Chapter 9, 10, 11 PDF

lOMoARcPSD|40186229 CH9: Managing a organization’s culture Organizational environment? Organizational Culture -Denitions:  Deal & Kennedy (1982): "The way things get done around here."  Ravasi & Schultz (2006): "Organizational culture is a set of shared assumptions that guide wh...

lOMoARcPSD|40186229 CH9: Managing a organization’s culture Organizational environment? Organizational Culture -Denitions:  Deal & Kennedy (1982): "The way things get done around here."  Ravasi & Schultz (2006): "Organizational culture is a set of shared assumptions that guide what happens in organizations by dening appropriate behavior for various situations."  Robbins & Coulter (2014): "The shared values, principles, traditions, and ways of doing things that inuence the way organizational members act and distinguish the organization from other organizations." -Schein (1992):  "A pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel (and act) in relation to those problems."  These assumptions function as the glue that holds the organization together. How to analyze/look at an organizational culture -Seven Dimensions of Organizational Culture: 32 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 1. Attention to detail: Degree to which employees are expected to exhibit precision, analysis and attention to detail 2. Outcome orientation: Degree to which managers focus on results or outcomes rather than on how these outcomes are achieved 3. People orientation: Degree to which management decisions take into account the eect on people in the organization 4. Team orientation: Degree to which work is organized around teams rather than individuals 5. Aggressiveness: Degree to which employees are aggressive and competitive rather than cooperative 6. Stability: Degree to which organizational decisions and actions emphasize maintaining the status quo 7. Innovations and risk taking: Degree to which employees are encouraged to be innovative and take risks -Schein's Model of Organizational Culture: Artifacts:  Denition: Artifacts refer to the visible, Artifacts tangible elements of an organization's culture that can be observed, experienced, and documented.  Examples: This includes physical structures Norms and (like oce layout), rituals (such as regular Values meetings or celebrations), and visible behaviors (such as dress codes or communication styles). Underlying Norms and values: Assumptions  Denition: Espoused (stated or desired cultural elements. This is most often a written or stated tone that the CEO or President hope to instil and Enacted (the actual values that the culture represents)  Examples: These are often expressed in mission statements, vision statements, and ocial corporate policies that outline desired behaviors and principles. Underlying Assumptions:  Denition: Underlying assumptions are the unconscious, deeply ingrained beliefs, perceptions, and expectations that guide behavior and decision-making in an organization.  Examples: Material, buildings, slogans, symbols, stories/myths, clothing, ceremonies… Do organizations have uniform cultures? 33 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 -The dominant culture expresses the core values that are shared by a majority of the organization’s members -Subcultures tend to develop in large organizations to reect common problems, situations, or experiences of members (departments, management levels) -Subcultures mirror the dominant culture but may add to or modify the core values Importance of an organizational culture -Culture’s Basic Functions: 1. Code of conduct: Acts as a mechanism for coordination and control. 2. Denes boundaries: Establishes limits and parameters for acceptable behavior. 3. Conveys identity: Shapes the organization's unique character and self- image. 4. Generates commitment: Fosters loyalty and dedication among members. 5. Inuences management style: Shapes how leaders lead and make decisions. 6. Guides interpersonal interactions: Denes norms for how people interact. 7. Enhances social stability: Acts as social glue, providing stability and unity. -Managerial Decisions Aected by Culture:  Planning: Determines the risk tolerance in plans, and whether they are developed individually or collaboratively.  Organizing: Inuences the autonomy given to employees, and whether tasks are performed individually or in teams.  Leading: Shapes managerial concern for employee satisfaction, appropriate leadership styles, and handling of disagreements.  Controlling: Determines whether controls are imposed externally or if employees are trusted to self-regulate, and the criteria for performance evaluations. -Person-Organization Fit:  Refers to the alignment between an individual's values, beliefs, and behaviors with the culture of the organization. Link between culture and performance Adaptive Culture and Organizational Success: A culture that is adaptive enables organizational success by 34 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 o Ensuring managers pay attention to all stakeholders. o Encouraging proactive change management. o Facilitating risk-taking. Dynamic Nature of Culture: Culture is not a one-size-ts-all recipe; what works eectively in the present may not necessarily work in the future. Key Insights from Kotter and Heskett: According to Kotter and Heskett (1992): o Culture plays a pivotal role in determining organizational performance. Fit as a Critical Factor: The concept of "t" emerges as crucial for culture to contribute to success: o Fit between organizational culture and its external environment. o Fit between organizational culture and its strategic goals. Strong vs. Weak culture -Characteristics of Strong Cultures:  Core values are intensely held and widely shared across the organization.  Inuence behavior of members signicantly.  Increase cohesiveness among employees.  Act similarly to formalization, guiding behaviors and decisions.  Particularly eective in organizations with less formalized policies. -Impact on Organizational Performance:  Linked to lower employee turnover rates.  Associated with improved organizational performance. -Factors Inuencing Cultural Strength:  Size and age of the organization.  Rate of employee turnover.  Initial strength of the culture.  Clarity of cultural values and beliefs.  Fewer subcultures within the organization contribute to stronger cultures. 35 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 -Dysfunctional Aspects of Strong Cultures:  Barrier to Change: o Strong cultures are resistant to change, even in dynamic environments. o Impedes adaptation and innovation.  Barrier to Diversity: o Managers prefer employees who align with existing cultural values. o Strong cultures may discourage diversity of thought and perspectives (groupthink).  Barrier to Acquisitions and Mergers: o Cultural incompatibility often leads to failure in mergers and acquisitions. o Integration challenges arise when cultures clash. Typologies of culture: Quinn & Cameron based on competing values (OCAI test) -Clan/Family Culture - Human Relations Model:  Involvement: Emphasizes participation and collaboration.  Characteristics: Vision, shared goals, loyalty, and a at structure with unwritten rules.  Leadership: Leaders act as mentors/Good fathers. -Adhocracy Culture - Open Systems Model:  Adaptability: Emphasizes exibility and innovation.  Characteristics: Speed, adaptability, teamwork, and a focus on experimentation.  Leadership: Leaders are visionary. -Hierarchy Culture - Internal Processes Model:  Consistency: Focuses on stability and control.  Characteristics: Emphasizes formalization, specialization, respect for position, and eciency.  Leadership: Leaders are coordinators and organizers. -Market Culture - Rational Goal Model:  Achievement: Focuses on results and goals.  Characteristics: Driven by sales, competition, winning, market share, minimal cost, and delay.  Leadership: Leaders are hard-driving. 36 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 How are cultures created and sustained? -Creating Culture:  Founders: The core source of an organization's culture. o Vision: Founders have a clear vision for the organization. o Inuence: Unconstrained by past traditions, they hire and retain employees who align with their vision. o Role Models: Founders act as role models, and their success solidies their vision into organizational myths.  Other Factors: Industry and national culture also play signicant roles.  "Basically, our goal is to organize the world's information and to make it universally accessible and useful." --Larry Page -Keeping Culture Alive:  Selection: Hiring individuals who t the culture.  Socialization: o Informal: Through stories, rituals, language, symbols, and peer pressure. o Formal: Training and espoused values.  Other Mechanisms: Performance evaluations, rewards, managerial role models, and organizational structure. -Culture Maintenance and Outcomes: 1. Antecedents: Founders’ values, National culture, Sector/industry 2. Org. culture: Artefacts, Values, Basic assumptions 3. Sustained by: Socialization, Formal & informal, Reward systems, Performance eval, Leadership, Structure 4. Processes: Communication, Interaction, Decision making, Risk taking, Autonomy, Power 5. Collective attitudes: Job satisfaction, Work attitudes, Motivation 6. Organizational outcomes: Stress, Eciency, Eectiveness, Innovation -Changing Organizational Culture: Not easy! Solution= Star model (Galbraith, J., R. (1995)) Strategy: Focuses on dening the organization's vision, mission, values, and strategic goals. Structure: Involves organizing the company through hierarchies, teams, roles, and reporting relationships. 37 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Processes: Includes the formal and informal procedures and workows that guide how work gets done. Rewards: Addresses the systems and criteria used to reward and recognize employee performance. People: Emphasizes HR practices like recruitment, training, development, and performance management -Why Change Culture at Heineken?  Market Challenges: o Declining beer consumption in key markets due to new laws and shifting preferences. o Increased competition from new brands. -Current Culture and Needed Changes:  Historical Inuence: o Deeply rooted in tradition with conservative practices.  Need for Change: o Shift from a play-it-safe approach to innovation and adaptability. o Balance attracting younger customers while retaining core middle- aged base. -Steps to Changing Heineken's Culture: 1. Acknowledge Need for Change: o Recognize market challenges and necessity to adapt. 2. Socialization: o Formal: Implement structured programs (e.g., roadshows). o Informal: Use stories, rituals, and peer pressure. 3. Rewards: o Set high performance goals with substantial perks and bonuses. 4. Leadership: o Exemplify new cultural values through actions. 5. Hiring: o Recruit individuals who align with the vision of innovation. 6. Balance: o Introduce changes gradually to retain core customers. -Challenges:  Resistance to Change: o Strong cultures are resistant to change, requiring consistent eort.  Maintaining Core Values: o Retain core values while introducing new practices to avoid eroding brand identity. 38 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Current trends in Organizational culture (! STAR MODEL !) -Developing an Innovative Culture:  Give people Challenges and Freedom  Install an inspiring vision of innovation  Trust and openness  Idea time (e.g. Googlettes)  Playfulness/humor  Conict resolution procedures  Allow debates, expression of opinions  Diversity  Allow and reward Risk-taking  Accept failure -Developing a Customer-Responsive Culture:  Hiring the right type of employees: Having good listening skills in relating to customers’ messages, Having conscientious, caring employees willing to take initiative  Having few rigid rules, procedures, and regulations  Providing role clarity to employees to reduce ambiguity and conict and increase job satisfaction  Using widespread empowerment of employees -Developing an ethical culture:  Formal socialization: Expectations about ethics must be clear: communication of ethical vision and values, Ethical training - ethical codes  Informal socialization, Stories, myths, language, peer pressure…  Top managers must be role models of ethical behavior  Performance appraisals and rewards for ethical conduct  Not too high bonuses and expectations  Encourage whistle blowers  Structure: Proper control systems and good working Corporate governance (board of directors) (esp. in a centralized structure) Intercultural dierences National culture: inuences how people behave and has an big inuence on organizational culture of the local rm Examples: Values, religion, ethics, gender issues, communication, food, habits etc. 39 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 -Cultural dierences can be challenging:  Between local employees and ex pat. Management  Between business units  Between the company and its customers and partners  E.g. communication style: o West: straightforward and direct o India and China a less agressive approach  E.g. Eye contact and gestures: o U.S: eye contact is seen as a reection of honesty o In some African, Asian and Middle Eastern cultures: prolonged eye contact can be seen as rude or aggressive  E.g Meetings o Germany: Very formal, an agenda, no delay!, punctual, communication through an older person o France: An agenda, but starting 15-30 minutes too late poses no problem, interaction between the members through the boss o The Netherlands: Quite informal, but some basic protocols and agenda, straight forward o UK: Very serious, sti lips, diplomatic, never articulate things in a negative way Ethnocentrism: The belief that one’s native country, culture, language and habits are superior to all others -Geert Hofstede’s cultural dimensions of national culture: Background: Conducted by Geert Hofstede in the 1980s, based on a study involving 116,000 IBM employees across more than 40 countries. Dimensions: Identied several cultural dimensions that inuence work-related values and behaviors:  Power Distance Index (PDI): Measures the extent to which less powerful members of organizations accept and expect power to be distributed unequally.  Individualism vs. Collectivism (IDV): Focuses on the degree to which individuals are integrated into groups. Individualistic societies prioritize individual goals over group goals.  Masculinity vs. Femininity (MAS): Refers to the distribution of emotional roles between genders. Masculine cultures emphasize assertiveness, material success, and achievement, while feminine cultures emphasize quality of life, relationships, and care for others.  Uncertainty Avoidance Index (UAI): Measures the tolerance for uncertainty and ambiguity within a society. High uncertainty avoidance cultures prefer structured situations with clear rules, while low uncertainty avoidance cultures are more tolerant of ambiguity and change.  Long-Term Orientation vs. Short-Term Orientation (LTO): Later added by Hofstede to assess values oriented toward the future (long-term rewards) versus the past and present (short-term rewards). 40 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 -The Globe studies (Robert House): Research Scope: Conducted by Robert House and colleagues, involving 173,000 managers across 951 organizations in 62 cultures. Objective: Explored global leadership and organizational behavior, focusing on identifying cultural dimensions and their impact. Key Dimensions Identied:  Power Distance: Measures the extent to which less powerful members of organizations accept and expect power to be distributed unequally.  Uncertainty Avoidance: Examines the degree to which societies tolerate uncertainty and ambiguity.  Institutional Collectivism: Reects the degree to which individuals are encouraged by societal institutions to prioritize collective over individual interests.  Gender Egalitarianism: Assesses the extent to which a culture minimizes gender discrimination and promotes gender equality.  Assertiveness: Evaluates the degree to which individuals are assertive, confrontational, and aggressive in social relationships.  Performance Orientation: Focuses on the degree to which a society encourages and rewards innovation, high standards, and performance improvement.  Future Orientation: Measures the extent to which a society encourages investment in the future as opposed to focusing on the present or past.  Humane Orientation: Reects the degree to which a society encourages and rewards individuals for being fair, altruistic, caring, and kind to others.  Collective Orientation: Assesses the degree to which organizational and societal institutional practices encourage and reward collective distribution of resources and collective action. Cultural Intelligence (CQ): The ability to understand and eectively interact with people from dierent cultures. It involves awareness, knowledge, skills, and adaptability to navigate diverse cultural contexts successfully. CH10: Decision-making Decisions -Decisions: Importance and Denition  Decision making is central to management as it involves choosing courses of action to achieve organizational goals.  Managers play a critical role as decision makers, facing choices such as whether to pursue growth, set pricing, hire personnel, allocate budgets for research and development, and decide on product launch timing. -Importance of Good Decisions in Management: 41 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 -The Globe studies (Robert House): Research Scope: Conducted by Robert House and colleagues, involving 173,000 managers across 951 organizations in 62 cultures. Objective: Explored global leadership and organizational behavior, focusing on identifying cultural dimensions and their impact. Key Dimensions Identied:  Power Distance: Measures the extent to which less powerful members of organizations accept and expect power to be distributed unequally.  Uncertainty Avoidance: Examines the degree to which societies tolerate uncertainty and ambiguity.  Institutional Collectivism: Reects the degree to which individuals are encouraged by societal institutions to prioritize collective over individual interests.  Gender Egalitarianism: Assesses the extent to which a culture minimizes gender discrimination and promotes gender equality.  Assertiveness: Evaluates the degree to which individuals are assertive, confrontational, and aggressive in social relationships.  Performance Orientation: Focuses on the degree to which a society encourages and rewards innovation, high standards, and performance improvement.  Future Orientation: Measures the extent to which a society encourages investment in the future as opposed to focusing on the present or past.  Humane Orientation: Reects the degree to which a society encourages and rewards individuals for being fair, altruistic, caring, and kind to others.  Collective Orientation: Assesses the degree to which organizational and societal institutional practices encourage and reward collective distribution of resources and collective action. Cultural Intelligence (CQ): The ability to understand and eectively interact with people from dierent cultures. It involves awareness, knowledge, skills, and adaptability to navigate diverse cultural contexts successfully. CH10: Decision-making Decisions -Decisions: Importance and Denition  Decision making is central to management as it involves choosing courses of action to achieve organizational goals.  Managers play a critical role as decision makers, facing choices such as whether to pursue growth, set pricing, hire personnel, allocate budgets for research and development, and decide on product launch timing. -Importance of Good Decisions in Management: 41 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229  Good decisions are essential for eective management as they drive organizational success and performance.  However, half of organizational decisions fail, impacting outcomes negatively. -Reasons for Decision Failures (based on Nutt, 2002):  Rush-to-judgment: Deciding hastily under stress without sucient analysis or consideration.  Poor problem denition: Lack of clarity in dening the issue leads to incorrect solutions.  Limited alternatives: Managers may only consider familiar or initial ideas (availability bias) rather than exploring all options.  Shortcuts: Decision makers may take shortcuts in the decision-making process, compromising quality.  Failure to learn from mistakes: Ignoring past errors due to biases like hindsight bias (seeing events as more predictable after they have occurred) and conrmation bias (seeking information that conrms preconceptions).  Group pressures: Inuence from colleagues, power dynamics, and organizational politics can skew decisions.  Flawed procedures: Ineective decision-making processes or inadequate structures contribute to failures. -Case Example: The EuroDisney Location Decision (1992)  Projected vs. Actual Outcome: o Cost: Initially projected at $2.5 billion, actual cost was $4.4 billion. o Attendance: Expected 11 million, actual 10 million (after discounts). o Hotel occupancy: Projected 76%, actual 37%.  Financial Impact: By 1994, EuroDisney faced losses of $400 million, achieving protability only in 2007. What is a decision? -Perception of the Decision Maker:  Denition of Problem: A decision arises from perceiving a gap between the current situation and a desired outcome.  Decisions: Choices made among alternatives based on perceived relevant data. 42 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 -Understanding the Perception of Decision Makers:  Subjectivity: What constitutes a problem can vary signicantly between individuals, organizations, and cultural contexts.  Organizational and Cultural Boundaries: Problems are inuenced by organizational norms and national cultures, impacting how they are perceived and addressed.  "No-problem" Issues: Issues that one person may not perceive as problematic can still require attention, especially if they aect others or organizational goals.  Importance of Problem Denition: Accurately dening a problem is crucial as it shapes the direction and eectiveness of potential solutions.  Risks of Ambiguous Problem Denitions: A poorly dened problem can lead to ineective or misguided solutions.  Example: For instance, identifying the need for CRM software might not address the underlying issue of customer dissatisfaction, which requires deeper exploration of root causes. Decision making models -How decisions are made, depends on  Content of decisions: Structured or unstructured problems, Operational or strategical  Context: Urgency,Organizational characteristics (Culture, structure, past decisions), Decision makers’ attributes (Propensity to risk, tolerance for ambiguity, decision style, experience) 1. Rational Decision Making: Denition: The idealized model where decision makers systematically maximize utility by evaluating all possible alternatives. Assumptions:  Complete knowledge of the situation.  Unbiased awareness of all relevant options.  Sucient time to make a decision.  Clear goal of maximizing utility. Evaluation Process: Involves weighing alternatives based on predened criteria to select the optimal solution. 2. Reality: Decision Making in Bounded Rationality: 43 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Bounded Rationality: Recognizes that decision makers are constrained by cognitive limitations, environmental factors, and emotional inuences. Factors Aecting Decision Making:  Content of Decisions: o Structured (well-dened) vs. unstructured (complex) problems. o Operational (routine) vs. strategic (long-term) decisions.  Context: o Urgency of the decision. o Organizational characteristics (culture, structure, past decisions).  Decision Makers' Attributes: o Propensity to risk. o Tolerance for ambiguity. o Decision-making style. o Experience and expertise. Decision Making in Reality:  Limited Search: Often rely on familiar criteria and readily available alternatives.  Satiscing: Choosing the rst acceptable alternative rather than the optimal one (due to time constraints or cognitive limits).  Intuition: Using gut feelings or heuristics based on past experiences.  Inuence of Emotions and Biases: Emotions, biases (like conrmation bias), stress, and satisfaction can aect decision outcomes. How does our brain work? -Dual Process Theory:  System 1: o Characteristics: Always active, operates unconsciously and quickly. o Functions: Intuitive, impulsive, relies on stereotypes, emotions, and perceptions. o Biases: Often satised quickly, relies on heuristics (WYSIATI - "What You See Is All There Is"). o Energy: Uses minimal energy, driven by beliefs, habits, and context. o Association: Forms quick associations, loves narratives.  System 2: o Characteristics: Activated consciously, operates slowly and deliberately. o Functions: Logical, analytical, seeks facts, and applies rules. o Control: Can override System 1 (e.g., self-control), but tends to follow the law of least eort. o Energy: Uses more energy, can become depleted. 44 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 o Conditions: Works less eectively under the inuence of alcohol. Interaction Between System 1 and System 2:  System 1: Typically dominant, always active and inuencing decisions.  System 2: Acts as a supervisor, exerting control over System 1 but is lazy and prefers minimal eort.  Fatigue: When System 2 is tired, System 1's inuence increases.  Conict: System 1 and System 2 often conict, with System 1 frequently winning in impulsive or emotional decisions. -Perception:  Biases and Cognitive Shortcuts: o “What You See Is All There Is” (WYSIATI): System 1 tends to rely on immediate information without seeking further details. o Inuence: Perception is heavily inuenced by System 1’s quick judgments, biases, and heuristics. o Factors: Emotions, habits, beliefs, and environmental context shape how perceptions are formed and decisions are made. Decision making errors and biases Moral Seduction: The inuence of ethical considerations or moral values on decision making, where decisions are guided by moral principles rather than purely rational or practical factors. Nudging: A concept from behavioral economics and psychology where indirect suggestions and positive reinforcement are used to inuence the behavior and decisions of individuals or groups, without restricting choices.  The Decoy Eect: A phenomenon where consumers change their preference between two options when presented with a third option (decoy) that is asymmetrically dominated. The decoy is designed to inuence decisions towards a specic choice. Priming: The subconscious activation of specic associations or concepts by exposure to related stimuli. 1. Overcondence:  Denition: Overestimating one's own abilities, knowledge, or judgments, often leading to making overly risky decisions or underestimating risks.  Dunning-Kruger Eect: A cognitive bias where individuals with low ability or knowledge tend to overestimate their competence or skills, while individuals with high ability may underestimate their own competence relative to others. 2. Immediate Gratication: 45 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229  Denition: Preferring immediate rewards or benets over larger, delayed rewards that may require more eort or patience. 3. Anchoring Eect:  Denition: The tendency to rely heavily on the rst piece of information encountered (the "anchor") when making decisions, often inuencing subsequent judgments. 4. Selective Perception:  Denition: The tendency to interpret information in a way that supports one's preexisting beliefs or expectations, while ignoring or dismissing contradictory information.  Nudging: A concept from behavioral economics and psychology where indirect suggestions and positive reinforcement are used to inuence the behavior and decisions of individuals or groups, without restricting choices. o The Decoy Eect: A phenomenon where consumers change their preference between two options when presented with a third option (decoy) that is asymmetrically dominated. The decoy is designed to inuence decisions towards a specic choice.  Priming: The subconscious activation of specic associations or concepts by exposure to related stimuli. 5. Conrmation Bias:  Denition: The tendency to seek out or interpret information in a way that conrms one's preconceptions or hypotheses, while disregarding contradictory evidence. 6. Framing Bias:  Denition: Decisions inuenced by how information is presented or framed; dierent presentations of the same information can alter perceptions and choices.  Prospect Theory: A theory in behavioral economics that describes how individuals make decisions under uncertainty. It suggests that people make decisions based on potential losses and gains relative to a reference point, rather than in absolute terms. 7. Availability Bias:  Denition: The tendency to overvalue information that is easily recalled or readily available, often due to recent exposure or vividness in memory. 8. Representation Bias:  Denition: Making judgments or decisions based on stereotypes, prototypes, or generalizations, rather than considering individual dierences or specic circumstances. 9. Randomness Bias: 46 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229  Denition: Perceiving patterns or order in random events where none actually exist, often leading to superstitious beliefs or unwarranted assumptions.  Denomination Eect: The preference for spending larger bills over an equivalent amount of smaller bills or coins, despite their identical value. This bias inuences spending behavior based on the form of currency used. 10. Sunk Cost Fallacy/Loss Aversion:  Denition: Continuing a course of action because of past investments of time, money, or eort, despite the current costs outweighing the benets.  Endowment Eect: The tendency for individuals to value items they already own more highly than identical items they do not own, even when there is no rational basis for the disparity in value. 11. Self-Serving Bias:  Denition: Attributing successes to internal factors (e.g., abilities, eorts) while attributing failures to external factors (e.g., luck, others' actions), to maintain self-esteem.  Attribution Theory: Examines how individuals explain the causes of behaviors and events, focusing on whether these are attributed to internal (personal) or external (situational) factors. 12. Hindsight Bias:  Denition: The tendency to perceive past events as more predictable than they actually were at the time, often leading to oversimplied explanations of causes and outcomes. What about intuition? Denition: Intuition in decision-making is based on implicit knowledge available to the decision-maker, often stemming from experience and subconscious processing (Burke & Miller, 1999). Caution: It's advised not to rely blindly on intuition due to potential biases like overcondence, which can lead to decision-making illusions. -Tips:  Dene the problem – go to the essence! Reach unanimity about the problem  Use technical experts, People from the frontline Formulate clear goals 25 % of your time  Be aware of satiscing Don’t stick to the rst alternatives, be creative Second opinion Search disconrmative information 47 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229  Be aware for new criteria, changing goals Be objective  Adapt if needed (change) Know when it is time to quit: Cut your losses  Be not tricked by your success Be aware of blind spots Decision making styles: Rowe and Mason (1987) Analytical: Long term, More alternatives, More exible. High Ambiguity, Data Oriented. Conceptual: Broad perspective, Many alternatives, Intuition, creative Indecisive. High Ambiguity, People Oriented. Directive: Autocratic, Short term, Analyze. Low Ambiguity, Data Oriented. Behavioral: Love people, Interaction, Avoid conict, Wishy washy solution. Low Ambiguity, People Oriented. Decision making in groups/teams -Advantages of group decision making  Generates more complete information and knowledge  Increases diversity of views => creativity  Increases acceptance of a solution -Disdvantages of group decision making  Time consuming  Conformity  Groupthink “Dominant coalition”  Groupshift Conformism: Asch experiment (Lines) = The act of adjusting one's beliefs or behaviors to match those of a group or societal norms, often due to social pressure or a desire to t in. Groupthink: = The deterioration of individual mental eciency and moral judgment due to group pressures, resulting in conformity and awed decisions. Symptoms: Includes pressure for unanimity, rationalizing away dissent, and stereotyping dissenters. Tips for minimizing groupthink 48 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229  Limit group size (≤10)  Encourage group leaders to actively seek input from all members  Leaders avoid expressing their own opinions – they have to play an impartial role  Appoint a “devil’s advocate”  Use outside experts  “Premortem” technique  Be aware of “correlated errors” (anchoring) The Challenger disaster in 1986 was a space shuttle mission that ended tragically when the shuttle exploded shortly after lifto due to a failed O-ring seal in a solid rocket booster. This incident raised concerns about safety protocols and highlighted the risks of groupthink within NASA, where dissenting opinions were not eectively considered. -Group decision-making techniques:  Brainstorming o Meant to overcome pressures of conformity o Generates a list of creative alternatives o Problem: production blocking, anchoring  Nominal Group Technique (NGT) o Restricts discussion during the decision-making process to encourage independent thinking CH11: Leadership What is leadership? Leadership vs. management? Leadership: The ability to inuence a group toward the achievement of goals Management: Use of authority inherent in designated formal rank to obtain compliance from organizational members Leadership:  Establish direction with a vision  Align resources and inspire workers to complete the vision  Leadership is doing the right things Management  Brings about order and consistency  Draws up plans, structures, and monitors results  Management is doing the things right Why is leadership important? 49 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229  Limit group size (≤10)  Encourage group leaders to actively seek input from all members  Leaders avoid expressing their own opinions – they have to play an impartial role  Appoint a “devil’s advocate”  Use outside experts  “Premortem” technique  Be aware of “correlated errors” (anchoring) The Challenger disaster in 1986 was a space shuttle mission that ended tragically when the shuttle exploded shortly after lifto due to a failed O-ring seal in a solid rocket booster. This incident raised concerns about safety protocols and highlighted the risks of groupthink within NASA, where dissenting opinions were not eectively considered. -Group decision-making techniques:  Brainstorming o Meant to overcome pressures of conformity o Generates a list of creative alternatives o Problem: production blocking, anchoring  Nominal Group Technique (NGT) o Restricts discussion during the decision-making process to encourage independent thinking CH11: Leadership What is leadership? Leadership vs. management? Leadership: The ability to inuence a group toward the achievement of goals Management: Use of authority inherent in designated formal rank to obtain compliance from organizational members Leadership:  Establish direction with a vision  Align resources and inspire workers to complete the vision  Leadership is doing the right things Management  Brings about order and consistency  Draws up plans, structures, and monitors results  Management is doing the things right Why is leadership important? 49 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 “I am more afraid of an army of 100 sheep led by a lion, than an army of 100 lions led by a sheep”. Charles Maurice de Talleyrand (1754-1838) -Why is leadership important?  To inuence subordinates o “They bring out the best of people”  Leadership plays a critical role in ethical shortcomings  Motivation, increased commitment  Job satisfaction  Link with performance Sir Ernest Shackleton and the Endurance: In 1921, Sir Ernest Shackleton aimed to cross Antarctica, but the ship Endurance became trapped and crushed in ice. Shackleton and his crew survived on ice oes before making a daring journey to Elephant Island. Shackleton then led a small team on an 800-mile voyage to South Georgia Island to get help. Remarkably, all crew members were rescued without loss of life, showcasing extraordinary leadership and resilience. -Characteristics of leadership:  Leaders “make a dierence” by who they are  They have IMPACT, Positive impact  It is no role, no function, no position  It is about relationships with people  Leaders inuence: Without a leader people behave dierently, Leaders make people things do out of free will  Leadership is “attributed” when results are shown  Leadership is often situational  Leaders have followers -Are leaders born?  Old trait theories have the assumption: Leaders are born o Goal: Select leaders  Later (behavioral theories): Mix of “nature and nurture” o If you don’t possess the traits/skills, at least you can try/learn to possess them o => leadership training! -Leadership is culturally bound:  France o More a bureaucratic view on leaders, task oriented, relatively autocratic  Nordic countries o Leaders are interpersonal, enthusiastic, sincere, informal, trustworthy, inspirational  Germany, Austria, Switzerland o Independent, autonomous, unique  Latin countries 50 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 o Visionary, team oriented and status conscious  US o Obsession with leadership, the sky is the limit Leadership theories 1. Trait Theories Trait theories focus on identifying the specic qualities and characteristics that distinguish leaders from non-leaders. Early Trait Theories  "Great man" theories (1940s-1950s) emphasized inherent qualities.  Leaders are believed to possess distinct traits such as intelligence, self- condence, determination, integrity, and sociability. Revival of Trait Theories  In the 1980s, there was renewed interest in personality traits linked to leadership.  Key traits include those from the Big Five personality model: extraversion, agreeableness, conscientiousness, openness to experience, and emotional stability.  Emotional Intelligence (EQ) became a signicant factor, emphasizing self- awareness, self-management, empathy, and relationship management. Critiques  No universal traits predict leadership in all situations.  Traits are often culturally bound and inuenced by implicit leadership theories. 2. Behavioral Theories Behavioral theories focus on the actions of leaders rather than their mental or physical characteristics. Style Approach  Emphasizes the behavior of leaders.  Key studies from Ohio State University identied two main behaviors: initiating structure and consideration.  University of Michigan studies dierentiated between employee-oriented and production-oriented leaders. Blake & Mouton’s Managerial Grid  A tool to assess leadership style based on concern for people and concern for production. 51 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229  Identies ve leadership styles: country club management, team management, middle-of-the-road management, impoverished management, and authority-compliance. Skills Approach  Focuses on the skills and abilities that can be learned and developed.  Emphasizes technical, human, and conceptual skills. 3. Situational Theories Situational theories propose that the eectiveness of a leadership style is contingent on the context and situation. Hersey and Blanchard’s Situational Leadership Theory  Leadership style should vary according to the followers’ readiness (ability and willingness).  Identies four leadership styles: directing, coaching, supporting, and delegating. Fiedler’s Contingency Model  Leaders have a xed style (task-oriented or relationship-oriented).  Eectiveness depends on the situation, dened by leader-member relations, task structure, and leader's position power.  Proposes matching the leader to the situation or modifying the situation to t the leader's style. Path-Goal Theory  Leaders help followers achieve their goals by providing direction and support.  Leadership styles include directive, supportive, participative, and achievement-oriented, depending on subordinate characteristics and task environment. 4. Leaders-Followers Approach Focuses on the dynamic relationship between leaders and followers. Leader-Member Exchange (LMX) Theory  Emphasizes the quality of the relationship between leader and follower.  Leaders develop dierent types of relationships (in-group vs. out-group) with dierent followers, impacting performance and satisfaction. 5. New Leadership Paradigm Shifts focus from traditional transactional leadership to more inspiring and motivating forms of leadership. 52 Downloaded by Hong Van Do ([email protected])  lOMoARcPSD|40186229 Transactional vs. Transformational Leadership  Transactional Leadership: Based on exchanges between leader and followers to meet their immediate needs.  Transformational Leadership: Leaders inspire followers to exceed their own self-interests for the good of the organization, characterized by the "4 I’s": o Inspirational Motivation: Providing vision and sense of mission. o Idealized Inuence: Acting as role models. o Intellectual Stimulation: Encouraging innovation and creativity. o Individualized Consideration: Providing personal attention and coaching. Charismatic Leadership  Leaders possess extraordinary qualities and articulate a compelling vision.  They exhibit behaviors that are unconventional and take personal risks. Authentic Leadership  Leaders are self-aware, genuine, and transparent.  They lead with integrity and have a strong sense of purpose. Ethical Leadership  Emphasizes leading with ethical principles and promoting a moral environment. Cautionary Notes  Leadership is an ancient phenomenon, but systematic study started in the 1930s.  Most leadership research reects Western, particularly American, contexts.  The relationship between leadership and organizational culture, structure, and external constituencies is often overlooked. 53 Downloaded by Hong Van Do ([email protected])