Organizational Behavior (Chapter 6: Perception and Individual Decision Making)

Case Incident 1: Decision-Making Processes at Steel Inc.

1) Which biases in decision making can be identified in the performances of both Pieterson and Gack?
In general, the decision making style for manager approach decision making is toward rational and
intuitive thinking. In rational thinking a person consider the problem in a rational, step-by-step and
analytical way. Rational thinking person will resolve a complex and complicated problem into smaller
part and then resolve them in a rational, logical and integrated method. Another way of decision making
style which is intuitive thinking is more flexible, spontaneous and creative. Intuitive thinking person will
respond to a problem quickly and gone through evaluation and come out with several possible alternative
solution. Intuitive thinking person is expected to deal with many problems at once, review quickly from
one to another and respond based on experience of his own and spontaneous ideas.
In this case, John Pieterson behaves anchoring and adjustment heuristic and rational in his decision
making for the Steel Incorporated branch in the Netherlands while Jack Gack is an intuitive thinking
manager and he has the escalating commitment. Anchoring bias is a tendency to fixate on initial
information and fail to adequately adjust for subsequent information. It occurs because our mind appears
to give a disproportionate amount of emphasis to the first information it receives. Escalation of
commitment is refers to staying with a decision even where there is clear evidence its wrong. Both
managers have their own way in handle their problem and making decision for their problem but they
having biases in their making decision.
John Pieterson has the biases anchoring and adjustment heuristic because he making decision based on
adjustments to a previously starting point or existing value. In this case study, the evidence that John
Pieterson has the biases anchoring and adjustment heuristic is John is a rational person in prepare a
proposal or bid for customers order. After a few years success in the Steel Inc, John decision making is
affected by it. He starting to consider less information and takes competitor prices as a starting point by
simply adapts a little amount from that. The evidence that Jack Gack has the bias escalation of
commitment is although often criticized, Gack is not willing to let go his intuition. He truly believes that
external factors contributed to his bad performance.
2) How can the identified biases be overcome?
* Focus on goals
* Clear goals make decision making easier and help you eliminate options that are inconsistent with your
interests.
* Dont try to create meaning out of random events
* The educated mind has been trained to look for cause-and-effect relationships. When something
happens, we ask why. Ask yourself if patterns can be meaningfully explained or whether there are merely
coincidences. Dont attempt to create meaning out of coincidence.
* Increase the options
* The more alternatives you can generate, and there more diverse those alternatives, the greater your
chance of finding an outstanding one.
3) Is rational decision making better than intuitive decision making? If so, when?
Yes. Rational decision is certainly better. Generally while making a decision we do not know whether it
will prove right or wrong. Thus a risk is always involved. Intuitive decision means taking risk with closed
eyes. Rational decision is taking risk with open eyes.
In general, the decision making style for manager approach decision making is toward rational and

intuitive thinking. In rational thinking a person consider the problem in a rational, step-by-step and
analytical way. Rational thinking person will resolve a complex and complicated problem into smaller
part and then resolve them in a rational, logical and integrated method. Another way of decision making
style which is intuitive thinking is more flexible, spontaneous and creative. Intuitive thinking person will
respond to a problem quickly and gone through evaluation and come out with several possible alternative
solution. Intuitive thinking person is expected to deal with many problems at once, review quickly from
one to another and respond based on experience of his own and spontaneous ideas.
4) Should top management change Gacks decision making style?
Yes. Top management should change Gacks decision making style from intuitive decision making to
rational decision making. As a professional manager, Gacks should think rationally. If Gacks use a
rational decision making, he able to solve the problem by followed the 6 steps in the rational decision
making model.
1. Define the problem
2. Identify the decision criteria
3. Allocate weights to the criteria
4. Develop the alternatives
5. Evaluate the alternatives
6. Select the best alternative