PERCEPTION AND INDIVIDUAL DECISION MAKING

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Robbins: Organizational Behavior


Chapter Five

89


PERCEPTION AND INDIVIDUAL DECISION MAKING



LEARNING OBJECTIVES


After studying this chapter, students should be able to:


1.

Explain how two people can see the same thing and interpret it differently

2.

List the three determinants of attribution

3.

Desc
ribe how shortcuts can assist in or distort our judgment of others

4.

Explain how perception affects the decision making process

5.

Outline the six steps in the rational decision making model

6.

Describe the actions of the boundedly rational decision maker

7.

Identify the conditions in which individuals are most likely to use intuition in decision making

8.

Describe four styles of decision making

9.

Define
heuristics
, and explain how they bias decisions

10.

Contrast the three ethical decision criteria



CHA
PTER 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
environme
nt 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 employee’s perception of a situation that becomes the
basis for his or her behavior. The e
mployee 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 re
sponses to their supervisor. The difference
has nothing to do with the reality of the supervisor’s 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
manager’s 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 ass
ess how workers perceive their jobs.


Absenteeism, turnover, and job satisfaction are also reactions to the individual’s 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 one’s job. The employee’s 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.


Indi
vidual 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 model’s 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.

Robbins: Organizational Behavior


Chapter Five

90


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 ri
sk, the use of
groups, and the like. Adjust your decision style to ensure it is compatible with the organization’s culture. Second,
be aware of biases. We all bring biases to the decisions we make. If you understand the biases influencing your
judgment, yo
u 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. A
s 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 diff
er, 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 ins
tructor’s manual, you will find suggested exercise
s

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 ac
cordingly. 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
public’s 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.

Robbins: Organizational Behavior


Chapter Five

91


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.


Why is this important to the study of OB?




Because people’
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Notes:


A.

Factors Influencing Perception



1.

Factors that shape (and can distort perception):




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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
dis
tinguishable 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)


Notes:

1. Our perceptions of people differ from our perceptions of inanimate objects.




We make inferences about the actions of people that we do not make
about inanima
te objects.



Nonliving objects are subject to the laws of nature.



People have beliefs, motives, or intentions.


2. Our perception and judgment of a person’s actions are influenced by these
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Robbins: Organizational Behavior


Chapter Five

92


3. 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:




Distinctiveness



Consensus



Consistency


4. Clarification of the differences between internal a
nd external causation:




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.




If it is, the observer is likely to give the be
havior 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 employee’s 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 person’s actions. Does the person respond the same wa
y
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 facto
rs 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 th
ere is some preliminary
evidence that indicates cultural differences:




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 wit
h
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.



Notes:


Robbins: Organizational Behavior


Chapter Five

93


B.

Frequently Used Shortcuts in Judging Others


Notes:

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




Any characteristic that makes a person, obje
ct, or event stand out will
increase the probability that it will be perceived.




It is impossible for us to assimilate everything we see

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A classic example:


a. Dearborn and Simon performed a perceptual study in wh
ich 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 situat
ion that
were specifically related to the activities and goals of the unit to which
they were attached.


c. A group’s perception of organizational activities is selectively altered to
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d. Selectivity wor
ks as a shortcut in judging other people by allowing us to
“speed
J
read” others, but not without the risk of drawing an inaccurate
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3. Halo Effec
t




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 e
nthusiasm
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, practi
cal,
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
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b. The experiment showed that subjects wer
e 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.




Robbins: Organizational Behavior


Chapter Five

94


B. Frequently Used Shortcuts in Judging Others (cont.)


Notes:

4. Contrast Effects




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 candidate’s
evaluation can occur as a result of his or her place
in the interview
schedule.


5. Projection




This tendency to attribute one’s own characteristics to other people

which
is called projection

can distort perceptions made about others.




When managers engage in projection, they compromise their ability to
re
spond to individual differences. They tend to see people as more
homogeneous than they really are.


6.

Stereotyping




Stereotyping

judging 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, eth
nicity, 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.





Instructor Note:

At this point in the lecture you may want to introduce the POINT

CO
UNTER 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


Notes:

1. Employment Interview




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
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Because interviews usually have so little co
nsistent structure and
interviewers vary in terms of what they are looking for in a candidate,
judgments of the same candidate can vary widely.




Robbins: Organizational Behavior


Chapter Five

95


C. Specific Applications in Organizations (cont.)


Notes:

2. Performance Expectations




Evidence demons
trates 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
people’s 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. Instr
uctors got better results from the high
potential group because they expected it confirming the effect of a self
-
fulfilling prophecy.



3. Performance Evaluation




An employee’s performance appraisal is very much dependent on the
perceptual process.




Alt
hough 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 individual’s future in an organization is usually not dependent on
performance alone. An assessment of an individual’s effort is

a subjective
judgment susceptible to perceptual distortions and bias.




The Link between Perception and Individual Decision Making


Notes:

1. Individuals in organizations make decisions; they make choices from among
two or more alternatives.




Top ma
nagers determine their organization’s goals, what products or
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Middle
-

and lower
-
level managers determine production schedules, select
new employees, and deci
de 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.




Robbins: Organizational Behavior


Chapter Five

96


The Link between Perception and Individual Decision Making


Notes:

2
. Decision
-
making occurs as a reaction to a problem.




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 decisio
n 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.




Data are typically received from multiple sources.




Which data are r
elevant 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


Notes:

1. The optimizing decision
maker is rational. He or she makes consistent, value
-
maximizing choices within specified constraints.


2. The Rational Model

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Exhibit 5
-
3


3.
Step 1
: Defining the problem




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 relevan
t in making the decision.
Any factors not identified in this step are considered irrelevant to the
decision maker.




This brings in the decision maker’s interests, values, and similar personal
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Step 3
: Weight the previously identified cri
teria 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.




Critically analyze and evaluate each alt
ernative




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 alte
rnative against the weighted criteria and selecting the
alternative with the highest total score.



Robbins: Organizational Behavior


Chapter Five

97


A. The Rational Decision
-
Making Process (cont.)


Notes:

9. Assumptions of the Model




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 importanc
e.



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 assum
ed 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




Most people have creative potential.




People have to get out of the psy
chological ruts most of us get into and
learn how to think about a problem in divergent ways.


2.

People differ in their inherent creativity.




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 it’s
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Robbins: Organizational Behavior


Chapter Five

98


How Are Decisions Actually Made in Organ
izations?


Notes:

1. Are decision makers in organizations rational?




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 mode
l is fairly accurate.


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




Decision makers generally make limited use of their creativity.




Choices tend to be confined to the neighborhood of the problem symptom
and to the neighborhoo
d 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 capabil
ity of human
beings makes it impossible to assimilate and understand all the information
necessary to optimize.




People
satisfice

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2. Individuals operate within the confines of bounded rationalit
y. They construct
simplified models that extract the essential features.


3. How does bounded rationality work?




Once a problem is identified, the search for criteria and alternatives begins.





The decision maker will identify a limited list made up of t
he 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 reviewin
g 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
s敡rc栮




The order in which alternat
ives 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.






Robbins: Organizational Behavior


Chapter Five

99


B.

Intuition


Notes:

1. Intuitive decision
-
making has recently come out of the closet and into some
respectability.


2. What is intuitive decision making?




It is an unconscious p
rocess 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. Re
search on chess playing provides an excellent example of how intuition
works.




The expert’s experience allows him or her to recognize the pattern in a
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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. when a high level of uncertainty

exists

b. when there is little precedent to draw on

c. when variables are less scientifically predictable

d.

when “facts” are limited

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摥cision




Although intuitive decision making has gained in respectability, don’t
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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 l
inked. 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 viewpoint

this time from the CEO perspective. A summar
y of the case and questions can be
found at the end of this chapter.



Robbins: Organizational Behavior


Chapter Five

100



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 i
nto 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 fire’s behavior did not match his expectations.
Much of the fire was burning underneath the living
-
room floor, so it was una
ffected by the firefighters’ attack. Also,
the rising heat made the room extremely hot

too 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 rea
ct 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 decisions

firefighters, intensive
-
care nurses, jet
-
fighter pilots,
SWAT team members

see a different wo
rld 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, “What’s Your Intuition?”
Fast C
ompany
, September 2000, pp. 290

300.


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 ma
ke 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 wh
en 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 Identificati
on


Notes:

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




Visible problems are more likely to catch a decision maker’s attention.




Second, remember we are concerned with decision mak
ing 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 maker’s self interest also plays a p
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Robbins: Organizational Behavior


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101


D.

Alternative Development


Notes:

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 com
parisons. The
picture that emerges is one of a decision maker who takes small steps toward
his or her objective.




E.

Making Choices



1. In order to avoid information overload, decision makers rely on heuristics or
judgmental shortcuts in decision maki
ng.




There are two common categories of heuristics

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Another bias is the tendency to escalate commitment to a failing course of
action.


2. Availability heuristic




The
availability h
euristic

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
exa
mple, 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
n
ew product by relating it to a previous product’s success.


㐮Q†bsc慬慴i潮 ⁣潭mit浥湴




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.

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102


F.

Individual

Differences: Decision
-
Making Styles


Notes:

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.




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 person’s tolerance for ambiguity




Some people have a high need to minimize ambiguity.



Others are abl
e 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 ma
de 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 character
ized 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
solut
ions 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 manager’s dominant style and his or her backup styles.




Business students, lower
-
level managers, and top execu
tives 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 fin
al choices they
make.




Robbins: Organizational Behavior


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103


G.

Organizational Constraints


Notes:

1. The organization itself constrains decision makers. This happens due to
policies, regulations, time constraints, etc.


2. Performance evaluation




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


3. Reward systems




The organization’s reward system influences decision makers by
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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, org
anizations are able to get individuals to
achieve high levels of performance without paying for the years of
experience.


5. System
-
imposed time constraints




Organizations impose deadlines on decisions.




Decisions must be made quickly in order to stay a
head of the competition
and keep customers satisfied.




Almost all important decisions come with explicit deadlines.


6. Historical Precedents




Decisions have a context. Individual decisions are more accurately
characterized as points in a stream of deci
sions.




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 year’s budget is last year’s budget.




H.

Cultural Differences


Notes:

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


a.

selection of problems

b. depth of analysis

c. the importance placed on logic and rati
onality

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 p
eople to solve problems, and preference
for collective decision making.




Robbins: Organizational Behavior


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104




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.


Notes:


What about Ethics in Decision Making?


Ethical considerations should be an important criterion in organizational decision
making.



A.

Three Ethical Decision Criteria



2.

Utilitarian criterion

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3.

Focus on rights

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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 ju
stice

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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 manag
ers to develop ethical standards based solely on non
-
utilitarian criteria.




Robbins: Organizational Behavior


Chapter Five

105


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, yo
u may want to
introduce the MYTH OR SCIENCE:
“Ethical People Don’t Do Unethical Things”
box found in the text (and below).
A suggested class exercise follows within the boxed text.




MYTH OR SCIENCE?




Ethical People Don’t Do Unethical Things”


This st
atement 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 et
hical 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 individual’s et
hical 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, m
anagers 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 e
mployees 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 evaluati
ng 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 respon
se 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 f
ired me

they don’t remember I’ve got their laptop
--
I’m 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 di
fferent 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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106


B.

Ethics and National Culture


Notes:

1. There are no global ethical standards.


2. Contrasts between Asia and t
he West illustrate:




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 country’s 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 c
learer in the West than in Asia. Few
issues are black
-
and
-
white there; most are gray.




C.

Individual Decision Making


Notes:

1.

Most people do not follow the rational decision
-
making model

but satisfice
rather than optimize. What can managers do to improv
e their decision
making?


2.

Be aware of these five strategies:




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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107


QUESTIONS FOR REVIEW


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 su
bstantially different from objective
reality. Perception is important in the study of OB because people’s behavior is based on their perception of
what reality is, not on reality itself.


2.

What is attribution theory? What are its implications for explainin
g organizational behavior?

Answer


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:
distinctiveness, con
sensus, 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 attribution
s. 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 self
-
serving bias and suggests that feedback provided to employees will be distorted by recip
ients.


4.

How does selectivity affect perception? Give an example of how selectivity can create perceptual distortion.

Answer


Selective perception

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 see

only
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 pi
cture. 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


Stereotyping

judging someone on the basis of o
ur 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 per
ceptual
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 ot
hers.

Answer


They save us time and they help us process overloads of information effectively, but the drawbacks
may out weigh such advantages. Employment interview

Evidence 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 expectations

Evidence demonstrates that people will atte
mpt to validate their
perceptions of reality, even when those perceptions are faulty. Performance evaluation

An employee’s
performance appraisal is very much dependent on the perceptual process. Employee effort

An individual’s
future in an organization is
usually not dependent on performance alone. An assessment of an individual’s
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 Model

six steps listed in Exhibit 5
-
4.



Define the problem.



Identify the decision criteria important to solving the problem.




Weight the previously identified criteria in order to give them the correct priority in the decision.



Generate possible alternatives that could succeed in resolving the problem.



Critically analyze and evaluate each alternative.



Compute the optimal decis
ion.



Evaluate each alternative against the weighted criteria, and select the alternative with the highest total
score.

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Chapter Five

108


8.

Describe organizational factors that might constrain decision makers.

Answer


1) The lack of problem clarity

The decision maker is as
sumed to have complete information
regarding the decision situation. 2) Not knowing all the options

It is assumed the decision maker is aware of
all the possible consequences of each alternative. 3) Not being able to make clear preferences

Criteria and
alt
ernatives can be ranked and weighted to reflect their importance. 4) Constant preferences

When specific
decision criteria are constant and the weights assigned to them are stable over time. 5) If there are important
time or cost constraints

The rational de
cision 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 alternative

The rational decision maker will choose the alternative that yields th
e highest perceived
value.


Other organizational constraints:

Performance evaluation



Managers are strongly influenced in their decision making by the criteria by which they are evaluated.



Managers blocking negative information

Reward systems



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

Programmed routines



By programming decisions, organizations are able to get individuals to achieve high levels of performance
wit
hout paying for the years of experience.

System
-
imposed time constraints



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 com
e with explicit deadlines.

Historical precedents



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 com
mon knowledge that the largest determining factor of the size of any given year’s budget is last
year’s budget.


9.

What role does intuition play in effective decision making?

Answer


Intuitive decision making has recently come out of the closet and into som
e respectability. We
define intuitive decision making as an unconscious process created out of distilled experience. It operates in
complement with rational analysis. The expert’s experience allows him or her to recognize the pattern in a
situation and dra
w 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:



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



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 maker’s 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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Chapter Five

109


QUESTIONS FOR CRITICAL THINKING


1.

How m
ight 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 heavi
ly 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 one’s focus, so do one’s past experiences. You perceive those things to
which you can relate. Finally, expectations can distort your perceptions in that you will see what you expec
t to
see.


2.

An employee does an unsatisfactory job on an assigned project. Explain the attribution process that this
person’s manager will use to form judgments about this employee’s job performance.

Answer



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:
distinctiveness, consensus, and consistency.


First, clarification of the differences between internal
and external causation



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 th
e behavior by the situation.

Distinctiveness refers to whether an individual displays different behaviors in different situations.



What we want to know is whether the observed behavior is unusual.



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.

If everyone who is faced with a similar situation responds in the same way, we can say the behavior shows
consensus.



If consensus is high, you would be expected

to give an external attribution to the employee’s 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 person’s 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.

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
understood

bounded 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 experience

it operates in complement with rational analysis.
The expert’s
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 w
hat appears to be very limited information.


4.

What factors do you think differentiate good decision makers from poor ones? Relate your answer to the six
-
step rational model.

Answer



The optimizing decision maker is rational. He or she makes consistent, val
ue
-
maximizing choices
within specified constraints. The rational model

six steps listed in Exhibit 5
-
4.



Define the problem

Many poor decisions can be traced to the decision maker overlooking a problem or
defining the wrong problem.



Identify the decision cr
iteria important to solving the problem. This brings in the decision maker’s
interests, values, and similar personal preferences. Any factors not identified in this step are considered
irrelevant to the decision maker.

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Chapter Five

110



Weight the previously identified crit
eria in order to give them the correct priority in the decision.



Generate possible alternatives that could succeed in resolving the problem.



Critically analyze and evaluate each alternative.



Compute the optimal decision.


5.

Have you ever increased your com
mitment 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
inform
ation. 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 Employe
es, 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
expec
tations 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 applicant’s responsibility to follow the dictum
caveat emptor

let the buyer
beware.

Why should managers emph
asize 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 layoff
s 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. Manag
ers 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 i
n 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 th
eir
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 applicants

that is,
openly provides th
e negative aspects of a job along with the positive

risks 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 th
e 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 j
ob 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 w
ith 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 preview

provided both unfavorable and favorable information

before an offer is made. For example, in
addition to positive comments, the candidate might be told th
at there are limited opportunities to talk with co
-
workers during work hours, or that erratic fluctuations in workloads create considerable stress on employees
during rush periods.

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Chapter Five

111


Research indicates that applicants who have been given a realistic job p
review 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:
Informa
tion 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. 673

90; and J. A. Breaugh and M. Starke, “Research on Employee
Recr
uitment: So Many Studies, So Many Remaining Questions,”
Journal of Management
, vol. 26, no. 3, 2000, pp. 415

17.

H R

Class Exercise:


1.

Before doing this exercise, sit down and write out a realistic job preview for your position. Show it to
colleagues for th
eir input and to help tone it down or up [depending

].



Make copies to hand out in class.



One caution

Do 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 col
lege professor teaching business.



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
Fo
rtune
magazine to be among the 500 largest United States
-
based firms according to sales volume for 1998.



Group A: B.F. Goodrich, Hershey Foods, Mattel, Maytag, Quaker Oats



Group B: Conagra, Enron, Ingram Micro, United Technologies, USX


a.

Which group of fiv
e 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
heuris
tic

the companies are better known. By what percentage (10%, 50%, 100%, or ?) do you think the
higher group’s 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 bes
t student in my introductory MBA class this past semester writes poetry and is rather shy and small in
stature. What was the student’s undergraduate major: Chinese studies or psychology?


Answer


Illustrates representative heuristic. Most students would o
ffer “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 r
epresents available
heuristic because of the emphasis in the media on car accidents.

Robbins: Organizational Behavior


Chapter Five

112


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% chan
ce 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.


Step 2: Break into groups of three
-
to
-
five. Compare your answers. Explain why you ch
ose 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 author’s experience. The percentages
are not
important but the general pattern in your class is. In all likelihood, your class will parallel the author’s
experience.] In a test, 84 percent of students chose “b”

a sure gain. Sixteen percent chose “a”

a 25
percent chance. This exemplifies our t
endency to be risk
-
averse concerning gains and positively framed
questions.


5.

Which would you choose?

Answer


[The percentage of responses come from the author’s experience. The percentages aren’t
important but the general pattern in your class is. In all
likelihood, your class will parallel the author’s
experience.] Eighty
-
seven percent chose “b”

75 percent chance, and 13 percent chose “a”

a sure loss.
This demonstrates our tendency to be risk
-
seeking concerning losses and negatively framed questions.


6.

Whi
ch would you choose?

Answer


[The percentage of responses come from the author’s experience. The percentages aren’t
important but the general pattern in your class is. In all likelihood, your class will parallel the author’s
experience.] This is the same
question as number five, but the amounts will probably shift students to
choosing “a”

the sure loss because “b”

the 80 percent loss is much greater, if they calculate the
percentages.


[These problems are based on examples provided in M.H. Bazerman,
Judgme
nt in Managerial Decision Making,
3
rd

ed. (New York: Wiley,
1994).]


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Chapter Five

113


ETHICAL DILEMMA EXERCISE


Five Ethical Decisions: What Would You Do?


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 representative’s employer wouldn’t 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.



Impact on people

Who are the key stakeholders? What is the potential for harm to them?



Organizational systems

In what way does the organization’s way of doing b
usiness, policies and
procedures contribute to the ethical conflict.



Choice

What 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 yo
u 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 hav
e noticed that his work has not been up to standard lately and is hurting
your team’s performance. This executive happens to be the son
-
in
-
law of the company’s 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 bef
ore 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
. 15

20.]





CASE INCIDENT


John Neill at Unipart


While most part suppliers for the United Kingdom’s automobile industry struggle, one company is doing
just fine

Unipart. 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 cam
paigns and focusing company attention on the parts business (in contrast to its cars and trucks).
He increased the division’s marketing budget six
-
fold, created a retail shop program, altered the packaging, and
began promoting the division’s parts on telev
ision.

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Chapter Five

114


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 BL’s top management to do much about it. Neill had created a viable business, while
the rest of the comp
any (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 today’s market share was smaller than yesterday’s. 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 company’s 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 Unipart’s fortunes tied singularly to Rover. In fact, one of Unipart
’s most
profitable current businesses is running Jaguar’s entire parts operation on a fee basis. Despite Neill’s success
since the buy
-
out, Unipart faces tough times ahead. The U.K. auto industry suffers from massive overcapacity.
Intensive downward pricin
g pressure on suppliers is likely to eat away at Unipart’s profits. In response, Neill has
expanded Unipart’s logistic business by paying 292 million euros for auto parts distributor Partco. This acquisition
makes Unipart the biggest automotive parts distr
ibutor in the United Kingdom. Neill is also diversifying beyond
Unipart’s 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 Neill’s
intuition also may have played a part. Despite his youth, he had expertise in auto manufacturing business
and knew that tying all the Unipart’s 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 Neill’s 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 anyway

it
could have quite possibly been intuition.


3.

Contrast the major strategic decisions at Unipart and British Leyland.

Unipart saw itsel
f 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 Unipart’s 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 op
eration and which was where his performance was being
evaluated. Typically manager’s 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. 76

78.


Robbins: Organizational Behavior


Chapter Five

115


Exploring OB Topics on the World Wide Web


Search E
ngines are our navigational tool to explore the WWW. Some
commonly used search engines are:


www.goto.com

www.google.com


www.excite.com

www.lycos.com


www.hotbot.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 impro
ve 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 i
deas 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 ex
plain 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 in
tuition go to the following web site sponsored
by the US Army’s surgeon general
http://www.hooah4health.com/spirit/decisions.htm

.


6.

Earlier we learned about personality indicators. What rol
e 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.htm
l

. 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.