Robbins: Organizational Behavior

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PERCEPTION AND INDIVIDUAL DECISION MAKING

LEARNING OBJECTIVES After studying this chapter, students should be able to: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Explain how two people can see the same thing and interpret it differently List the three determinants of attribution Describe how shortcuts can assist in or distort our judgment of others Explain how perception affects the decision making process Outline the six steps in the rational decision making model Describe the actions of the boundedly rational decision maker Identify the conditions in which individuals are most likely to use intuition in decision making Describe four styles of decision making Define heuristics, and explain how they bias decisions Contrast the three ethical decision criteria

CHAPTER OVERVIEW Perception Individuals behave in a given manner based not on the way their external environment actually is but, rather, on what they see or believe it to be. An organization may spend millions of dollars to create a pleasant work environment for its employees. However, in spite of these expenditures, if an employee believes that his or her job is lousy, that employee will behave accordingly. It is the employees perception of a situation that becomes the basis for his or her behavior. The employee who perceives his/her supervisor as a hurdle reducer who helps him/her do a better job and the employee who sees the same supervisor as big brother, closely monitoring every motion, to ensure that I keep working will differ in their behavioral responses to their supervisor. The difference has nothing to do with the reality of the supervisors actions; the difference in employee behavior is due to different perceptions. The evidence suggests that what individuals perceive from their work situation will influence their productivity more than will the situation itself. Whether or not a job is actually interesting or challenging is irrelevant. Whether or not a manager successfully plans and organizes the work of his or her employees and actually helps them to structure their work more efficiently and effectively is far less important than how employees perceive the managers efforts. Similarly, issues like fair pay for work performed, the validity of performance appraisals, and the adequacy of working conditions are not judged by employees in a way that assures common perceptions, nor can we be assured that individuals will interpret conditions about their jobs in a favorable light. Therefore, to be able to influence productivity, it is necessary to assess how workers perceive their jobs. Absenteeism, turnover, and job satisfaction are also reactions to the individuals perceptions. Dissatisfaction with working conditions or the belief that there is a lack of promotion opportunities in the organization are judgments based on attempts to make some meaning out of ones job. The employees conclusion that a job is good or bad is an interpretation. Managers must spend time understanding how each individual interprets reality and, where there is a significant difference between what is seen and what exists, try to eliminate the distortions. Failure to deal with the differences when individuals perceive the job in negative terms will result in increased absenteeism and turnover and lower job satisfaction. Individual Decision Making Individuals think and reason before they act. It is because of this that an understanding of how people make decisions can be helpful for explaining and predicting their behavior. Under some recent decision situations, people follow the rational decision-making model. But for most people, and most non-routine decisions, this is probably more the exception than the rule. Few important decisions are simple or unambiguous enough for the rational models assumptions to apply, so we find individuals looking for solutions that satisfice rather than optimize, injecting biases and prejudices into the decision process, and relying on intuition. 89

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Given the evidence we have described on how decisions are actually made in organizations, what can managers do to improve their decision-making? We offer five suggestions. First, analyze the situation. Adjust your decision making style to the national culture you are operating in and to the criteria your organization evaluates and rewards. For instance, if you are in a country that does not value rationality, do not feel compelled to follow the rational decision making model or even to try to make your decisions appear rational. Similarly, organizations differ in terms of the importance they place on risk, the use of groups, and the like. Adjust your decision style to ensure it is compatible with the organizations culture. Second, be aware of biases. We all bring biases to the decisions we make. If you understand the biases influencing your judgment, you can begin to change the way you make decisions to reduce those biases. Third, combine rational analysis with intuition. These are not conflicting approaches to decision making. By using both, you can actually improve your decision-making effectiveness. As you gain managerial experience, you should feel increasingly confident in imposing your intuitive processes on top of your rational analysis. Fourth, do not assume that your specific decision style is appropriate for every job. Just as organizations differ, so do jobs within organizations. And your effectiveness as a decision maker will increase if you match your decision style to the requirements of the job. For instance, if your decision-making style is directive, you will be more effective working with people whose jobs require quick action. This style would match well with managing stockbrokers. An analytic style, on the other hand, would work well managing accountants, market researchers, or financial analysts. Finally, try to enhance your creativity. Overtly look for novel solutions to problems, attempt to see problems in new ways, and use analogies. Additionally, try to remove work and organizational barriers that might impede your creativity.

WEB EXERCISES At the end of each chapter of this instructors manual, you will find suggested exercises and ideas for researching the WWW on OB topics. The exercises Exploring OB Topics on the Web are set up so that you can simply photocopy the pages, distribute them to your class, and make assignments accordingly. You may want to assign the exercises as an out-of-class activity or as lab activities with your class. Within the lecture notes the graphic will note that there is a WWW activity to support this material.

The chapter opens introducing Bob Lutz currently with General Motors. In the 1980s he was president of Chrysler when it was highly criticized as brain dead, technologically dated, and for building cars that were uninspiring. During a joy ride in his Ford-made Cobra Roadster he had an idea, which lead to a decision that changed the publics perception of Chrysler forever. Use the new ten-cylinder engine in development for a new Dodge truck and put it into a sports car model. He met with critics from within the company, but he was unwavering in his resolve. The result was the Dodge Viper. Making decisions is an important part of everyday organizational life, and do not always carefully follow a formulated process as we see in this example from Mr. Lutz.

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Robbins: Organizational Behavior CHAPTER OUTLINE What Is Perception, and Why Is It Important? Definition: Perception is a process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment. Notes:

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Why is this important to the study of OB? y Because peoples behavior is based on their perception of what reality is, not on reality itself.

A. Factors Influencing Perception 1. Factors that shape (and can distort perception): y y y Perceiver Target Situation

2. When an individual looks at a target and attempts to interpret what he or she sees, that interpretation is heavily influenced by personal characteristics of the individual perceiver. 3. The more relevant personal characteristics affecting perception of the perceiver are attitudes, motives, interests, past experiences, and expectations. 4. Characteristics of the target can also affect what is being perceived. This would include attractiveness, gregariousness, and our tendency to group similar things together. For example, members of a group with clearly distinguishable features or color are often perceived as alike in other, unrelated characteristics as well. 5. The context in which we see objects or events also influences our attention. This could include time, heat, light, or other situational factors. Person Perception: Making Judgments about Others A. Attribution Theory (Exhibit 5-2) 1. Our perceptions of people differ from our perceptions of inanimate objects. Notes:

y y y

We make inferences about the actions of people that we do not make about inanimate objects. Nonliving objects are subject to the laws of nature. People have beliefs, motives, or intentions.

2. Our perception and judgment of a persons actions are influenced by these assumptions.

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Robbins: Organizational Behavior 3. Attribution theory suggests that when we observe an individuals behavior, we attempt to determine whether it was internally or externally caused. That determination depends largely on three factors: Notes:

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y y y

Distinctiveness Consensus Consistency

4. Clarification of the differences between internal and external causation:

y y

Internally caused behaviors are those that are believed to be under the personal control of the individual. Externally caused behavior is seen as resulting from outside causes; that is, the person is seen as having been forced into the behavior by the situation.

5. Distinctiveness refers to whether an individual displays different behaviors in different situations. What we want to know is whether the observed behavior is unusual.

y y

If it is, the observer is likely to give the behavior an external attribution. If this action is not unusual, it will probably be judged as internal.

6. Consensus occurs if everyone who is faced with a similar situation responds in the same way. If consensus is high, you would be expected to give an external attribution to the employees tardiness, whereas if other employees who took the same route made it to work on time, your conclusion as to causation would be internal. 7. Consistency in a persons actions. Does the person respond the same way over time? The more consistent the behavior, the more the observer is inclined to attribute it to internal causes. 8. Fundamental Attribution Error

There is substantial evidence that we have a tendency to underestimate the influence of external factors and overestimate the influence of internal or personal factors. There is also a tendency for individuals to attribute their own successes to internal factors such as ability or effort while putting the blame for failure on external factors such as luck. This is called the self-serving bias and suggests that feedback provided to employees will be distorted by recipients.

9. Are these errors or biases that distort attribution universal across different cultures? While there is no definitive answer there is some preliminary evidence that indicates cultural differences:

y y y

Korean managers found that, contrary to the self-serving bias, they tended to accept responsibility for group failure. Attribution theory was developed largely based on experiments with Americans and Western Europeans. The Korean study suggests caution in making attribution theory predictions in non-Western societies, especially in countries with strong collectivist traditions.

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Robbins: Organizational Behavior B. Frequently Used Shortcuts in Judging Others 1. We use a number of shortcuts when we judge others. An understanding of these shortcuts can be helpful toward recognizing when they can result in significant distortions. 2. Selective Perception Notes:

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y y y

Any characteristic that makes a person, object, or event stand out will increase the probability that it will be perceived. It is impossible for us to assimilate everything we seeonly certain stimuli can be taken in. A classic example: a. Dearborn and Simon performed a perceptual study in which 23 business executives read a comprehensive case describing the organization and activities of a steel company. b. The results along with other results of the study, led the researchers to conclude that the participants perceived aspects of a situation that were specifically related to the activities and goals of the unit to which they were attached. c. A groups perception of organizational activities is selectively altered to align with the vested interests they represent. d. Selectivity works as a shortcut in judging other people by allowing us to speed-read others, but not without the risk of drawing an inaccurate picture. Because we see what we want to see, we can draw unwarranted conclusions from an ambiguous situation.

3. Halo Effect

The halo effect occurs when we draw a general impression on the basis of a single characteristic: a. This phenomenon frequently occurs when students appraise their classroom instructor. b. Students may give prominence to a single trait such as enthusiasm and allow their entire evaluation to be tainted by how they judge the instructor on that one trait.

The reality of the halo effect was confirmed in a classic study. a. Subjects were given a list of traits such as intelligent, skillful, practical, industrious, determined, and warm, and were asked to evaluate the person to whom those traits applied. When the word warm was substituted with cold the subjects changed their evaluation of the person. b. The experiment showed that subjects were allowing a single trait to influence their overall impression of the person being judged. c. Research suggests that it is likely to be most extreme when the traits to be perceived are ambiguous in behavioral terms, when the traits have moral overtones, and when the perceiver is judging traits with which he or she has had limited experience.

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Robbins: Organizational Behavior B. Frequently Used Shortcuts in Judging Others (cont.) 4. Contrast Effects Notes:

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y y

We do not evaluate a person in isolation. Our reaction to one person is influenced by other persons we have recently encountered. For example, an interview situation in which one sees a pool of job applicants can distort perception. Distortions in any given candidates evaluation can occur as a result of his or her place in the interview schedule.

5. Projection y y This tendency to attribute ones own characteristics to other peoplewhich is called projectioncan distort perceptions made about others. When managers engage in projection, they compromise their ability to respond to individual differences. They tend to see people as more homogeneous than they really are.

6. Stereotyping y y Stereotypingjudging someone on the basis of our perception of the group to which he or she belongs Generalization is not without advantages. It ius a means of simplifying a complex world, and it permits us to maintain consistency. The problem, of course, is when we inaccurately stereotype. In organizations, we frequently hear comments that represent stereotypes based on gender, age, race, ethnicity, and even weight. From a perceptual standpoint, if people expect to see these stereotypes, that is what they will perceive, whether or not they are accurate.

y y

Instructor Note: At this point in the lecture you may want to introduce the POINTCOUNTER POINT: When Hiring Employees Emphasize the Positive found in the text and at the end of these chapter notes. A suggestion for a class exercise follows.

C. Specific Applications in Organizations

1. Employment Interview

Notes:

y y

Evidence indicates that interviewers make perceptual judgments that are often inaccurate. In addition, agreement among interviewers is often poor. Different interviewers see different things in the same candidate and thus arrive at different conclusions about the applicant. Interviewers generally draw early impressions that become very quickly entrenched. Studies indicate that most interviewers decisions change very little after the first four or five minutes of the interview. Because interviews usually have so little consistent structure and interviewers vary in terms of what they are looking for in a candidate, judgments of the same candidate can vary widely.

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Robbins: Organizational Behavior C. Specific Applications in Organizations (cont.) 2. Performance Expectations Notes:

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y y

Evidence demonstrates that people will attempt to validate their perceptions of reality, even when those perceptions are faulty. Self-fulfilling prophecy or Pygmalion effect characterizes the fact that peoples expectations determine their behavior. Expectations become reality. A study was undertaken with 105 soldiers in the Israeli Defense Forces who were taking a fifteen-week combat command course. Soldiers were randomly divided and identified as having high potential, normal potential, and potential not known. Instructors got better results from the high potential group because they expected it confirming the effect of a selffulfilling prophecy.

3. Performance Evaluation

y y y

An employees performance appraisal is very much dependent on the perceptual process. Although the appraisal can be objective, many jobs are evaluated in subjective terms. Subjective measures are, by definition, judgmental. To the degree that managers use subjective measures in appraising employees, what the evaluator perceives to be good or bad employee characteristics or behaviors will significantly influence the outcome of the appraisal.

4. Employee Effort

An individuals future in an organization is usually not dependent on performance alone. An assessment of an individuals effort is a subjective judgment susceptible to perceptual distortions and bias.

The Link between Perception and Individual Decision Making 1. Individuals in organizations make decisions; they make choices from among two or more alternatives.

Notes:

Top managers determine their organizations goals, what products or services to offer, how best to finance operations, or where to locate a new manufacturing plant. Middle- and lower-level managers determine production schedules, select new employees, and decide how pay raises are to be allocated. Non-managerial employees also make decisions including whether or not to come to work on any given day, how much effort to put forward once at work, and whether or not to comply with a request made by the boss. A number of organizations in recent years have been empowering their non-managerial employees with job-related decision-making authority that historically was reserved for managers.

y y

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Robbins: Organizational Behavior The Link between Perception and Individual Decision Making 2. Decision-making occurs as a reaction to a problem. Notes:

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y y

There is a discrepancy between some current state of affairs and some desired state, requiring consideration of alternative courses of action. The awareness that a problem exists and that a decision needs to be made is a perceptual issue.

3. Every decision requires interpretation and evaluation of information. The perceptions of the decision maker will address these two issues.

y y y

Data are typically received from multiple sources. Which data are relevant to the decision and which are not? Alternatives will be developed, and the strengths and weaknesses of each will need to be evaluated.

How Should Decisions Be Made? A. The Rational Decision-Making Process 1. The optimizing decision maker is rational. He or she makes consistent, valuemaximizing choices within specified constraints. 2. The Rational Modelsix steps listed in Exhibit 5-3 3. Step 1: Defining the problem Notes:

y y

A problem is a discrepancy between an existing and a desired state of affairs. Many poor decisions can be traced to the decision maker overlooking a problem or defining the wrong problem.

4. Step 2: Identify the decision criteria important to solving the problem.

The decision maker determines what is relevant in making the decision. Any factors not identified in this step are considered irrelevant to the decision maker. This brings in the decision makers interests, values, and similar personal preferences.

5. Step 3: Weight the previously identified criteria in order to give them the correct priority in the decision. 6. Step 4: Generate possible alternatives that could succeed in resolving the problem. 7. Step 5: Rating each alternative on each criterion.

y y

Critically analyze and evaluate each alternative The strengths and weaknesses of each alternative become evident as they are compared with the criteria and weights established in the second and third steps.

8. Step 6: The final step is to compute the optimal decision:

Evaluating each alternative against the weighted criteria and selecting the alternative with the highest total score.

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Robbins: Organizational Behavior A. The Rational Decision-Making Process (cont.) 9. Assumptions of the Model Notes:

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y y y y y y

Problem clarity. The decision maker is assumed to have complete information regarding the decision situation. Known options. It is assumed the decision maker is aware of all the possible consequences of each alternative. Clear preferences. Criteria and alternatives can be ranked and weighted to reflect their importance. Constant preferences. Specific decision criteria are constant and the weights assigned to them are stable over time. No time or cost constraints. The rational decision maker can obtain full information about criteria and alternatives because it is assumed that there are no time or cost constraints. Maximum payoff. The rational decision maker will choose the alternative that yields the highest perceived value.

B. Improving Creativity in Decision Making Definition: Creativity is the ability to produce novel and useful ideas. These are ideas that are different from what has been done before, but that are also appropriate to the problem or opportunity presented.

1. Creative Potential y y
Most people have creative potential. People have to get out of the psychological ruts most of us get into and learn how to think about a problem in divergent ways.

2. People differ in their inherent creativity. y y

A study of lifetime creativity of 461 men and women found that fewer than one percent were exceptionally creative. Ten percent were highly creative, and about sixty percent were somewhat creative.

3. Three-component model of creativity. This model proposes that individual

creativity essentially requires expertise, creative-thinking skills, and intrinsic task motivation. (See Exhibit 5-4.)

Expertise is the foundation for all creative work. The potential for creativity is enhanced when individuals have abilities, knowledge, proficiencies, and similar expertise in their field of endeavor. Creative thinking skills. This encompasses personality characteristics associated with creativity, the ability to use analogies, as well as the talent to see the familiar in a different light. Intrinsic task motivation. The desire to work on something because its interesting, involving, exciting, satisfying, or personally challenging. This turns creativity potential into actual creative ideas. It determines the extent to which individuals fully engage their expertise and creative skills.

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Robbins: Organizational Behavior How Are Decisions Actually Made in Organizations? 1. Are decision makers in organizations rational? Notes:

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When decision makers are faced with a simple problem having few alternative courses of action, and when the cost of searching out and evaluating alternatives is low, the rational model is fairly accurate.

2. Most decisions in the real world do not follow the rational model.

y y

Decision makers generally make limited use of their creativity. Choices tend to be confined to the neighborhood of the problem symptom and to the neighborhood of the current alternative.

A. Bounded Rationality 1. When faced with a complex problem, most people respond by reducing the problem to a level at which it can be readily understood.

This is because the limited information-processing capability of human beings makes it impossible to assimilate and understand all the information necessary to optimize. People satisficethey seek solutions that are satisfactory and sufficient.

2. Individuals operate within the confines of bounded rationality. They construct simplified models that extract the essential features. 3. How does bounded rationality work?

y y

Once a problem is identified, the search for criteria and alternatives begins. The decision maker will identify a limited list made up of the more conspicuous choices, which are easy to find, tend to be highly visible, and they will represent familiar criteria and previously tried-and-true solutions. Once this limited set of alternatives is identified, the decision maker will begin reviewing it. a. The decision maker will begin with alternatives that differ only in a relatively small degree from the choice currently in effect. b. The first alternative that meets the good enough criterion ends the search.

y y

The order in which alternatives are considered is critical in determining which alternative is selected. Assuming that a problem has more than one potential solution, the satisficing choice will be the first acceptable one the decision maker encounters. Alternatives that depart the least from the status quo are the most likely to be selected.

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Robbins: Organizational Behavior B. Intuition 1. Intuitive decision-making has recently come out of the closet and into some respectability. 2. What is intuitive decision making? Notes:

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y y y

It is an unconscious process created out of distilled experience. It operates in complement with rational analysis. Some consider it a form of extrasensory power or sixth sense. Some believe it is a personality trait that a limited number of people are born with.

3. Research on chess playing provides an excellent example of how intuition works.

The experts experience allows him or her to recognize the pattern in a situation and draw upon previously learned information associated with that pattern to quickly arrive at a decision choice. The result is that the intuitive decision maker can decide rapidly with what appears to be very limited information. Eight conditions when people are most likely to use intuitive decision making: a. b. c. d. e. f. g. when a high level of uncertainty exists when there is little precedent to draw on when variables are less scientifically predictable when facts are limited when facts do not clearly point the way to go when analytical data are of little use when there are several plausible alternative solutions to choose from, with good arguments for each h. when time is limited, and there is pressure to come up with the right decision

y y

Although intuitive decision making has gained in respectability, dont expect peopleespecially in North America, Great Britain, and other cultures where rational analysis is the approved way of making decisions to acknowledge they are using it. Rational analysis is considered more socially desirable in these cultures.

Instructor Note: At this point in the lecture you may want to introduce the OB IN THE NEWS: Firefighters Use Intuition to Make the Right Choices box found in the text. The purpose of the exercise is to help students better understand how intuition and experience are linked. A suggestion for a class exercise follows the introduction of the material below. Once you have completed the exercise, refer students to the CASE INCIDENT: John Neill at Unipart for another viewpointthis time from the CEO perspective. A summary of the case and questions can be found at the end of this chapter.

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OB IN THE NEWS Firefighters Use Intuition to Make the Right Choices Do fire commanders use the rational model to make life-and-death decisions? No. They rely on their intuition, built on years of experience, and intuition begins with recognition. The following illustrates how that recognition process works. A Cleveland, Ohio, fire commander and his crew encountered a fire at the back of a house. The commander led his hose team into the building. Standing in the living room, they blasted water onto the smoke and flames that appeared to be consuming the kitchen, but the fire roared back and continued to burn. The men doused the fire again, and the flames briefly subsided, but then they flared up again with an even greater intensity. As the firefighters retreated and regrouped, the commander was gripped by an uneasy feeling. He ordered everyone to leave. Just as the crew reached the street, the living-room floor caved in. Had the men stayed in the house, they would have plunged into a blazing basement. Why did the commander give the order to leave? Because the fires behavior did not match his expectations. Much of the fire was burning underneath the living-room floor, so it was unaffected by the firefighters attack. Also, the rising heat made the room extremely hottoo hot for such a seemingly small fire. Another clue that this was not just a small kitchen fire was that the sounds it emitted were strangely quiet. Hot fires are loud. The commander was intuitively sensing that the floor was muffling the roar of the flames that were raging below. Veteran firefighters have accumulated a storehouse of experiences and they subconsciously categorize fires according to how they should react to them. They look for cues or patterns in situations that direct them to take one action over another. Experienced people whose jobs require quick decisionsfirefighters, intensive-care nurses, jet-fighter pilots, SWAT team memberssee a different world than novices in those same jobs do, and what they see tells them what they should do. Ultimately, intuition is all about perception. The formal rules of decision-making are almost incidental.
Source: Based on B. Breen, Whats Your Intuition? Fast Company, September 2000, pp. 290300.

Class Exercise: Conduct as a Q & A for the entire class: 1. What is intuition? Was the commander using intuition or utilizing his experience and training, or both? 2. Have there been times when you needed to make a decision quickly? Was it intuition, a reaction, or something else? (For example, avoiding hitting another car, during a sports match, etc.) What resources do you think you used when making that decision? 3. Do you use a decision making process when making a big decision in your life? (For example, when buying a car, selecting a roommate, etc.) Why or why not? Have you made a decision recently that you could have done better had you used a formal decision making process?

C. Problem Identification 1. Problems that are visible tend to have a higher probability of being selected than ones that are important. Why?

Notes:

y y

Visible problems are more likely to catch a decision makers attention. Second, remember we are concerned with decision making in organizations. If a decision maker faces a conflict between selecting a problem that is important to the organization and one that is important to the decision maker, self-interest tends to win out. The decision makers self interest also plays a part. When faced with selecting a problem important to the decision maker or important to the organization, self interest tends to win out.

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Robbins: Organizational Behavior D. Alternative Development 1. Since decision makers seek a satisficing solution, there is a minimal use of creativity in the search for alternatives. Efforts tend to be confined to the neighborhood of the current alternative. 2. Evidence indicates that decision-making is incremental rather than comprehensive. Decision makers make successive limited comparisons. The picture that emerges is one of a decision maker who takes small steps toward his or her objective. Notes:

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E. Making Choices 1. In order to avoid information overload, decision makers rely on heuristics or judgmental shortcuts in decision making.

y y

There are two common categories of heuristicsavailability and representativeness. Each creates biases in judgment. Another bias is the tendency to escalate commitment to a failing course of action.

2. Availability heuristic

y y

The availability heuristic is the tendency for people to base their judgments on information that is readily available to them. Events that evoke emotions, that are particularly vivid, or that have occurred more recently tend to be more available in our memory. Fore example, many more people suffer from fear of flying than fear of driving in a car.

3. Representative heuristic

To assess the likelihood of an occurrence by trying to match it with a preexisting category, managers frequently predict the performance of a new product by relating it to a previous products success.

4. Escalation of commitment

y y

Escalation of commitment is an increased commitment to a previous decision in spite of negative information. It has been well documented that individuals escalate commitment to a failing course of action when they view themselves as responsible for the failure. Implications for the organizations: a. An organization can suffer large losses when a manager continues to invest in a failed plan just to prove his or her original decision was correct. b. Consistency is a characteristic often associated with effective leaders. Managers might be reluctant to change a failed course of action to appear consistent.

Instructor Note: At this point in the lecture you may want to introduce the TEAM EXERCISE: Biases in Decision Making box found in the text and at the end of these chapter notes. The purpose of the exercise is to help students better understand what their own decision making biases might be. 101

Robbins: Organizational Behavior F. Individual Differences: Decision-Making Styles 1. Research on decision styles has identified four different individual approaches to making decisions. 2. People differ along two dimensions. The first is their way of thinking. Notes:

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y y

Some people are logical and rational. They process information serially. Some people are intuitive and creative. They perceive things as a whole.

3. The other dimension is a persons tolerance for ambiguity

y y

Some people have a high need to minimize ambiguity. Others are able to process many thoughts at the same time.

4. These two dimensions, diagrammed, form four styles of decision making. (See Exhibit 5-5.)

Directive: a. Low tolerance for ambiguity and seek rationality b. Efficient and logical c. Decisions are made with minimal information and with few alternatives assessed. d. Make decisions fast and focus on the short-run. Analytic a. Greater tolerance for ambiguity b. Desire for more information and consideration of more alternatives c. Best characterized as careful decision makers with the ability to adapt to or cope with new situations Conceptual a. Tend to be very broad in their outlook and consider many alternatives b. Their focus is long range, and they are very good at finding creative solutions to problems. Behavioral a. Characterizes decision makers who work well with others b. Concerned with the achievement of peers and subordinates and are receptive to suggestions from others, relying heavily on meetings for communicating c. Tries to avoid conflict and seeks acceptance

5. Most managers have characteristics that fall into more than one. It is best to think in terms of a managers dominant style and his or her backup styles.

y y

Business students, lower-level managers, and top executives tend to score highest in the analytic style. Focusing on decision styles can be useful for helping you to understand how two equally intelligent people, with access to the same information, can differ in the ways they approach decisions and the final choices they make.

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Robbins: Organizational Behavior G. Organizational Constraints 1. The organization itself constrains decision makers. This happens due to policies, regulations, time constraints, etc. 2. Performance evaluation Notes:

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Managers are strongly influenced in their decision making by the criteria by which they are evaluated. Their performance in decision making will reflect expectation.

3. Reward systems

The organizations reward system influences decision makers by suggesting to them what choices are preferable in terms of personal payoff.

4. Programmed routines

All but the smallest of organizations create rules, policies, procedures, and other formalized regulations in order to standardize the behavior of their members. By programming decisions, organizations are able to get individuals to achieve high levels of performance without paying for the years of experience.

5. System-imposed time constraints

y y y

Organizations impose deadlines on decisions. Decisions must be made quickly in order to stay ahead of the competition and keep customers satisfied. Almost all important decisions come with explicit deadlines.

6. Historical Precedents

y y

Decisions have a context. Individual decisions are more accurately characterized as points in a stream of decisions. Decisions made in the past are ghosts which continually haunt current choices. It is common knowledge that the largest determining factor of the size of any given years budget is last years budget.

H. Cultural Differences 1. The rational model makes no acknowledgment of cultural differences. We need to recognize that the cultural background of the decision maker can have significant influence on:

Notes:

a. selection of problems b. depth of analysis c. the importance placed on logic and rationality d. whether organizational decisions should be made autocratically by an individual manager or collectively in groups
2. Cultures, for example, differ in terms of time orientation, the importance of rationality, their belief in the ability of people to solve problems, and preference for collective decision making.

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y y

Some cultures emphasize solving problems, while others focus on accepting situations as they are. Decision making by Japanese managers is much more group-oriented than in the United States.

What about Ethics in Decision Making? Ethical considerations should be an important criterion in organizational decision making. A. Three Ethical Decision Criteria

2. Utilitarian criteriondecisions are made solely on the basis of their outcomes

or consequences. The goal of utilitarianism is to provide the greatest good for the greatest number. This view tends to dominate business decision making.

3. Focus on rightscalls on individuals to make decisions consistent with

fundamental liberties and privileges as set forth in documents such as the Bill of Rights.

An emphasis on rights means respecting and protecting the basic rights of individuals, such as the right to privacy, to free speech, and to due process.

3. Focus on justicerequires individuals to impose and enforce rules fairly and impartially. There is an equitable distribution of benefits and costs. 4. Advantages and liabilities of these three criteria:

Utilitarianism a. Promotes efficiency and productivity b. It can result in ignoring the rights of some individuals, particularly those with minority representation in the organization. Rights a. Protects individuals from injury and is consistent with freedom and privacy b. It can create an overly legalistic work environment that hinders productivity and efficiency. Justice a. Protects the interests of the underrepresented and less powerful b. It can encourage a sense of entitlement that reduces risk taking, innovation, and productivity. c. Decision makers tend to feel safe and comfortable when they use utilitarianism. Many critics of business decision makers argue that this perspective needs to change.

5. Increased concern in society about individual rights and social justice suggests the need for managers to develop ethical standards based solely on nonutilitarian criteria.

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Instructor Note: At this point in the lecture you may want to introduce the ETHICAL DILEMMA EXERCISE: Five Ethical Decisions: What Would You Do? found in the text and at the end of these chapter notes. The purpose of the exercise is to help students better understand what their reactions might be when faced with various ethical decisions. A suggestion for a class exercise follows the introduction of the material. Or, you may want to introduce the MYTH OR SCIENCE: Ethical People Dont Do Unethical Things box found in the text (and below). A suggested class exercise follows within the boxed text.

MYTH OR SCIENCE? Ethical People Dont Do Unethical Things This statement is mostly true. People with high ethical standards are less likely to engage in unethical practices, even in organizations or situations in which there are strong pressures to conform. The essential issue that this statement addresses is whether ethical behavior is more a function of the individual or the situational context. The evidence indicates that people with high ethical principles will follow them in spite of what others do or the dictates of organizational norms, but when an individuals ethical and moral development are not of the highest level, he or she is more likely to be influenced by strong cultures. This is true even when those cultures encourage questionable practices. Because ethical people essentially avoid unethical practices, managers should be encouraged to screen job candidates (through testing and background investigations) to determine their ethical standards. By seeking out people with integrity and strong ethical principles, the organization increases the likelihood that employees will act ethically. Of course, unethical practices can be further minimized by providing individuals with a supportive work climate. This would include clear job descriptions, a written code of ethics, positive management role models, the evaluating and rewarding of means as well as ends, and a culture that encourages individuals to openly challenge questionable practices. Class exercise: 1. Prior to class prepare 3 x 5 index cards with various events, which might lead to an emotional response or the possibility of making an decision (hopefully in an ethical manner!). For example the cards should have the statements like: You are fired!, lunch with vendor, transfer to India, I quit!, double insurance refund, unpaid overtime, business travel to Las Vegas, etc. 2. Break students into teams and ask them write a short scenario around the event listed. For example: I received a refund from the health insurer for twice the amount I was expecting. No one will know if I keep it. Or, hey they fired methey dont remember Ive got their laptop--Im keeping it! 3. Have the student teams switch cards with another team. The team should now come to a decision as how they would resolve the (new) situation. Ask them to look at it from several different perspectives: the employee, co-workers, management, and customers. Do different perspectives create a different outcome for the decision? Who carries the most weight when the final decision is made? (Is it self-serving or for the greater good?) 4. As a class, discuss what they learned when faced with these situations, and the perspectives and decision process they underwent.

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Robbins: Organizational Behavior B. Ethics and National Culture 1. There are no global ethical standards. 2. Contrasts between Asia and the West illustrate: Notes:

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Bribery is commonplace in countries such as China. Should a Western business professional pay a bribe to secure business if it is an accepted part of that countrys culture? A manager of a large U.S. company operating in China caught an employee stealing. She fired him, turned him over to the local authorities, only to learn later that the employee had been summarily executed. While ethical standards may seem ambiguous in the West, criteria defining right and wrong are actually much clearer in the West than in Asia. Few issues are black-and-white there; most are gray. Notes:

C. Individual Decision Making 1. Most people do not follow the rational decision-making modelbut satisfice
rather than optimize. What can managers do to improve their decision making?

2. Be aware of these five strategies: y y y y

Analyze the situation: Adjust to national culture, the criteria the organization evaluates and rewards. Be aware of biases: Understanding how they influence judgment can help to reduce their impact. Combine rational analysis with intuition: Using both can improve decision making effectiveness. Realize that no specific decision style is appropriate for every job: Organizations differ, as do jobs. Matching decision style to the situation is the most effective strategy.

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Robbins: Organizational Behavior QUESTIONS FOR REVIEW

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1. Define perception. Answer Perception is a process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment. What one perceives can be substantially different from objective reality. Perception is important in the study of OB because peoples behavior is based on their perception of what reality is, not on reality itself. 2. What is attribution theory? What are its implications for explaining organizational behavior? Answer Attribution theory suggests that when we observe an individuals behavior, we attempt to determine whether it was internally or externally caused. That determination depends largely on three factors: distinctiveness, consensus, and consistency. 3. How are our perceptions of our own actions different from our perceptions of the actions of others? Answer One of the more interesting findings from attribution theory is that there are errors or biases that distort attributions. There is substantial evidence that we have a tendency to underestimate the influence of external factors and overestimate the influence of internal or personal factors. This is the fundamental attribution error. There is also a tendency for individuals to attribute their own successes to internal factors, such as ability or effort, while putting the blame for failure on external factors such as luck. This is the selfserving bias and suggests that feedback provided to employees will be distorted by recipients. 4. How does selectivity affect perception? Give an example of how selectivity can create perceptual distortion. Answer Selective perceptionAny characteristic that makes a person, object, or event stand out will increase the probability that it will be perceived. It is impossible for us to assimilate everything we seeonly certain stimuli can be taken in. Selectivity works as a shortcut in judging other people by allowing us to speed-read others, but not without the risk of drawing an inaccurate picture. Because we see what we want to see, we can draw unwarranted conclusions from an ambiguous situation. 5. What is stereotyping? Give an example of how stereotyping can create perceptual distortion. Answer Stereotypingjudging someone on the basis of our perception of the group to which he or she belongs. Generalization is not without advantages. It is a means of simplifying a complex world, and it permits us to maintain consistency. The problem, of course, is when we inaccurately stereotype. From a perceptual standpoint, if people expect to see these stereotypes, that is what they will perceive, whether they are accurate or not. One of the problems of stereotypes is that they are widespread. 6. Give some positive results of using shortcuts when judging others. Answer They save us time and they help us process overloads of information effectively, but the drawbacks may out weigh such advantages. Employment interviewEvidence indicates that interviewers make perceptual judgments that are often inaccurate. Because interviews usually have so little consistent structure and interviewers vary in terms of what they are looking for in a candidate, judgments of the same candidate can vary widely. Performance expectationsEvidence demonstrates that people will attempt to validate their perceptions of reality, even when those perceptions are faulty. Performance evaluationAn employees performance appraisal is very much dependent on the perceptual process. Employee effortAn individuals future in an organization is usually not dependent on performance alone. An assessment of an individuals effort is a subjective judgment susceptible to perceptual distortions and bias. 7. What is the rational decision-making model? Under what conditions is it applicable? Answer The optimizing decision maker is rational. He/she makes consistent, value-maximizing choices within specified constraints. The Rational Modelsix steps listed in Exhibit 5-4. y Define the problem. y Identify the decision criteria important to solving the problem. y Weight the previously identified criteria in order to give them the correct priority in the decision. y Generate possible alternatives that could succeed in resolving the problem. y Critically analyze and evaluate each alternative. y Compute the optimal decision. y Evaluate each alternative against the weighted criteria, and select the alternative with the highest total score. 107

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8. Describe organizational factors that might constrain decision makers. Answer 1) The lack of problem clarityThe decision maker is assumed to have complete information regarding the decision situation. 2) Not knowing all the optionsIt is assumed the decision maker is aware of all the possible consequences of each alternative. 3) Not being able to make clear preferencesCriteria and alternatives can be ranked and weighted to reflect their importance. 4) Constant preferencesWhen specific decision criteria are constant and the weights assigned to them are stable over time. 5) If there are important time or cost constraintsThe rational decision maker can obtain full information about criteria and alternatives because it is assumed that there are no time or cost constraints. 6) When there is no maximum payoff alternativeThe rational decision maker will choose the alternative that yields the highest perceived value. Other organizational constraints: Performance evaluation y Managers are strongly influenced in their decision making by the criteria by which they are evaluated. y Managers blocking negative information Reward systems y The organizations reward system influences decision makers by suggesting to them what choices are preferable in terms of personal payoff. Programmed routines y By programming decisions, organizations are able to get individuals to achieve high levels of performance without paying for the years of experience. System-imposed time constraints y Organizations impose deadlines on decisions. y Decisions must be made quickly in order to stay ahead of the competition and keep customers satisfied. y Almost all important decisions come with explicit deadlines. Historical precedents y Decisions have a context. Individual decisions are more accurately characterized as points in a stream of decisions. y Decisions made in the past are ghosts which continually haunt current choices. y It is common knowledge that the largest determining factor of the size of any given years budget is last years budget. 9. What role does intuition play in effective decision making? Answer Intuitive decision making has recently come out of the closet and into some respectability. We define intuitive decision making as an unconscious process created out of distilled experience. It operates in complement with rational analysis. The experts experience allows him or her to recognize the pattern in a situation and draw upon previously learned information associated with that pattern to quickly arrive at a decision choice. The result is that the intuitive decision maker can decide rapidly with what appears to be very limited information. Eight conditions when people are most likely to use intuitive decision making: y When a high level of uncertainty exists y When there is little precedent to draw on y When variables are less scientifically predictable y When facts are limited y When facts do not clearly point the way to go y When analytical data are of little use y When there are several plausible alternative solutions to choose from, with good arguments for each y When time is limited and there is pressure to come up with the right decision 10. Are unethical decisions more a function of the individual decision maker or the decision makers work environment? Explain. Answer This is an opinion question. In many ways, it parallels earlier questions whether heredity or environment shape personality.

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Robbins: Organizational Behavior QUESTIONS FOR CRITICAL THINKING

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1. How might the differences in experiences of students and instructors affect their perceptions of students written work and class comments? Answer When an individual looks at a target and attempts to interpret what he or she sees, that interpretation is heavily influenced by personal characteristics of the individual perceiver. The more relevant personal characteristics affecting perception are attitudes, motives, interests, past experiences, and expectations. Unsatisfied needs or motives stimulate individuals and may exert a strong influence on their perceptions. As interests narrow ones focus, so do ones past experiences. You perceive those things to which you can relate. Finally, expectations can distort your perceptions in that you will see what you expect to see. 2. An employee does an unsatisfactory job on an assigned project. Explain the attribution process that this persons manager will use to form judgments about this employees job performance. Answer Attribution theory suggests that when we observe an individuals behavior, we attempt to determine whether it was internally or externally caused. That determination depends largely on three factors: distinctiveness, consensus, and consistency. First, clarification of the differences between internal and external causation y Internally caused behaviors are those that are believed to be under the personal control of the individual y Externally caused behavior is seen as resulting from outside causes; that is, the person is seen as having been forced into the behavior by the situation. Distinctiveness refers to whether an individual displays different behaviors in different situations. y What we want to know is whether the observed behavior is unusual. y If it is, the observer is likely to give the behavior an external attribution. y If this action is not unusual, it will probably be judged as internal. If everyone who is faced with a similar situation responds in the same way, we can say the behavior shows consensus. y If consensus is high, you would be expected to give an external attribution to the employees tardiness, whereas if other employees who took the same route made it to work on time, your conclusion as to causation would be internal. Consistency in a persons actions. Does the person respond the same way over time? y The more consistent the behavior, the more the observer is inclined to attribute it to internal causes. Exhibit 5-3 summarizes the key elements in attribution theory. 3. For the most part, individual decision making in organizations is an irrational process. Do you agree or disagree? Discuss. Answer Students may argue either side, but they need to understand bounded rationality and the role of intuition in decision-making. When decision makers are faced with a simple problem having few alternative courses of action, and when the cost of searching out and evaluating alternatives is low, the rational model is fairly accurate. Decision makers generally make limited use of their creativity. Choices tend to be confined to the neighborhood of the problem symptom and to the neighborhood of the current alternative. When faced with a complex problem, most people respond by reducing the problem to a level at which it can be readily understoodbounded rationality. The capacity of the human mind for formulating and solving complex problems is far too small to meet the requirements for full rationality. Intuitive decision making as an unconscious process created out of distilled experienceit operates in complement with rational analysis. The experts experience allows him or her to recognize the pattern in a situation and draw upon previously learned information associated with that pattern to quickly arrive at a decision choice. The result is that the intuitive decision maker can decide rapidly with what appears to be very limited information.

4. What factors do you think differentiate good decision makers from poor ones? Relate your answer to the sixstep rational model. Answer The optimizing decision maker is rational. He or she makes consistent, value-maximizing choices within specified constraints. The rational modelsix steps listed in Exhibit 5-4. y Define the problemMany poor decisions can be traced to the decision maker overlooking a problem or defining the wrong problem. y Identify the decision criteria important to solving the problem. This brings in the decision makers interests, values, and similar personal preferences. Any factors not identified in this step are considered irrelevant to the decision maker. 109

Robbins: Organizational Behavior Chapter Five y Weight the previously identified criteria in order to give them the correct priority in the decision. y Generate possible alternatives that could succeed in resolving the problem. y Critically analyze and evaluate each alternative. y Compute the optimal decision. 5. Have you ever increased your commitment to a failed course of action? If so, analyze the follow-up decision to increase your commitment, and explain why you behaved as you did. Answer Escalation of commitment is an increased commitment to a previous decision in spite of negative information. It has been well-documented that individuals escalate commitment to a failing course of action when they view themselves as responsible for the failure. Students analysis will vary with their experience.

POINT-COUNTERPOINT When Hiring Employees, Emphasize the Positive POINT Hiring new employees requires managers to become salespeople. They have to emphasize the positive, even if it means failing to mention the negative aspects in the job. While there is a real risk of setting unrealistic expectations about the organization and about the specific job, that is a risk managers have to take. As in dealing with any salesperson, it is the job applicants responsibility to follow the dictum caveat emptorlet the buyer beware. Why should managers emphasize the positive when discussing a job with a prospective candidate? They have no choice. First, there is a dwindling supply of qualified applicants for many job vacancies; and second, this approach is necessary to meet the competition. Corporate layoffs have received a lot of attention in recent years. What has often been overlooked in this process is the growing shortage of qualified applicants for literally millions of jobs. Through the foreseeable future, managers will find it increasingly difficult to get qualified people who can fill jobs such as legal secretary, nurse, accountant, maintenance mechanic, computer-repair specialist, software programmer, social worker, physical therapist, environmental engineer, and telecommunications specialist. Managers will also find it harder to get qualified people to fill entry-level, minimum-wage jobs. There may be no shortage of physical bodies, but finding individuals who can read, write, perform basic mathematical calculations, and have the proper work habits to effectively perform these jobs is not so easy. There is a growing gap between the skills workers have and the skills employers require, so managers need to sell jobs to the limited pool of applicants. This means presenting the job and the organization in the most favorable light possible. Another reason management is forced to emphasize the positive with job candidates is that this is what the competition is doing. Other employers also face a limited applicant pool. As a result, to get people to join their organizations, they are forced to put a positive spin on their descriptions of their organizations and the jobs they seek to fill. In this competitive environment, any employer who presents jobs realistically to applicantsthat is, openly provides the negative aspects of a job along with the positiverisks losing many of the most desirable candidates. COUNTERPOINT Regardless of labor-market conditions, managers who treat the recruiting and hiring of candidates as if the applicants must be sold on the job and exposed to only positive aspects set themselves up to have a workforce that is dissatisfied and prone to high turnover. Every applicant acquires, during the selection process, a set of expectations about the organization and about the specific job he or she hopes to be offered. When the information an applicant receives is excessively inflated, a number of things happen that have potentially negative effects on the organization. First, mismatched applicants who will probably become dissatisfied with the job and soon quit are less likely to select themselves out of the search process. Second, the absence of negative information builds unrealistic expectations. These unrealistic expectations often lead to premature resignations. Third, new hires are prone to become disillusioned and less committed to the organization when they come face-to-face with the negatives in the job. Employees who feel they were tricked or misled during the hiring process are unlikely to be satisfied workers. To increase job satisfaction among employees and reduce turnover, applicants should be given a realistic job previewprovided both unfavorable and favorable informationbefore an offer is made. For example, in addition to positive comments, the candidate might be told that there are limited opportunities to talk with coworkers during work hours, or that erratic fluctuations in workloads create considerable stress on employees during rush periods. 110

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Research indicates that applicants who have been given a realistic job preview hold lower and more realistic expectations about the job they will be doing and are better prepared for coping with the job and its frustrating elements. The result is fewer unexpected resignations by new employees. Remember that retaining qualified people is as critical as hiring them in the first place. Presenting only the positive aspects of a job to a recruit may initially entice him or her to join the organization, but it may be a marriage that both parties will quickly regret.
Source: Information in this argument comes from J. M. Phillips, Effects of Realistic Job Previews on Multiple Organizational Outcomes: A Meta-Analysis, Academy of Management Journal, December 1998, pp. 67390; and J. A. Breaugh and M. Starke, Research on Employee Recruitment: So Many Studies, So Many Remaining Questions, Journal of Management, vol. 26, no. 3, 2000, pp. 41517.

HR
Class Exercise: 1. Before doing this exercise, sit down and write out a realistic job preview for your position. Show it to colleagues for their input and to help tone it down or up [depending ]. y Make copies to hand out in class. y One cautionDo not put anything down you are not willing to have the Dean or a parent read. 2. Brainstorm with the students about a realistic job preview for being a college professor teaching business. y You may have to encourage participation; students may feel somewhat intimidated describing your job to you. 3. List on the board what students think a professor does, how he/she uses his/her time, etc. 4. Before handing our your RJP, ask students how they know these things, first-hand experience, observation, etc. 5. Ask students if any have first-hand knowledge of one of these professions. 6. Hand out your RJP; have students compare it with theirs. 7. How are they the same or different? Why are they different? What are the implications?

TEAM EXERCISE Biases in Decision Making Step 1. Have students answer each of the following problems on their own. (They can be found in the text.) 1. The following ten corporations were ranked by Fortune magazine to be among the 500 largest United Statesbased firms according to sales volume for 1998. y Group A: B.F. Goodrich, Hershey Foods, Mattel, Maytag, Quaker Oats y Group B: Conagra, Enron, Ingram Micro, United Technologies, USX a. Which group of five organizations listed (A or B) had the larger total sales volume? Answer Group B had the larger total, with combined sales of $127.6 billion. Group A had combined sales of $22.1 billion. Students often choose this group because of the available heuristicthe companies are better known. By what percentage (10%, 50%, 100%, or ?) do you think the higher groups sales exceeded the lower group? Answer 500%. Group B has 5 times the sales but is less well known and is comprised of industrial firms. 2. The best student in my introductory MBA class this past semester writes poetry and is rather shy and small in stature. What was the students undergraduate major: Chinese studies or psychology? Answer Illustrates representative heuristic. Most students would offer Chinese studies, overlooking that psychology majors outnumber Chinese studies majors 50:1. 3. Which of the following causes more deaths in the United States each year? Answer Stomach cancer. Twice as many as from motor vehicle accidents, but this represents available heuristic because of the emphasis in the media on car accidents. 111

Robbins: Organizational Behavior 4. Which would you choose? a. A sure gain of $240 b. A 25% chance of winning $1,000 and a 75% chance of winning nothing. 5. Which would you choose? a. A sure loss of $750 b. A 75% chance of losing $1,000 and a 25% chance of losing nothing. 6. Which would you choose? a. A sure loss of $3,000 b. An 80% chance of losing $4,000 and a 20% chance of losing nothing.

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Step 2: Break into groups of three-to-five. Compare your answers. Explain why you chose the answers that you did. Step 3: Your instructor will give you the correct answers to each problem. Now discuss the accuracy of your decisions, the biases evident in the decisions you reached, and how you might improve your decision making to make it more accurate. Teaching notes 1. Answer found in instructions above. 2. Answer found in instructions above. 3. Answer found in instructions above. 4. Which would you choose? Answer [The percentage of responses come from the authors experience. The percentages are not important but the general pattern in your class is. In all likelihood, your class will parallel the authors experience.] In a test, 84 percent of students chose ba sure gain. Sixteen percent chose aa 25 percent chance. This exemplifies our tendency to be risk-averse concerning gains and positively framed questions. 5. Which would you choose? Answer [The percentage of responses come from the authors experience. The percentages arent important but the general pattern in your class is. In all likelihood, your class will parallel the authors experience.] Eighty-seven percent chose b75 percent chance, and 13 percent chose aa sure loss. This demonstrates our tendency to be risk-seeking concerning losses and negatively framed questions. 6. Which would you choose? Answer [The percentage of responses come from the authors experience. The percentages arent important but the general pattern in your class is. In all likelihood, your class will parallel the authors experience.] This is the same question as number five, but the amounts will probably shift students to choosing athe sure loss because bthe 80 percent loss is much greater, if they calculate the percentages.
[These problems are based on examples provided in M.H. Bazerman, Judgment in Managerial Decision Making, 3 ed. (New York: Wiley, 1994).]
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Robbins: Organizational Behavior ETHICAL DILEMMA EXERCISE Five Ethical Decisions: What Would You Do?

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Assume you are a middle manager in a company with about a thousand employees. How would you respond to each of the following situations? 1. You are negotiating a contract with a potentially very large customer whose representative has hinted that you could almost certainly be assured of getting his business if you gave him and his wife an all-expense-paid cruise to the Caribbean. You know the representatives employer wouldnt approve of such a payoff, but you have the discretion to authorize such expenditure. What would you do? Answer Students responses will vary significantly. Two suggestions for discussing these questions: First, do not show shock at the lack of ethicality of the students. Research shows, for some reason, business students have far lower ethicality than practicing managers. The point of these questions is to help the students develop their ethical frameworks. Second, suggest the students analyze the question based on the following criteria. y Impact on peopleWho are the key stakeholders? What is the potential for harm to them? y Organizational systemsIn what way does the organizations way of doing business, policies and procedures contribute to the ethical conflict. y ChoiceWhat alternatives do they have? How much risk do they face in doing the ethical thing? 2. You have the opportunity to steal $100,000 from your company with absolute certainty that you would not be detected or caught. Would you do it? Answer See #1 above. 3. Your company policy on reimbursement for meals while traveling on company business is that you will be repaid for your out-of-pocket costs, not to exceed $60 a day. You do not need receipts for these expenses the company will take your word. When traveling, you tend to eat at fast-food places and rarely spend in excess of $15 a day. Most of your colleagues put in reimbursement requests in the range of $45 to $50 a day, regardless of what their actual expenses are. How much would you request for your meal reimbursements? Answer See #1 above. 4. Another executive, who is part of a small planning team in which you are a member, frequently has the smell of alcohol on his breath. You have noticed that his work has not been up to standard lately and is hurting your teams performance. This executive happens to be the son-in-law of the companys owner and is held in very high regard by the owner. What would you do? Answer See #1 above. 5. You have discovered that one of your closest friends at work has stolen a large sum of money from the company. Would you: Do nothing? Go directly to an executive to report the incident before talking about it with the offender? Confront the individual before taking action? Make contact with the individual with the goal of persuading that person to return the money? Answer See #1 above. [Several of these scenarios are based on D.R. Altany, Torn between Halo and Horns, Industry Week, March 15, 1993, pp. 1520.]

CASE INCIDENT John Neill at Unipart While most part suppliers for the United Kingdoms automobile industry struggle, one company is doing just fineUnipart. This 2.3 billion-euro company has done well largely because of the decisions made by its CEO, John Neill. In 1974, at the youthful age of 29, John Neill was made managing director of the Unipart division of British Leyland (BL). He immediately began to ruffle feathers of conservative BL executives by developing innovative marketing campaigns and focusing company attention on the parts business (in contrast to its cars and trucks). He increased the divisions marketing budget six-fold, created a retail shop program, altered the packaging, and began promoting the divisions parts on television. 113

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His parts first pitch did not go down well with his bosses, who saw it as an attack on the viability of BL itself, but it was too late for BLs top management to do much about it. Neill had created a viable business, while the rest of the company (which later became part of the Rover Group) labored along, losing market share every year. Almost from the beginning, Neill envisioned making Unipart independent from BL. In 1987, he did just that. He negotiated a 89.5 million euro management buyout of Unipart from BL. He then immediately began taking actions that would allow Unipart to stand on its own two feet. We knew the future would be worse, Neill recalls, because todays market share was smaller than yesterdays. So the parts business would go down unless we did something dramatically different. That something was to move away from providing original parts for Rover. Instead, Unipart would commit to creating a strong consumer brand built around replacement parts. Today, Unipart has become a highly recognizable consumer brand in the United Kingdom. It has also diversified into a range of other businesses. Producing and selling automotive parts is still the companys main activity but it also runs a successful warehouse, a logistics business, and has created an Internet trading platform. In 1987, when Unipart became independent, sales to Rover represented 90 percent of its business. It is now down to 3 percent. No longer are Uniparts fortunes tied singularly to Rover. In fact, one of Uniparts most profitable current businesses is running Jaguars entire parts operation on a fee basis. Despite Neills success since the buy-out, Unipart faces tough times ahead. The U.K. auto industry suffers from massive overcapacity. Intensive downward pricing pressure on suppliers is likely to eat away at Uniparts profits. In response, Neill has expanded Uniparts logistic business by paying 292 million euros for auto parts distributor Partco. This acquisition makes Unipart the biggest automotive parts distributor in the United Kingdom. Neill is also diversifying beyond Uniparts automotive parts roots, especially on the e-commerce front. Questions 1. John Neill is not smart; he is just lucky. Do you agree or disagree? Explain. Students answers will vary. Luck may very well have been a part of the outcome, however, it appears Neills intuition also may have played a part. Despite his youth, he had expertise in auto manufacturing business and knew that tying all the Uniparts fortunes to one manufacture could put you at risk. His willingness to take a risk and follow his hunch paid off for the organization. 2. Did intuition play a role in Neills decisions? Discuss. It appears so since the scenario does not discuss any other decision process that he may have gone through. His ideas were not initially met with enthusiasm. Since he ignored the critics and moved ahead anywayit could have quite possibly been intuition. 3. Contrast the major strategic decisions at Unipart and British Leyland. Unipart saw itself as a viable business apart from BL. It focused its marketing and sales on parts and became strong enough to split from BL and begin offering its services to other British auto manufactures. BL continued to follow its plan despite shrinking market share. It was not enthusiastic about Uniparts direction and as a result missed an opportunity. 4. Do you think John Neill would have been equally successful if, back in 1987, he had been made head of BL? Explain. Quite possibly. He was the head of the parts operation and which was where his performance was being evaluated. Typically managers will focus their decisions based on what will bring the most benefits to him or her, not necessarily the organization as a whole. Had he been charged with the entire BL operation, he may have had a different focus which could have benefited BL more substantially.
Source: Based on T. Rubython and A. Sibillin, The Reality Man, EuroBusiness, October 2000, pp. 7678.

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Exploring OB Topics on the World Wide Web

Search Engines are our navigational tool to explore the WWW. Some commonly used search engines are: www.goto.com www.excite.com www.hotbot.com www.google.com www.lycos.com www.looksmart.com

1. How can you improve your creativity? There are many strategies and most of the fun! Go to: http://members.ozemail.com.au/~caveman/Creative/Techniques/ and read how to improve your creativity. Choose three or four techniques and write a short journal entry or paragraph comparing them. Take one technique and apply it to a question or decision you are in the process of making. Write about this also. Bring both paragraphs to class for discussion. 2. Are you creative? Take a creativity test to see how you compare to others. The Center for the Development of Creative Thinking has a short test. Go to http://www.cocd.be/eng/index.htm . Bring your short story to class so that we can share them with the class. 3. Read more about ethics in the workplace. A comprehensive guide to many topics confronting managers can be found at http://www.mapnp.org/library/ethics/ethxgde.htm . In particular look at the pages on the myths and benefits of managing ethics in the workplace. Also look at the roles and responsibilities of managing ethics in the workplace. Write three major ideas you learned from reading this page and bring them to class for further discussion. 4. Learn more about Attribution Theory at http://cognet.mit.edu/MITECS/Entry/morris . Does this information explain how we as humans can explain anything? Obviously, there are accurate attributions and errors in attributions that we make everyday. Write a paragraph or two about what you learned from this page. 5. For a spirited overview of decision making and intuition go to the following web site sponsored by the US Armys surgeon general http://www.hooah4health.com/spirit/decisions.htm . 6. Earlier we learned about personality indicators. What role does our personality have in our ability to problem solve and make decisions. Go to a paper written by W.G. Huitt on this topic at http://chiron.valdosta.edu/whuitt/files/prbsmbti.html . Once you have read the paper write a one page reaction paper on what you learned and how you think your personality influences the way you make decisions. 7. Are college students different than employees when it comes to ethics? Go to www.shrm.org/press/releases/980128.htm#Snapshot and http://www.icce2001.org/cd/pdf/p08/Au102.pdf to make a comparison of why employees and students say they sometimes behave in unethical ways. Write a paragraph or two on what you believe are the similarities in reasons are between these two groups. 8. Conduct a web search on one of the topics from this chapter combined with the word culture. For example, stereotyping and culture, ethics and culture, decision making and culture. Write a two page paper on the topic of your choice. Be sure to address how culture relates to the topic you chose.

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