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DECISION MAKING-A BROADERPERSPECTIVEA comprehensive summary of 4 critical articles on Decision

Making

INTRODUCTION

Human have perpetually sought new tools and

techniques to help them make better decisions since the

dawn of time. For a millennia, human decisions were guided

primarily by faith, religion and myths. The Chinese relied on

poetic wisdom and divinations compiled in I-Ching, the

Greeks consulted the Oracle of Delphi and others seek

prophets and clairvoyants to peer into the future or interpret

dreams. Since then countless studies and research have been

conducted on the subject of decision making and out of the

many 4 critical articles were selected in this study.

In Looking beneath the surface: The impact of

psychology on corporate decision making, the article

examines the ways business decisions can be affected by

emotions (particularly negative emotions) and by our

unconscious state of mind.

Management decision making, ethical issues and

emotional intelligence, is a paper that expands and

updates an existing model of approach to ethical decision

making by Holian (2002).

DECISION MAKING-A BROADER

PERSPECTIVE

A comprehensive summary of 4 critical articles on

Decision Making

Ding Wei Yee (1071200152)

BOB 6024 Organisational Behaviour and Design

10/29/2007

Life is the sum of all your choices, Albert Cadmus


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The article, Anxiety and defective decision making: an elaboration of

the groupthink model, revisits Janis groupthink theory and updates it with

some new recent findings on the underlying causes behind concurrence

seeking behaviour.

The final article, Decisions without blinders is an interesting one on

the phenomena of bounded rationality where complex circumstances,

limited time frame, and insufficient mental computational power can reduce

even the best of decision makers to a state of bounded awareness.

LOOKINGBENEATHTHESURFACE: THEIMPACTOFPSYCHOLOGYON

CORPORATEDECISIONMAKING

(Kath Hall (2007), Looking beneath the surface: The impact of psychology on

corporate decision making, Managerial Law, Vol. 49 No. 3, pp. 93-105)

The main objective of this article is to look into the common ways in

which decision making in the corporate setting can be affected by cognitive

biases. It also delves into how flaws in decision making can manifest when

executives are under pressure, over-confident or part of a group. The

potential effect of cognitive biases can be show by drawing upon a range of

research in cognitive and organizational psychology. In order to develop a

better understanding on decision making or to that effect, good and sound

decision making it is necessary to first develop a deeper understanding as to

what affects decision making in the first place. It is now an undeniable fact

that cognitive biases do indeed affect the quality of decision making but to

what extent? The article then suggests that although the many aspects of

decision making processes operate outside of ones conscious awareness, the

flaws may be easier to monitor and control when one is fully aware of the

potential impact of the decisions on their livelihood.

The legal regulation of corporate decision making is the ultimate

decision making power that lies with the board of directors. The main

function of the board is to overlook the management, monitor the financial

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position of the company and provide guidance and advice to management on

operational issues. Therefore, it has become clear that the key to corporate

governance is investor confidence and board effectiveness, a point that has

been taken into serious consideration by corporations. This is evident by the

increase in the number and role of independent directors. Although it is

apparent that there might be a link between the presence of independent

directors and improved corporate governance, there is still a need to prove

that the presence of independent directors has a direct influence on

corporate success. The assumption on which the legal regulation of corporate

governance is based is not consistent with common human behaviour and

might be a subject that warrants some looking into.

The study of how business decisions are made has been a subject of

great interest to many. After analysing 400 strategic decisions made by top

managers in private, public and non-profit organizations; the key finding is

that the majority of all business decisions are destined to fail (Nutt, 2002).

Disney Corporations decision on the location to build Euro Disney was called

into question and used as a demonstrative example on how some business

propositions that may seem promising at first can turn out into catastrophic

disasters. Because of the success of Tokyo Disney, the executives were

excited to replicate its success in Europe. Bolstered by their recent success,

overconfidence dominated their decision making damaging Disneys sterling

reputation and charting losses of nearly USD400 million. Poor decision

making factors such as these can adversely affect any corporate decision

making process regardless of how confident an individual is in their decision

making capacity in an organization. Tversky and Kahnemann suggested that

people rely on a number of simplifying strategies in decision making called

heuristics. They showed that heuristics serve as a mechanism for coping

with harsh environments that surround decisions although there are

situations when these strategies can backfire on us.

On 9th of May 1996 two highly experienced mountaineers Rob Hall and

Scott Fischer took 2 teams of 20 clients who were a mix of experienced and

inexperienced high altitude climbers. But by 11th May 1996, both Hall and

Fischer and 3 other climbers were dead. The others barely managed to

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escape with their lives. In retrospect, when analysing the factors influencing

what happened that day, it was the poor quality of their decision making that

was at fault. Both Hall and Fischer were affected by shortcuts in their decision

making. These included 3 common shortcuts that are; commitment bias,

confirmation bias and assumed reality bias.

The flaws of decision making are many and what difficult about it is

their invisibility. These processes have become so routine to our thinking

process that we fail to understand that some of these shortcuts that allow us

to make decisions under pressure can also cause great errors of judgement.

These errors are predictable, systemic and unconscious. In order to better

understand the nature of these shortcuts and how they affect corporate

decision making, first there is a need to understand the different ways people

make decisions.

In 2002 researchers from Sweden and USA decided to test the

accuracy of 250 participants with different levels of knowledge about football

in predicting results of the World Cup (Andersson, et al., 2003). Based on the

results it was conclusive that there are at least 2 processes we use to make

decisions. The first is rational decision making which involves using problem

solving techniques to arrive at the best conclusion because the nature of the

problem is usually logical and definitive. The second process is called

intuitive or automatic decision making; this is something that operates below

the level of conscious awareness and is sometimes referred to as the gut.

Intuitive decisions can be overridden by deliberate and rational thought but

only if triggered. The key to good corporate decision making is to correctly

use the rational and intuitive decision making processes to our own corporate

advantage.

Basically all regulations in Corporate Law are based upon the

assumption that the decision making in companies are performed by rationaldecision makers. Yet psychological research on decision making seems to

prove otherwise as cognitive biases can blind individuals and especially

groups in their decision making.

Groupthink is a particularly influential theory on how dysfunction can

occur in group decision making. Janis and Mann argue that strongly cohesive

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groups can be drawn in by group blindness, group pressure and self-interest

(Janis and Mann, 1977). Conditions leading toward cohesiveness include a

strong sense of belonging to a powerful and protective group, similarity in

members backgrounds and principles, loyalty to group leader and insular

group practices. That is why companies are increasing the number of

independent directors in a company as a solution to this problem. However,

when decision making processes become distorted and dysfunctional, even

independent directors may be drawn into these dynamics and become

limited in their ability to speak their minds.

In conclusion, it is important to look beneath the surface of corporate

decision making as it reveals to us facets of our thinking that even we are not

aware or conscious of. The key to making quality decisions is to become fully

aware of our rational and intuitive decision making processes. With this

decision makers in companies can become better equipped at dealing with

corporate problems even under pressure.

MANAGEMENTDECISIONMAKING, ETHICALISSUESAND

EMOTIONAL INTELLIGENCE

(Rosalie Holian (2006), Management decision making, ethical issues and

emotional intelligence, Management Decision, Vol. 44 No. 8, pp. 1122-

1138)

This article focuses on the expansion of a model of approaches to

decision making on ethical issues in an organization (Hollian, 2002). Two

broad categories of decision making were identified as individual perceptions

that are either black and white or shades of gray. Bounded by these

perceptions are: The Legalistic mode which relies on laws, which can be

regarded as objectives standards of behaviour that are explicit, impartial andinclude predetermined punishments. However, this approach may ignore

ethical dilemmas. The Narcissistic mode on the other hand is a subjective

black and white where a person possesses a certain narrow-mindedness on

ethical issues and acts without conscience or concern for others. The

remaining 3 modes represent the views of shades of gray- Navigation,

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Entrepreneurial and Worried. The 4 modes of Navigation,

Entrepreneurial, Worried and Legalistic all describe approaches to

ethical decision making that take into consideration the legal and/or moral

issues. A fifth mode was added later to cover unethical and illegal

approaches, the Narcissistic mode.

The research is based on a study of practising managers in Australia.

The data collected in 2 phases: Phase (I) was a 12 month case study of over

200 managers, and Phase (II) involved in-depth interviews with 39

managers/management consultants from 32 organizations. The data

obtained was thoroughly analyzed to explore the underlying knowledge, skills

or abilities that are associated with decision making on ethical issues in an

organisational context.

There are 4 main categories of underlying skill and characteristics that

are associated with different styles of ethical decision making- Judgement,

Integrity, Courage and Humanity. Judgement and Integrity were usually

applied to ethical decision making but Courage will be necessary when

Judgement and Integrity are conflicted or when insufficient information was

provided. Humanity is that something extra that will tell a good decision

from just a satisfactory one.

The 4 key categories of skills: Judgement, Integrity, Courage and

Humanity are associated with the 5 decision making modes. Judgement is the

identification of the level and extent required about a situation and then

choosing between the options while taking into account the risks and

priorities associated. It is a skill that is generally obtained through observing

role models and feedback. Integrity can be described as having conscious

personal values and the desire to act in accordance to their own set of

values. Courage is the ability to act knowingly and willingly accept risks. And

last but not least, Humanity which is described as the capacity to understandand forgive, resilience and appreciation of the lack of control over the

unpredictable events.

To date the literature on ethics are few with only brief mentions on the

subject of ethics in the many articles on emotional intelligence. Narcissism

on the other hand is a subject that has been discussed vehemently over the

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years within the organisational context. Aspects of pathological behaviour in

organizations have been a topic that has demanded a great deal of attention.

Industrial psychopaths, Snakes in suits and Bully bosses are just the

many names given by scholars that show the abuse of power by a narcissist

in an organization. Narcissistic behaviour is defined here in an organizational

context as remorseless, without conscience or concern for others, lacking

empathy and human values, self-absorbed with an inflated self-image, cold

and exploitative with a strong need to be in control and not criticised. As such

we can assume that a narcissist makes decisions that are not in the best

interest of the corporation. It is easy to mistake high-level of self-confidence

with selfish arrogance because it has always been the common

misconception that when a person is highly optimistic or confident, he or she

is also emotionally intelligent. The reality of the matter is that even with the

presence of self-confidence as a trait, it doesnt guarantee that the same

person is also emotionally intelligent.

Over the years there has been considerable debate over whether or

not emotional intelligence can be further developed at a later stage in life

and so far the results have been inconclusive. At the time being, it is

determined that the most effective way to reinforce ethical decision making

may be role models. Ethical decision making can be inculcated by observing

role models negative and positive, real or even fictional. These also included

primary and secondary influences in a persons life like childhood, adolescent

and adulthood experiences. Role models in an organization are typically seen

as people in the senior management positions or media personalities.

Ethical decision making can be reinforced and enhanced if an organization

pays attention to the development of skills associated with Judgement,

Integrity in addition to the newer less developed areas of Humanity and

Courage. Decision makers with the ability to utilize all 4 of these skills would

be equipped with a greater range of options when faced with ethical issues

within an organization. There are 6 tools and techniques involved with the

development of these skills highlighted in the article:

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1. Developing a sense of humour: may be the most important tool yet as

humour can be used to diffuse tension around a sensitive subject when

discussing ethical issues.

2. Developing courage: may be useful for those who constantly find

themselves in the Worried mode. Learning how to discuss the

undiscussable (Argyris, 1986, 1990), questioning group norms are

some of the many ways to develop courage but it needs to begin

gradually by taking only small risks.

3. Rock, Paper, Scissors: is an exercise to explore thoughts and feelings

about risk.

4. Ethical Issues Card Sort: an exercise to examine the nature of

perceptions about ethical decisions. This explores where individuals

draw the line between what is morally right and wrong.

5. A Mythical Model: an analogy to the Greek legend, Straits of Messina

where the model is used to represent the 5 different decision modes in

an organization.

6. Learning how to interpret gray areas: because ethical choices are

usually a mixture of components of right and wrong which can be

difficult to separate; shades of gray.

Judgement, Integrity, Courage and Humanity are skills that can contribute

to a managers flexibility in their approaches to ethical decision making.

Learning these skills can be done in a variety of ways either at an individual

level or in groups, and could include experiences in formal organisational or

academic programmes.

In conclusion, Humanity is a valuable personal attribute that can be used

to help reduce the impacts of errors in judgement in an organization and

assist in the learning and development of other skills. Humanity is the holistic

factor that lifts decision making from satisfactory to good. Therefore decision

makers may be required to develop a range of skills in order to maximize

their ability in dealing with ethical problems. The task of inculcating these

skills is not a simple additive process. While the tedious daily decisions can

be addressed with the use of Judgement and Integrity, Humanity and

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of the groupthink model and other theories that include the impact of both

negative and positive emotions on decision making.

In a management context, groupthink is still a term that is not fully

understood by corporations and can sometimes be mistaken for other causes

for poor decision making. Managers need to understand the underlying

causes and consequences of concurrence seeking as a step in reducing

human error in their decision making routine.

There are many reasons why managers sometimes make poor

decisions and concurrence seeking is but one of them. Groupthink as a

problem is almost universally recognized by managers. Confusion can

sometimes occur when decisions are made when rationality is limited due to

the many complexities in organisational life. Other factors such as

organisational politics and culture can also contribute to the aggravation of

groupthink.

In conclusion, there are several recommended measures to prevent

groupthink from emerging such as instituting impartial leadership and

developing more systematic ways of evaluating options in decision making.

Managers need to equip themselves with the ability to recognise negative

emotions in oneself and others, and the willingness to discuss and deal with

these issues. They would also need to be constantly vigilant of the defence

mechanisms triggered by groupthink such as blindness to the existence of a

developing problem, underestimating the risks or deflecting attention

elsewhere. Either way the result is a crisis that should have been avoided.

Better group leadership and methodical decision making procedures are only

part of the solution. There is also a need to developand instill a capacity for

self knowledge and good communication skills for managers.

DECISIONS WITHOUT BLINDERS

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(Max H. Bazerman, Dolly Chugh (2006), Decision without blinders, Harvard

Business Review Special Issue on Decision Making, pp. 88-97)

In this article, the phenomenon of bounded awareness will be

examined. Bounded awareness or bounded rationality (Simon, 1956) is a

phenomena where decision makers unconsciously ignore certain valuable

information in the critical process of decision making.

Most executives are not aware of the specific ways in which their

awareness is bounded and failure to recognize those limitations can lead to

catastrophic consequences. Note that bounded awareness is not the same as

information overload, or having to make decisions where too much

information is available with too little time. In the case of bounded

awareness, even when provided with sufficient time and information, most

individuals still fail to bring the right information into their awareness at the

right time. This phenomena can occur at various points in the decision

making process. 4 key points were highlighted in this article are as follows:

1. Failure to see information: studies have shown that when a person is

too focussed on a particular task he or she will fail to notice the other

things that are happening in their peripheral view. This can explain

how the Enron and WorldCom scandals grew to such monumental

proportions.

2. Failure to seek information: the Challenger space shuttle disaster was

used to demonstrate this point. Failure to seek information becomes a

real problem when the decision makers are motivated to favour a

particular outcome. Here some references were made on the Bush

administrations decision to invade Iraq and how the 9/11 disaster

could have been averted had the people involved sought out the right

information at the time.

3. Failure to use information: Citibanks failure in Japanese markets was

taken as a case in point to represent how failure to use the right

information obtained can spell disaster.

4. Failure to share information: the 9/11 incident was again used to

exemplify this point. Had the White House, CIA, FBI and other

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government agencies worked together to collectively gather and

process the information, the disaster could have easily been

prevented.

If any of these factors occur at any point of the decision making process,

the effects may be detrimental to the quality of decision making. There are a

few techniques executives can use as a measure for bounded awareness;

that is to increase levels of awareness in the 4 key areas as described in the

above paragraph.

5. See information: get a birds eye view of every situation; know what

youre looking for. Training the eyes to see what usually escapes the

notice of others.

6. Seek information: receiving recommendations or proposals without any

contradictory data should raise a red flag indicating that the group has

succumbed to bounded awareness. Always assign someone to play the

role of devils inquisitor. Extensive research on a given problem and

options is a wise strategy.

7. Use information: always focus on a wider perspective, that way one

can avoid ignoring critical information.

8. Share information: everyone has some unique information to

contribute, always ask for it explicitly. Important individual information

should be shared. Create an organisational structure where

information sharing is default in every level of the organization.

The key solution to the problem of bounded awareness is to increase

awareness in areas that were previously out of focus. The important thing is

to take toll of the whole situation before proceeding to evaluating the options

and then deciding on a solution. Executives should also be cautious of

becoming hyperaware of their own limitation and as a result lose valuable

time and resources collecting too much information. People normally accept

a status quo as a given but by contrast the most creative solutions usually

emerge when people question common assumptions. Executives have to

learn to locate useful information that lies outside of the bounds of their

awareness by simply questioning common assumptions about how things

work.

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CONCLUSION

Decision making is an important aspect to the lives of many, as Albert

Cadmus reminds us, Life is the sum of all your choices. It is evident that

good decision making skills will not only bring rewards in the organisational

context but also life in general. Decision making is affected by cognitive

biases, anxiety and a range of other factors. It is therefore imperative to

understand these effects and increase awareness in these areas to avoid

succumbing to the state to bounded rationality. In a management context,

when ethical issues are being discussed managers have to remember that

being emotionally intelligent and developing the skills such as Judgement,

Integrity, Courage and Humanity is the key to the creative solving of ethical

problems that arise in an organization.

Consensus is good, unless it is achieved too easily, in which case it

becomes suspect (Buchanan, OConnell, 2006). Irving Janis (1972) coined

the term groupthink to describe a mode of thinking that people engage in

when they are deeply involved in a cohesive in-group, when the members

strivings for unanimity override their motivation to realistically appraisealternative courses of action. Groupthink is a term that is widely used in

corporations but there is a need to properly define it so as to not mistake it

for other reasons for defective decision making. Being emotionally intelligent

and consciously aware of things that are happening in the environment

surrounding the decision are just some of the aspects that need further

developing in senior personnel within organizations.

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ACKNOWLEDGEMENTS

I would like to express my sincere appreciation and gratitude towards Prof. V.

Anantaraman for his infinite patience and guidance.

REFERENCES

Kath Hall (2007), Looking beneath the surface: The impact of psychology on

corporate decision making, Managerial Law, Vol. 49 No. 3, pp. 93-105

Rosalie Holian (2006), Management decision making, ethical issues and

emotional intelligence, Management Decision, Vol. 44 No. 8, pp.

1122-1138

Judith Chapman (2006), Anxiety and defective decision making: An

elaboration of the groupthink model, Management Decision, Vol. 44 No.

10, pp. 1391-1404

Max H. Bazerman, Dolly Chugh (2006), Decision without blinders, Harvard

Business Review (January 2006) Special Issue on Decision Making, pp.

88-97

Leigh Buchanan, Andrew OConnell (2006), A brief history of decision

making, Business Review (January 2006) Special Issue on Decision

Making, pp. 32-41

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