluations are better able than others to main-tain creativity in negative situations.105 Perhaps counterintuitively, some research supports the “mad genius” theory that some people with mental illness are wildly creative partially due to their psychopathology; history cer-tainly provides examples, such as Vincent Van Gogh, John Forbes Nash, and others. However, the converse isn’t true—people who are creative may have less psychopathology as a group than the general population.1063.

C. Expertise and Creativity Expertise is the foundation for all creative work and thus is the single most important predictor of creative potential. Film writer, producer, and director Quentin Tarantino spent his youth working in a video rental store, where he built up an encyclopedic knowledge of movies. The potential for creativity is enhanced when individuals have abilities, knowledge, proficiencies, and similar expertise to their field of endeavor. For instance, you wouldn’t expect someone with minimal knowledge of programming to be very creative as a software engineer. The expertise of others is important, too. People with larger social networks have greater exposure to diverse ideas and informal access to the expertise and resources of others.1074.

D. Ethics and Creativity Although creativity is linked to many desirable indi-vidual characteristics, it is not correlated with ethicality. People who cheat may actually be more creative than those who behave ethically, according to recent research. It may be that dishonesty and creativity can both stem from a rule-breaking desire

2. Creative Environment Most of us have creative potential we can learn to apply, but as important as creative potential is, by itself it is not enough. We need to be in an environment where creative potential can be realized. What environmen-tal factors affect whether creative potential translates into creative behaviors?First and perhaps most important is motivation. If you aren’t motivated to be creative, it is unlikely you will be. Intrinsic motivation, or the desire to work on something because it’s interesting, exciting, satisfying, and challenging (discussed in more detail in the next chapter), correlates fairly strongly with creative outcomes.109It is also valuable to work in an environment that rewards and recognizes creative work. A study of health care teams found that team creativity trans-lated into innovation only when the climate actively supported innovation.110 The organization should foster the free flow of ideas, including providing fair and constructive judgment. Freedom from excessive rules encourages creativity; employees should have the freedom to decide what work is to be done and how to do it. One study in China revealed that both structural empowerment (in which the structure of the work unit allows sufficient employee freedom) and psychological empowerment (which lets the individual feel personally enabled to decide) were related to employee creativity.111 However, research in Slovenia found that creating a competitive climate where achievement at any cost is val-ued will stymie creativity to appropriate tools when resources are plentiful.113 Managers also serve an important bridge role for knowledge transfer. When managers link teams to additional information and resources, radical creativity (introducing creative ideas that break the status quo) is more likely.114 The weaker ties between team members and manager networks may actually have more impact on creativity than the direct, stronger ties that team members have with their own networks, because the weaker sources provide more divergent thinking

Creative Outcomes (Innovation)The final stage in our model of creativity is the outcome. Creative behavior does not always produce an innovative outcome. An employee might generate a creative idea and never share it. Management might reject a creative solution. Teams might squelch creative behaviors by isolating those who propose differ-ent ideas. One study showed that most people have a bias against accepting cre-ative ideas because ideas create uncertainty. When people feel uncertain, their ability to see any idea as creative is blocked.126We can define creative outcomes as ideas or solutions judged to be novel and useful by relevant stakeholders. Novelty itself does not generate a creative out-come if it isn’t useful. Thus, “off-the-wall” solutions are creative only if they help solve the problem. The usefulness of the solution might be self-evident (the iPad), or it might be considered successful by only the stakeholders initially.127An organization may harvest many creative ideas from its employees and call itself innovative. However, as one expert stated, “Ideas are useless unless used.” Soft skills help translate ideas into results. One researcher found that in a large agribusiness company, creative ideas were most likely to be implemented when an individual was motivated to translate the idea into practice—and had strong networking ability.128 These studies highlight an important fact: Creative ideas do not implement themselves; translating them into creative outcomes is a social process that requires utilizing other concepts addressed in this text, including power and politics, leadership, and motivation