OB Midterm Notes PDF - Organizational Behavior Queen's University

lOMoARcPSD|52458463 OB Midterm Notes Organizational Behaviour (Queen's University) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by ween dog ([email protected]) ...

lOMoARcPSD|52458463 OB Midterm Notes Organizational Behaviour (Queen's University) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 OB Midterm Notes Chapter 1: Organizational Behavior and Management Organizational behavior: examines how individuals act, think and feel in organizations by studying individual and group processes. For organizations to survive and adapt people must: 1. Be motivated to join and remain in the organization 2. Carry out their basic work reliability in terms of productivity, quality, service 3. Be willing to continuously learn and upgrade their knowledge/skills 4. Be flexible and innovative Evidence based-management: translating principles based on scientific evidence into organizational practices. History of Organizational Behavior Scientific Management - Taylorism/Bureaucracy 1. High degree of specialization 2. Routinized procedures 3. Decision making power in upper management Staff is motivated by promotion Faults: Repetitive work is boring - people do not develop new skills People lose sight of the significance of their work when tasks are specialized Strict rules can lead people to do the bare minimum or rebel Upper management decisions = missed opportunities, perpetual mistakes 1920’s and 30’s Social influence on workers Human relations movement: Hawthrone Increased productivity with more medium breaks, food and early end Improvements removed: increased performance - workers felt heard and valued (happy) Contemporary Management: The Contingency Approach: circumstantial guidance - there is no one best way to manage and appropriate management style depends on the situation. Role of the Manager: Informal/informational ○ Monitor (environment), spokesperson, Disseminator - send out facts/preferences Interpersonal Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 ○ Figurehead, Leader (select, mentor, reward employees), Liaison Decisional Roles ○ Entrepreneur, Disturbance handler, Resource allocator, Negotiator Managerial Activities: Routine communication: sending/receiving info and paperwork (meetings) Traditional Management: planning, decision making, controlling Networking: inside and outside of org. Human resource management Contemporary Management Concerns: Diversity - of employees and mindset Employee health and wellbeing ○ Stress/mental health - low productivity, efficiency, high absenteeism and turnover ○ Workplace spirituality: provides employees with meaning, purpose, sense of community and connection to others (ex. quiet/mediation rooms) ○ Positive Organizational Behavior: developing employees and providing them with necessary resources for goals and well-being. ○ Psychological capital: individuals positive state of mind due to self-efficacy, optimism, hope, and resilience. Talent Management and Engagement: ○ Talent Management: the processes for attracting, developing, retaining and utilizing people with the skills to meet current and future business needs. ○ Employee Engagement: positive work-related state of mind characterized by vigour, dedication and absorption ○ Providing opportunities for learning, having meaningful challenging and rewarding jobs, recognizing performance, offering flexible arrangements and effective leadership are key. Corporate Social Responsibility: an org. taking responsibility for impact of its decisions. Chapter 2: Personality and Learning Personality: the relatively stable set of psychological characteristics that influence the way an individual interacts with their environment Dispositional approach: individuals possess stable traits of characteristics that influence their attitudes and behaviors. (ex. Using personality tests for hiring) Situational approach: characteristics of the organizations setting influences people's attitudes and behaviors (ex. Rewards, emotions, processes) Interactionist approach: individuals attitudes and behaviors are a function of both dispositions and situations. Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 Strong situations: clear demands that restrict people from displaying their true traits Personality has less impact Weak situations: places few constraints on behavior making their traits more clear Personality has large impact Trait activation theory: traits lead to certain behaviors only when the situation makes the need for the trait. This is why FIT is important - certain traits come out in different needs which is why diversity is key. Personality Traits: characteristics on which people differ that are relatively stable across situations and over time Extraversion: extent to which is person is outgoing, sociable, assertive vs. shy, withdrawn Important for interpersonal jobs (sales, management) Related to absenteeism (more extroverted = more absent) Emotional stability: extent to which a person has appropriate emotional control. People with high emotional stability are calm, self-confident and have high self esteem. Those with low are nervous, insecure and prone to stress. Higher is better in all jobs for both customer and co-worker interaction Agreeableness: extend to which a person is friendly, warm and approachable. More agreeable = tolerant, cooperative, friendly, eager to help others Less agreeable = cold, rude, uncaring, disagreeable. Important for jobs involving helping, teamwork and nurturing Conscientiousness: extent to which a person is responsible and achievement oriented. High = dependable, responsible, hardworking, motivated Low = careless, impulsive, irresponsible, lazy Related to retention, attendance, theft Openness to experience: extent to which a person thinks flexibly and is receptive to new ideas High = curious, original, creative Less = inquisitive, traditional Change in Personality Traits Extraversion: little change Emotional Stability: increases, mostly in young adulthood Agreeable: increases (across life) - develop experience and empathy Conscientiousness: increases (fast at first, then slower) - responsibilities increase Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 Openness to experience: low, increases, then decreases - you get to know yourself better with age and become more selective with your experiences Link to Performance Job Satisfaction = Emotional stability > conscientiousness > extraversion > agreeableness (openness unrelated to job sat.) Job performance = Conscientiousness Unsafe behavior = high extraversion, low emotional stability Less deviance = high conscientiousness, agreeableness and emotional stability Motivation = emotional stability and conscientiousness Teamwork = conscientiousness, extraversion, agreeableness and emotional stability High income and status = extraversion, conscientiousness and emotional stability Locus of Control: beliefs about if behavior is controlled by internal or external forces High External Control: behavior is determined by fate, luck, powerful people ○ Typically very religious people High Internal Control: behavior is determined by self-initiative, personal actions, free will ○ Uncertainty generates stress ○ Higher job and life satisfaction, committed to their org., earn more money and get promoted more. ○ Less stress, less burnout, plan their career better, less absent Self Monitoring: extent which people observe and regulate how they appear in social settings. High self-monitors: use social cues to guide their own behavior “Social chameleon” ○ Gravitate towards role playing jobs, good at adapting (law, PR, politics) ○ More involved in job, emerge as leaders, perform better ○ More role stress and less commitment to organization Low self-monitors: use their own attitudes and beliefs to guide their own behavior ○ “What you see is what you get”, hearts on their sleeve ○ Good innovators, can resist social pressure, stand up for their beliefs Self-Esteem: degree to which a person has a positive evaluation of himself High = positive relationship with job performance and satisfaction Low = more susceptible to external influence, good at behavior modelling, respond poorly to negative feedback ○ Low are great candidates for mentorship Behavioral Plasticity theory: people with low self-esteem tend to be more susceptible to external and social influences. Giving feedback: Focus on external force instead of individual abilities Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 Focus on behavior and outline what they can change Positive/ Negative Affectivity: emotional disposition that predict peoples general emotional tendencies. Positive: propensity to view the world and self in a positive light (joyful, cheerful) ○ Creative, happy at work, high job satisfaction and performance Negative: propensity to view the world and self in a negative light (anxiety, fear) ○ Experience lots of stress and strain and counterproductive/withdrawal behaviors Proactive Personality: stable personal disposition that reflects a tendency to taking initiative to improve current circumstances or creating new ones. Higher job satisfaction, performance, org. Citizenship behavior, leadership, etc. More likely to find jobs, higher salaries and promotions. General Self Efficacy: general trait that refers to an individual's belief in his or her ability to perform successfully in a variety of situations. Motivational trait instead of affective trait Self-efficacy beliefs: beliefs about their own ability to perform a task. ○ Influenced by performance mastery, observation, mental state and persuasion. Core Self-evaluation: broad personality concept consisting of self-esteem, self-efficacy, locus of control, and emotional stability. These are some of the best predictors of job satisfaction and performance. Operant learning: learning to function in an environment to achieve certain consequences. Ex. Sales people learn how to be effective to avoid criticism from their managers. Positive Reinforcement: application/addition of a stimulus that increases probability of a behavior Clapping after successfully learning a dance move in class Negative reinforcement: removal of bad stimulus to increases probability of a behavior Know you are successfully doing your job when nagging is removed Errors managers make with reinforcement: 1. Confusing rewards with reinforcement: rewards should be directly related to performance 2. Neglecting diversity in reward preferences: some people would rather promotion over time off 3. Neglecting important sources of reinforcement: performance feedback and social recognition (praise, appreciation, etc) Reinforcement Strategies: Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 Fast acquisition: reinforcement should be applied immediately and everytime (continuous) the behavior occurs - shapes short term behaviors Persistence: sometimes (partial) use of reinforcement after it occurs - shapes long-term behaviors Reducing Probability of learned behaviors: 1. Extinction: stopping the reinforcement that is creating the unwanted behavior. 2. Punishment: applying an adverse stimulus following bad behavior You must find an alternate behavior otherwise it will only be suppressed short term (ex. Receptionist on FB after done her work, what should she do instead?) TIPS: make sure punishment is aversive, punish immediately, do not reward bad behaviors before/after punishment, do not inadvertently punish good behavior Social Cognitive Theory: emphasizes the role of cognitive processes in learning and regulating behavior - people learn by observing others, setting goals and rewarding themselves. Observational Learning: observing and imitating the behavior of others. Affective if model is vivid and memorable by an attractive, credible high status person. Self-Regulation techniques: Collect self-observation data, observe models, set goals, rehearse, reinforce yourself Organizational learning practices: OB modification, employee recognition, training Employee Recognition Programs must involve public recognition! Chapter 4: Values, Attitudes and Work Behavior Values: broad tendencies to prefer certain states of affairs over others Very general and do not predict behaviors Differences in Values can be generational and cultural Hofstede’s Study: culturally different work values Power distance: extent to which an unequal distribution of power is excepted ○ Small power distance: equality, accessible superiors (Denmark, Australia) ○ Large power distance: inequality, inaccessible superiors, highlighted power differences (Canada, USA) Uncertainty Avoidance: extent to which people are uncomfortable with uncertain/ambiguous situations ○ Strong uncertainty = lots of rules, conformity, security, hard work ○ Low uncertainty avoidance = less rules, conformity, security, hard work Masculinity/femininity ○ Some cultures support different gender roles which others accept fluidity/equality Individualism/collectivism: ○ Individualist: stress independence, initiative and privacy Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 ○ Collectivism: favour interdependence, cooperation and loyalty to family/clan Long/short term orientation ○ Long: stress persistence and attention to status differences ○ Short: stress personal stabilit and face-saving Cultural Distance: extent to which cultures differ in values Implications of Cultural Variation OB theories: not all are designed or will work in all cultures, you must be sensitive/adapt Appreciating global customers - allows you to understand their wants/needs Developing global employees - must hire/train to appreciate cultural differences ○ Cultural intelligence: capability to function and manage well in diverse settings Attitudes: stable evaluative tendency to respond consistently to a situation, person or object Attitudes are directly towards specific targets Not always consistent with behavior Belief + Value = attitude → behavior Job interferes w family (belief) + family (value) = dislike job (attitude) → quit (behavior) Job Satisfaction: collection of attitudes that workers have about their jobs What Determines Job Satisfaction? Discrepancy: if the job outcomes people want and what they perceive to attain match Rewards, promotions and adequate compensation Optimally Challenging work Personality Traits ○ Emotional stability > conscientiousness > extraversion >agreeableness relationship with job satisfaction ○ Openness to experience has none. Social Relationships ○ Instrumental - help you develop your knowledge, skills, abilities ○ Affiliative - you enjoy spending time with them), personality traits Fairness: ○ Distributive fairness: receive the outcomes they think they deserve (equity) ○ Procedural Fairness: processes used to determine work outcomes Consistent over time/people, use accurate info, unbiased, allow two way communication, welcomes appeals ○ Interactional Fairness: people feel they have received respectful/informative communication about an outcome Job satisfaction has: Weak relationship with task performance Medium relationship with customer satisfaction and turnover Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 Strong relationship to organizational citizenship behavior Ex. Nuns who wrote positive things about themselves lived an extra 10 years. Probability of survival increases when positive emotions are used vs. negative Managing Stress at Work: Stressors: conditions that have the potential to cause stress Stress: Reaction to a stressor - make a person feel tense of anxious Low or moderate stress can be a source of motivation, high level is unwelcome Stress outcomes: physiological (sleep, headaches), psychological (depression, burnout, dissatisfied) and behavioral (poor performance, absenteeism, aggression) Causes of stress: People have important goals: stress is a response to perceived threats to goals High levels of stress occurs when threats overwhelm personal resources (tipping point) Locus of control (stressed if you believe you have no control), negative affectivity (view world negatively), type A Sources of stress at work: Role ambiguity: goals or means to achieve goals of a job are unclear Role conflict: when you have several roles, time spent on one takes away from time spent on another. Load demands or role overload: too much work, too many roles Heavy responsibilities: consequences of work decisions are large - burnout Interpersonal conflict: between co-workers Sexual harassment, bullying, interpersonal conflict Job Insecurity Dangerous work conditions Poor job design: low levels of autonomy, task identity, skill variety, task significance Managing Stress: Individually Problem solving (reduce stressor / effect) ○ Delegation ○ Time management - equal time for all courses rather than by preference ○ Discuss the issue - get clarity ○ Ask for help - when you have done your due diligence ○ Search for alternatives Managing Stress: Organizational Level Job redesign ○ Increase autonomy, job identity, task significance, skill variety, Family-friendly human resource policies ○ On-site daycare, flex-time, telecommuting, etc. Stress management programs: ○ Relaxation exercises, time management training, education about stressors Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 Disposition Theory: some people are predispositioned to be more or less satisfied despite changes in fairness. Extroverted and conscientious are most satisfied with their jobs Affective Events Theory: moods and emotions on the job affect satisfaction Emotional contagion Emotional regulation/labor: ○ Suppressing negative emotions: less job satisfaction, more stress ○ Required to express positive emotions: boosts satisfaction, reduces stress Emotion regulation strategies: Antecedent: focused on emotion regulation ○ Event: try and limit your time with the stressor / choose your situation ○ Appraisal: the positive/negative way you think about a stressor Response: focused on emotional regulation ○ Going online, drinking, having a smoke does not deal with source of stress Teacher Study: Antecedent focused: some teachers were instructed to use strategies such as reappraisal → more benefits (cheerfulness and calmness) Response focused: some teachers were instructed to use strategies such as cognitive distraction and energetic activities Dr. Kelly McGonigal Ted Talk Physiological signs of stress are preparations to meet a challenge Stress response includes oxytocin (motivational) Stress is bad if you think it is bad for you, but if you welcome it has no health effect Organizational Citizenship Behavior: voluntary, informal behavior that contributes to organizational effectiveness - tied closely with job satisfaction Organizational Commitment: reflects the link between an employee and the organization. Affective commitment: based on identification and involvement with the org. ○ Have task significance and role clarity Continuance commitment: based on the costs that would be incurred to leave org. ○ Having pension funds, promotions, etc can lock people in on this Normative commitment: based on feelings of obligation towards an org. ○ Add benefits by staying such as tuition reimbursement, specialized training Chapter 5 – Theories of Work Motivation Motivation: the extent to which persistent effort is directed Effort, Persistence (consistent application of effort) Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 Direction: Do workers channel persistent effort in a direction that benefits the organization? Direct correlation with quality of work. Goals: All motivated behaviour has some goal or objective it is directed toward. Extrinsic vs. Intrinsic Motivation Extrinsic: motivation that stems from the work environment external to the task; it is usually applied by others. Examples: pay, bonuses Intrinsic: motivation from the relationship between the worker and task; usually self- applied. Ex. feelings of achievement. Some motivators may have both intrinsic and extrinsic qualities, such as a compliment from a boss (applied by extrinsic factor for intrinsic accomplishment). Two forms of intelligence that are particularly important for performance: General Cognitive Ability: basic information-processing capacities and cognitive resources. Predicts learning, training, career success and job performance Strongest relationship to job performance from ANYTHING Verbal Ability, Quantitative Ability, Reasoning Ability Wonderlic personality test - 50 items, 12 minutes Emotional Intelligence: ability to understand & manage own and other’s feelings/emotions. Myths: emotions impede rational thinking, emotions cause bad decisions Truth: emotions are useful and functional - self preservation and social coordination Skills: Ability to use, perceive, understand and regulate emotions ○ Identify emotions ○ Use emotions to guide thinking ○ Understand why emotions happen ○ Regulating emotions in oneself and in others Mayer-Salovey-Caruso Emotional Intelligence - 141 items, untimed Positive relationship with emotional intelligence and salary & job performance The Motivation-Performance Relationship High motivation will not result in high performance if employees have low general cognitive ability and emotional intelligence, do not understand their jobs, or encounter unavoidable obstacles over which they have no control Need Theories: Motivation from the needs people have - what motivates workers. Maslow’s Hierarchy of Needs – Organizational level 1. Psychological needs: for survival – pay 2. Safety needs: – safe work conditions, fair and sensible regulations, job security, insurance 3. Belongingness needs: – interaction, supportive/friendly supervision, opp. for teamwork 4. Esteem needs: feelings of competence, strength and confidence, and acknowledgement Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 5. Self-actualization needs: desire to develop true potential - potential for creativity, growth and relaxation of structure to permit self-development and personal progression Link to motivation: The more lower-level needs are gratified, the more higher-level need satisfaction is desired. The less higher-level needs are gratified, the more lower-level need satisfaction is desired. Alderfer’s ERG Theory 1. Existence needs: Satisfied by some material substance or condition 2. Relatedness needs: open communication, exchange of thoughts/feelings with others 3. Growth needs: Involve the full utilization of one’s skills/abilities, and new developments Unlike the need hierarchy, lower-levels do not need to happen first Link to motivation: a satisfied need is no longer an effective motivator McClelland’s Theory of Needs – non-hierarchical that outlines when needs result in motivation Need for achievement: desire to perform challenging tasks well. Motivated by sales jobs or entrepreneurial positions. Need for affiliation: desire to establish and maintain friendly, compatible interpersonal relationship. Motivated by jobs such as social work or customer relations. Need for power: desire to influence others, make significant impact, or impression. Motivated by jobs such as journalism or management, with the opportunity for impact. Managerial Implications of Need Theories Appreciate diversity: survey employees and offer programs that meet their needs Appreciate intrinsic motivation: assure that different levels of needs are filled, which act as intrinsic motivators for members of the organization Self-Determination Theory: if motivation is autonomous (self-determined) or controlled Autonomous motivation: self-motivation or intrinsic motivation that occurs when people feel they are in control of their motivation Controlled motivation: Motivation that is externally controlled, such as when one is motivated to obtain a desired consequence or extrinsic reward When people have their basic psychological needs for competence, autonomy, and relatedness satisfied, their motivation will be autonomous. When they are not satisfied, it will be controlled. Autonomy support: providing employees with choice and encouragement for personal initiative Process Theories of Work Motivation: specify how motivation occurs Expectancy theory: motivation is determined by expected result of their actions on the job. Outcomes: Consequences that follow work behaviour Instrumentality: The probability that a particular first-level outcome will be followed by a particular second-level outcome Valence: expected value of work outcomes - extent they are attractive or unattractive Expectancy: The probability that a particular first-level outcomes can be achieved Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 Force: The effort directed toward a first-level outcome Managerial Implications of Expectancy Theory Boost expectancies: ensure employees expect to achieve desirable first-level outcomes Clarify reward contingencies: ensure paths between f outcomes are clear, and that desirable first-level outcomes lead to positive second level outcomes Appreciate diverse needs: design individualized “motivation packages” Equity Theory: employees compare the inputs they invest in a job and the outcomes they recieve to the inputs and outcomes of other workers Individuals are motivated to maintain an equitable exchange relationship Lower compensation: unmotivated, decreased productivity and performance Higher compensation: justifies the compensation they recieve (rightfully or not) ○ This is a self-serving bias ○ Undeservingly compensating people will not increase performance Goal Setting Theory: employees are motivated to attain goals that are specific, challenging that they are committed to and receive feedback throughout Goals are most effective when accepted or created with workers. ○ Sense of ownership and accountability Goals are most effective with frequent feedback, support and extrinsic rewards Goals increase effort, persistence, attention and strategies OB Chapter 6 – Motivation in Practice Personality is necessary and sufficient to predict typical behavior Ability is necessary but insufficient predict typical behavior - must have motivation! The Strongest Performers: Individuals who score high on IQ tests ○ High ability to process information Individuals who score high on EI tests ○ Understand how to react and network which provides resources Extroverts: good performers, especially in managerial and sales jobs Friendliness: agreeableness is associated with performance but less than conscientiousness (friendliness is weakest association of all) Amount of effort, persistence effort and direction of effort → motivation → personality/task understanding/cognitive ability/emotional intelligence/chance→ performance Linking Pay to Performance on Production Jobs Piece-rate: workers are paid a sum of money for each unity of production completed Wage incentive plans: link pay to performance = increase in productivity Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 Potential problems with wage incentives: Lowered quality, reduced cooperation Differential opportunity: different external production factors cause disadvantages Incompatible job design: some jobs require many people for one task Restriction of productivity: fear that increased productivity will lead to reductions in the workforce or rate of payment to cut labour costs Linking Pay to Performance on Professional/Managerial Jobs Merit pay: link pay to performance on white-collar jobs Potential problems with merit pay plans: Low discrimination: hard to differentiate so they reward good and bad workers equally Small increases in pay Pay secrecy: not disclosing pay so you don’t know how everyone else is being paid. Employees now “invent” pay by guessing. Using Pay to Motivate Teamwork Profit Sharing: The return of some company profit to employees Employee Stock Ownership Plans Gainsharing: group pay based on a productivity improvements (ex. Reduced costs) Skill-Based Pay: paid according to acquire job skills. Motivates learning more tasks. Job Design as a Motivator Job design: The structure, content, and configuration of a person’s work tasks and roles ○ Breadth: the number of activities performed on a job ○ Depth: the degree of control over how work tasks are performed ○ High levels of both are called high-scope jobs - have more intrinsic motivation Job rotation: Rotating employees to different tasks, to increase scope of a job Job Characteristics Model Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 * The more you have of these characteristics the more motivated you are Core Job Characteristics: Skill Variety: the more skills you must draw from to accomplish the job Task Identity: the extent to which you complete the work from beginning to end Task Significance: the importance and impact your work has on people Autonomy: the control you have about when and how your work gets done Feedback from Job Job Performance: extent to which an employee contributes to achieving org. objectives Task Performance: how well you do with formally assigned activities Organizational CItizenship Behavior Counterproductive Work Behavior: behavior that harms the organization 3 types of managers: task focus, counterproductive focus, or both Job Enrichment: enhance intrinsic motivation, quality of work life, and motivation Combining tasks, Establishing external/external client relationships Establishing internal client relationships Reducing supervision or reliance on others Forming work teams Making feedback more direct Potential problems: Poor diagnosis: Can lead to job enlargement: increasing job breadth by giving employees more tasks at the same level to perform but leaving out core characteristics Lack of desire or skill: some do not desire enriched jobs - places greater demands Demand for rewards: enrichment may lead to wanting an increase in extrinsic rewards Union resistance Supervisory resistance: Enrichment increases autonomy or individual employees and may “dis-enrich” the jobs of supervisors Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 Management by Objectives: Objectives developed by a top manager and diffused down 1. Manager meets with workers to develop employee objectives for the coming months 2. Periodic meetings to monitor progress 3. An appraisal meeting to evaluate the extent to which the objective has been achieved 4. MBO cycle repeats Flexible Work Arrangements as Motivators - Promotes job satisfaction. Flex-time: in which arrival and departure times are flexible. Benefits all aspects Compressed work week: positive effect on satis. but not on absenteeism productivity. Job Sharing: two part-time employees divide the work of a full-time job Work Sharing: Reducing work hours instead of layoffs during reduction in activity Telecommuting: able to work at remote locations but stay in touch with their offices OB Chapter 11 – Decision Making Decision-making: the process of developing a commitment to a course of action Availability Heuristic: make decisions based on what is easily accessible in their minds Information that is common or vivid is more easily retrievable from memory and more accessible Ex. N vs ING, plane crash seems worse than car crash but it is not Representativeness Heuristic: look for characteristics the individual or event may have in common with previously formed thoughts, stereotypes, other opinions Sample size of 1 - Better to ask around and see what you consistently hear from people Framing Heuristic: different decisions on the same problem depending on the way it is framed In terms of gain people want to go with a guarantee (little risk) Framed with loss people want to roll the dice (many risks) Anchoring and Adjustment Heuristic: use anchors (initial piece of information) to begin their decision making process and then fail to adjust sufficiently (do not consider it carefully enough) Ex. when negotiating if they are unprepared anchor them high, turkey weight The Power of Default and Contrast Effects The power of default: a number of decisions that people make are made for them ○ Often unsure of preferences so we go with whatever was chosen for us Contrast effects: information helps people make a decision by raising awareness of what they do not want ○ Introducing a 3rd irrelevant option (Ex. Rome with coffee, without and paris) Escalation of Commitment Downloaded by ween dog ([email protected])  lOMoARcPSD|52458463 People who have initiated a failing course of action all face a dilemma in deciding whether to continue down the same path or strike a new direction Although attempts to salvage these situations make make matters worse, people tend to escalate their commitment to failing courses of action Explanations for Escalation of Commitment Self-justification/dissonance reduction - do not like admitting mistakes Failure to treat sunk costs as sunk costs - must be forward looking, sunk costs are gone Social norm of consistency in behavior - taught persistence and finish what you started Avoiding the appearance of being wasteful Framing - in domain of loss so they take more risks and keep going How to Prevent Escalation of Commitment Change frame - what do you GAIN from other opportunities instead of thinking of loss Set specific goals - these must be met before committing further resources Place more emphasis on the decision making process and less on the outcome Decision-Making Bounded Rationality Perfect rationality model: analytical information processing is thorough and systematic 1. Complete information - aware of alternatives 2. Logical - in the way they work with that information 3. One criterion: economic gain Bounded Rationality: decision strategy that relies on limited information and that reflects time constraints and political considerations Paradox: Most of the time, people make good decisions, mental shortcuts and heuristics are generally helpful ○ BUT, it is impossible to make optimal decisions all the time and mistakes can be costly ○ Awareness is key - must know the flaws of the decision-making system and to correct for them when the stakes are high Downloaded by ween dog ([email protected])