Chapter 6 DECISIION MAKING & ETHICS

What Is Perception, and Why Is It Important?

Perception A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment.

Peoples behavior is based on their perception of what reality is, not on reality itself. The world as it is perceived is the world that is behaviorally important.

Factors That Influence Perception

Person Perception: Making Judgments About Others

Attribution Theory

When individuals observe behavior, they attempt to determine whether it is internally or externally caused.

Distinctiveness: shows different behaviors in different situations.

Consensus: response is the same as others to same situation. Consistency: responds in the same way over time.

Attribution Theory

Errors and Biases in Attributions

Fundamental Attribution Error The tendency to underestimate the influence of external factors and overestimate the influence of internal factors when making judgments about the behavior of others. In general, we tend to blame the person first, not the situation.

Errors and Biases in Attributions (contd)

Self-Serving Bias The tendency for individuals to attribute their own successes to internal factors while putting the blame for failures on external factors.

Thought: When student gets an A on an exam, they often say they studied hard. But when they dont do well, how does the self serving bias come into play?

Hint: Whose fault is it usually when an exam is tough?

Frequently Used Shortcuts in Judging Others

Selective Perception People selectively interpret what they see on the basis of their interests, background, experience, and attitudes.

Frequently Used Shortcuts in Judging Others

Halo Effect Drawing a general impression about an individual on the basis of a single characteristic

Contrast Effects Evaluation of a persons characteristics that are affected by comparisons with other people recently encountered who rank higher or lower on the same characteristics

Frequently Used Shortcuts in Judging Others

Projection Attributing ones own characteristics to other people. Stereotyping Judging someone on the basis of ones perception of the group to which that person belongs.

Specific Applications in Organizations

Performance Evaluations
Appraisals are often the subjective (judgmental) perceptions of appraisers of another employees job performance.
Employment Interview Perceptual biases of raters affect the accuracy of interviewers judgments of applicants. Performance Expectations Self-fulfilling prophecy (Pygmalion effect): The lower or higher performance of employees reflects preconceived leader expectations about employee capabilities. Ethnic Profiling A form of stereotyping in which a group of individuals is singled outtypically on the basis of race or ethnicityfor intensive inquiry, scrutinizing, or investigation.

The Link Between Perceptions and Individual Decision Making

Problem A perceived discrepancy between the current state of affairs and a desired state. Decisions Choices made from among alternatives developed from data perceived as relevant.

Perception of the decision maker

Outcomes

Assumptions of the Rational Decision-Making Model

Rational DecisionMaking Model Describes how individuals should behave in order to maximize some outcome.

Model Assumptions
Problem clarity Known options Clear preferences Constant preferences No time or cost constraints Maximum payoff

Steps in the Rational Decision-Making Model

1. Define the problem. 2. Identify the decision criteria. 3. Allocate weights to the criteria. 4. Develop the alternatives.

5. Evaluate the alternatives.

6. Select the best alternative.

The Three Components of Creativity

Creativity The ability to produce novel and useful ideas. Three-Component Model of Creativity Proposition that individual creativity requires expertise, creative-thinking skills, and intrinsic task motivation.

Source: T.M. Amabile, Motivating Creativity in Organizations, California Management Review, Fall 1997, p. 43.

How Are Decisions Actually Made in Organizations?

Bounded Rationality Individuals make decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity.

How Are Decisions Actually Made in Organizations? (contd)

How/Why problems are Identified
Visibility over importance of problem
Attention-catching, high profile problems Desire to solve problems

Self-interest (if problem concerns decision maker)

Alternative Development
Satisficing: seeking the first alternative that solves problem. Engaging in incremental rather than unique problem solving through successive limited comparison of alternatives to the current alternative in effect.

Common Biases and Errors

Overconfidence Bias
Believing too much in our own ability to make good decisions.

Anchoring Bias
Using early, first received information as the basis for making subsequent judgments.

Confirmation Bias
Using only the facts that support our decision.

Common Biases and Errors

Availability Bias Using information that is most readily at hand.
Recent Vivid

Representative Bias Mixing apples with oranges Assessing the likelihood of an occurrence by trying to match it with a preexisting category using only the facts that support our decision. Winners Curse Highest bidder pays too much Likelihood of winners curse increases with the number of people in auction.

Common Biases and Errors

Escalation of Commitment
In spite of new negative information, commitment actually increases!

Randomness Error
Creating meaning out of random events

Hindsight Bias
Looking back, once the outcome has occurred, and believing that you accurately predicted the outcome of an event

Intuition
Intuitive Decision Making
An unconscious process created out of distilled experience.

Conditions Favoring Intuitive Decision Making

A high level of uncertainty exists There is little precedent to draw on Variables are less scientifically predictable Facts are limited Facts dont clearly point the way Analytical data are of little use Several plausible alternative solutions exist Time is limited and pressing for the right decision

Individual Differences in Decision Making

Personality
Aspects of conscientiousness and escalation of commitment.

Self Esteem Gender

High self serving bias

Women tend to analyze decisions more than men.

Organizational Constraints on Decision Makers

Performance Evaluation
Evaluation criteria influence the choice of actions.

Reward Systems
Decision makers make action choices that are favored by the organization.

Formal Regulations
Organizational rules and policies limit the alternative choices of decision makers.

System-imposed Time Constraints

Organizations require decisions by specific deadlines.

Historical Precedents
Past decisions influence current decisions.

Cultural Differences in Decision Making

Problems selected Time orientation Importance of logic and rationality Belief in the ability of people to solve problems Preference for collective decision making

Ethics
Ethics are standards of right & wrong that influence behavior. Right behavior is considered ethical, & wrong behavior is considered unethical. It is major concern to both managers & employee.

Honesty is First Chapter in the Book of Wisdom

- Thomas Jefferson

Ethical Models
Social Ethics: Legal rules, customs

Organizations Code of Ethics

Professional Ethics:
Values in workplace

Individual Ethics: Family influence

Ethics
Ethics, also known as moral philosophy, is a branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong conduct. The term comes from the Greek word ethos, which means "character". Ethics is a complement to Aesthetics in the philosophy field of Axiology. In philosophy, ethics studies the moral behavior in humans, and how one should act. Ethics may be divided into four major areas of study: Meta-ethics, about the theoretical meaning and reference of moral propositions and how their truth values (if any) may be determined; Normative ethics, about the practical means of determining a moral course of action; Applied ethics, about how moral outcomes can be achieved in specific situations; Descriptive ethics, also known as comparative ethics, is the study of people's beliefs about morality

Business ethics
Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.

Business ethics has both normative and descriptive dimensions. As a corporate practice and a career specialization, the field is primarily normative. Academics attempting to understand business behavior employ descriptive methods.

Ethics in Decision Making

Utilitarianism : A system in which decisions are made to provide the greatest good for the greatest number. Whistle blowers : Individuals who report unethical practices by their employer to the outsiders. Justice : Fair & Impartial.

Ethics in Islam
Worship only God: Take not with Allah another object of worship; or thou (O man!) wilt sit in disgrace and destitution. (Quran 17:22) Be kind, honourable and humble to one's parents: Thy Lord hath decreed that ye worship none but Him, and that ye be kind to parents. Whether one or both of them attain old age in thy life, say not to them a word of contempt, nor repel them, but address them in terms of honour. (Quran 17:23) And, out of kindness, lower to them the wing of humility, and say: "My Lord! bestow on them thy Mercy even as they cherished me in childhood." (Quran 17:24) Be neither miserly nor wasteful in one's expenditure: And render to the kindred their due rights, as (also) to those in want, and to the wayfarer: But squander not (your wealth) in the manner of a spendthrift. (Quran 17:26) Verily spendthrifts are brothers of the Evil Ones; and the Evil One is to his Lord (himself) ungrateful. (Quran 17:27) And even if thou hast to turn away from them in pursuit of the Mercy from thy Lord which thou dost expect, yet speak to them a word of easy kindness. (Quran 17:28) Do not engage in 'mercy killings' for fear of starvation: Kill not your children for fear of want: We shall provide sustenance for them as well as for you. Verily the killing of them is a great sin. (Quran 17:31)

Ethics in Islam
Do not commit adultery: Nor come nigh to adultery: for it is a shameful (deed) and an evil, opening the road (to other evils). (Quran 17:32) Do not kill unjustly: Nor take life which Allah has made sacred except for just cause. And if anyone is slain wrongfully, we have given his heir authority (to demand qisas or to forgive): but let him not exceed bounds in the matter of taking life; for he is helped (by the Law). (Quran 17:33) Care for orphaned children: Come not nigh to the orphan's property except to improve it, until he attains the age of full strength...(Quran 17:34) Keep one's promises: ...fulfill (every) engagement [i.e. promise/covenant], for (every) engagement will be enquired into (on the Day of Reckoning). (Quran 17:34) Be honest and fair in one's interactions: Give full measure when ye measure, and weigh with a balance that is straight: that is the most fitting and the most advantageous in the final determination. (Quran 17:35) Do not be arrogant in one's claims or beliefs: And pursue not that of which thou hast no knowledge; for every act of hearing, or of seeing or of (feeling in) the heart will be enquired into (on the Day of Reckoning). (Quran 17:36) Nor walk on the earth with insolence: for thou canst not rend the earth asunder, nor reach the mountains in height. (Quran 17:37)

INTEGRITY Integrity: from the Latin integritas, meaning wholeness, completeness, or purity. To courageously hold to what one believes is right and true, without compromise. To stand undivided, immovable, consistent in both heart and action, word and deed. Involves the maintenance of virtue & pursuit of moral excellence.

INTEGRITY
Integrity is demonstrated by not only espousing your values, but by living according to them. Integrity describes both who you are and what you do. People of integrity are conscientious, trustworthy, accountable, committed and consistent. A key to maintaining integrity is counting the cost before committing yourself.

Decision-Making
8 Steps to Sound, Ethical DecisionMaking
1. Gather as many relevant & material facts as circumstances permit. 2. Identify the relevant ethical issues (consider alt. viewpoints) 3. Identify, weigh & prioritize all the affected parties (i.e. stakeholders) 4. Identify your existing commitments/obligations. 5. Identify various courses of action (dare to think creatively) 6. Identify the possible/probable consequences of same (both short & long-term) 7. Consider the practicality of same. 8. Consider the dictates and impacts upon your character & integrity.

CASE STUDY : BRIBERY

A well know social charity wishes to set up an office in Lahore city. Having employed an architect to draw up plans, its officers have to seek planning permission from planning department. The planning department indicates that in order to obtain approval, it will be necessary to offer a bribe to the relevant officials. TO BRIBE OR NOT TO BRIBE.

Faced with Moral Dilemma possible Responses.

Response 1 : It is up to the individual. Response 2 : Everyone does it in Pakistan. You cannot proceed without offering bribe. Response 3 : Bribery is simply wrong. The end does not justify the means. Response 4 : In a developing country where there is a low literacy rate, humanitarian work should always take precedence over principles. Response 5 : The planning officers have no right over charitys money. They are not entitled to it.

RESPONSES

Response 1 : SUBJECTIVISM. (It is up to the individual) Response 2 : CULTURAL RELATIVISM. (Everyone does it). Response 3 : NON CONSEQUENTIALISM. (Bribery is simply wrong). Response 4 : CONSEQUENTIALISM. (Human welfare is best served). Response 5 : NATURAL LAW. (An ETHICS of rights).

Ways to Improve Decision Making

1. Analyze the situation and adjust your decision making style to fit the situation.

2. Be aware of biases and try to limit their impact.

3. Combine rational analysis with intuition to increase decision-making effectiveness.

4. Dont assume that your specific decision style is appropriate to every situation.
5. Enhance personal creativity by looking for novel solutions or seeing problems in new ways, and using analogies.

Toward Reducing Bias and Errors

Focus on goals.
Clear goals make decision making easier and help to eliminate options inconsistent with your interests.

Look for information that disconfirms beliefs.

Overtly considering ways we could be wrong challenges our tendencies to think were smarter than we actually are.

Dont try to create meaning out of random events.

Dont attempt to create meaning out of coincidence.

Increase your options.

The number and diversity of alternatives generated increases the chance of finding an outstanding one.

QUESTIONS