Cross Cultural Management INBU 2201 Class 17 PDF

Cross Cultural Management INBU 2201 Class 17 THE MANAGER AS DECISION MAKER DR. HEDI AZOUZ 1 Rational Decision Making Decision making is typically divided into ◦Prescriptive approach: based on assumptions about how a decision should be made (what managers should do)....

Cross Cultural Management INBU 2201 Class 17 THE MANAGER AS DECISION MAKER DR. HEDI AZOUZ 1 Rational Decision Making Decision making is typically divided into ◦Prescriptive approach: based on assumptions about how a decision should be made (what managers should do). The goal of the rational decision maker is to make an optimal choice between alternatives ◦Descriptive approach: what managers actually do Rational decision making is considered to follow the prescriptive approach 2 eps in the rational decision process Problem definition Identify decision criteria Weight the criteria Generate the alternatives Evaluate the alternatives Select the optimal solution 3 Rational decision making Cultural differences in optimization: When to identify the problem (doing vs. being) Amount of information collected before making decisions The identification of weighing criteria (short term vs. long term orientation) Who is making the decision (power distance and collectivism) 4  Desirable Characteristics of an Acquisition Target USA Managers South Korean Managers 1. Demand for target’s products 1. Attractiveness of industry 2. Discounted cash flow 2. Sales revenue 3. Returns on investment 3. Market structure 4. Attractiveness of industry 4. Manufacturing capabilities 5. Management talent 5. Research and Development capabilities 5  Ringi-sei decision making process in Japan "The "ringi" system refers to the process of making bottom- up decisions that is common in Japan, especially in the bureaucracy. Under this system, low-ranking officials (lower- level managers in the private sector) draw up an initial plan, which is then circulated among higher-ranking officials to receive their seals of approval. Although the "ringi" system may seem to be a democratic decision making process that achieves a consensus among those concerned before reaching a final decision, some people claim that it makes it difficult to determine who is actually responsible for a Essentials fordecision and Understanding its outcome Japan's Bureaucracy because (1997) nobody seems to assume responsibility." apaneselist.blogspot.com/2009/12/ringi-sei-ringi-system.html#ixzz3oCfqtjMX 6  Factors Affecting Rational Decision Making Cognitive Limits The optimization Cultural model Constraints (Rational Decision Motivation Making) al Biases 7 Rational decision making The optimization model assume that decision makers can Accurately define the problem Identify all decision criteria Accurately weigh the criteria Be aware of all available alternatives Accurately assess each alternative However individual judgments are bounded because of the limitation in acquiring all the relevant information and then in the processing of this information (bounded rationality concept, Simon 1955) An alternative model for decision making was proposed (Satisficing model). This model suggests that decision makers forgo optimal solutions for ones that are acceptable 8  Cultural constraints on rationality The conflict model of decision making: decision makers use one of these styles to cope with stress associated with decision making Vigilance: careful collecting of facts and consideration of alternatives Complacency: either ignoring the decision or simply take the first course of action Defensive avoidance: passing the decision to someone else, putting of the decision, or devaluing the importance of making a decision Hypervigilance: making a hasty ill-conceived decisions (panicking) 9 How International Managers Deviate From Rationality (Simplifying complex decision making) Heuristics: rules of thumb that people use to simplify decision making. They are mental shortcuts that usually involve focusing on one aspect of a complex problem and ignoring others ◦Trade-offs (speed vs. quality) The three general heuristics: 1. Availability 2. Representativeness 3. Anchoring and adjustment When we consider cultural variation and the role it plays in social cognition, we can anticipate systematic differences in how these heuristics are applied and the resulting biases 10 Availability A mental shortcut that occurs when people make judgments about the probability of events by the ease with which examples come to mind An event that is easily imagined or evokes emotions is more easily recalled than vague or bland event Are there more words in English language with K in the 3rd or 1st place? __ __ K __ K __ __ __ There are actually twice as many words in the English Language that have K as the third letter than start with K, but words that start with K are much easier to recall and bring to mind 11 Availability Availability can influence managers’ judgments of the frequency, probability, or likely causes of events Availability can be provided as an explanation for illusory correlations in which people wrongly judge two events to be associated with each other (people judge correlation on the basis of the ease of imagining or recalling the two events together) Because the availability heuristic is based on life experiences, cultural differences in judgments that result from availability are easily suggested. Culturally different individuals might differ systematically in the way they apply their available recollections to larger situations outside their experience 12 Representativeness Manager’s assessment of the likelihood that an event will occur is influenced by how similar the occurrence is to their mental representation (stereotype) of similar experiences Friend in the school Friend in the Gym Friend in the work Very bad behavior Also very bad behavior For sure, he is one of them 13 Representativeness  Misconception of chance: ignoring probability in favor of the representativeness heuristic  People search for causes that are similar in strength to effect they observe Collectivist and individualist vary in the extent to which they expect similarities in magnitude regarding cause and effect (expect more similarities in individualistic societies)  Correctness of decisions Once they have made a decision, people from collectivistic cultures display greater confidence in its correctness. In contrast people from individualistic cultures might consider more possible negative outcomes of their decisions Escalation of commitment is more in collectivistic cultures 14 Anchoring and adjustment Describes the common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions. Do you think that the number of official cities in Alberta is more than or less than 5 cities? Please give an estimate? It involves starting from a readily available value—the "anchor"—and shifting either up or down to reach an answer that seems plausible (adjustment). Regardless of the of the initial anchor point, subsequent adjustment tend to be insufficient Both the source of an anchor and norms for adjustment might vary with cultural experience 15