COMMERCE 2BA3 ORGANIZATIONAL

BEHAVIOURClass 8

Decision-MakingPower, politics, and ethics

Dr. Christa Wilkin

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Brain Teasers

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BendBackwards

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Last Class

Communication is more than what you say

THIS CLASS Decision Making Power, Politics and Ethics

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Agenda

Rational decision making vs. Bounded rationality

Individual vs. Group decision making Types of power Organizational politics Ethical behaviour

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CH 11: DECISION MAKING

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Food for Thought

People usually make rational decisions. Agree? Disagree?

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A Rational Decision Making Model

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Perfect Rationality

Perfect rationality is a decision strategy that is completely informed, perfectly logical, and oriented toward economic gain.

The prototype is the Economic Person who is perfect, cool, calculating decision maker.

These perfectly rational characteristics do not exist in real decision makers.

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Bounded Rationality

Bounded rationality is a decision strategy that relies on limited information and that reflects time constraints and political considerations.

Framing: How problems and decision alternatives are framed can have a powerful impact on decisions E.g., 20% probability that will win vs. 80% that you will

lose Cognitive biases: Tendencies to acquire and

process info in a particular way that is prone to error E.g., anchoring

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Satisficing

Decision maker establishes an adequate level of acceptability for a solution to a problem and then screens solutions until he or she finds one that exceeds this level

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Risky Decision Making

When people view a problem as a choice between losses, they tend to make risky decisions E.g., Option A: 85% chance of losing $100 along

with a 15% chance of losing nothing. Option B:100% chance of losing $50

When people frame the alternatives as a choice between gains, they tend to make conservative decisions E.g., Option A: bet $100 on the flip of a coin (50-

50 chance) if you stood to win $200. Option B: bet $100 if there was a 90% chance that you win $150

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Quiz Question

Jennifer has a choice: (A)100% chance of losing $5 or (B) 85% chance of losing $10 along with a 15% chance of losing nothing. What is she likely to do now?

A) Ignore economic considerationsB) Make a risky decisionC) Make a conservative decisionD) Ignore sunk costsE) Ignore sample sizes

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Justification

Substantial dissonance can be aroused when a decision turns out to be faulty.

To prevent such dissonance, decision makers sometimes avoid careful evaluations or devote their energy to trying to justify a faulty decision. E.g., oh I didn’t give that much thought; I

wasn’t feeling well that day

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The Dollar Auction

You can participate or watch. Only bidders can talk (no extraneous

conversation). Bidding will be in 5¢ or 10¢ increments.

There is only one deviation from a conventional auction. Both the winner and the second highest bidder must pay the amount that each has bid. If you win at 30¢ and beat out a bid of 25¢, I get that 25¢ and I owe you 70¢.

Will someone give me 10¢ for this dollar?

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Debrief

What was going through your mind during the auction?

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Sunk Costs

The justification of faulty decisions is best seen in the irrational treatment of sunk costs

Sunk costs are permanent losses of resources incurred as the result of a decision

Since these resources have been lost due to a past decision, they should not enter into future decisions E.g., Your used car breaks down again and

because you’ve already spent $1000 fixing it, you decide to fix it again

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Escalation of Commitment

People often “throw good resources after bad,” acting as if they can recoup sunk costs

This process is known as escalation of commitment

Escalation of commitment refers to the tendency to invest additional resources in an apparently failing course of action E.g., You are playing poker and you have bet so

much of your chip stack on one hand that you will not fold even with new info that casts doubt on your decision

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Escalation of Commitment

Reasons for escalation of commitment: Dissonance reduction. Social norm for consistent behaviour. Motivation to not appear wasteful. The way the problem is framed. Personality, moods, and emotions.

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Preventing Escalation of Commitment

Encourage continuous experimentation with reframing the problem.

Set specific goals for the project in advance that must be met if more resources are to be invested.

Place more emphasis in evaluating managers on how they made decisions and less on decision outcomes.

Separate initial and subsequent decision making.

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Hindsight is 20/20

Decision evaluation is also inhibited by faulty hindsight

Hindsight refers to the tendency to review the decision-making process that was used to find what was done right or wrong

It is the tendency to assume, after the fact, that we knew all along what the outcome of a decision would be E.g., See, I knew all along that I shouldn’t of

fixed the car again

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QUESTIONS?

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CH 12: POWER, POLITICS, AND ETHICS

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Types of Power

Coercive Power: Controlling people through fear E.g., You arrive to work 15 minutes early because

you know your boss will flip out if you’re late Reward Power: Controlling people because you

can distribute or withhold something that they want E.g., You accept overtime because you want your

boss to promote you Legitimate Power: Position or job in an

organization E.g., President of your company asks you to do

something

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Types of Power

Referent Power: Stems from being well liked by others E.g., People will do a favour for you because

you’re such a nice person Expert Power: Derived from having special

information or expertise that is valued by an organization E.g., You got your undergrad from Mac and

because you’re super smart, everyone at work comes to you with questions

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Quiz Question

Two army officers get into an argument, and one cites his rank in an attempt to settle the matter. To which power base is he resorting?

A) Expert B) Legitimate C) Referent D) Coercive E) Reward

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Power26

Empowerment

Giving people the authority, opportunity, and motivation to take initiative and solve organizational problems

Giving people the freedom and ability to make decisions and commitments

Puts power where it is needed to make it effective

People who are empowered have a strong sense of self-efficacy

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Who Wants Power?

Those high on McClelland’s Need for Power (N-Pow) McClelland argues that the most effective

managers (“Institutional Managers”): Have high N-Pow Use their power to achieve organizational goals Adopt a participative or “coaching” leadership style Are relatively unconcerned with how much others

like them

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Organizational Politics

The pursuit of self-interest in an organization, whether or not this self-interest corresponds to organizational goals

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Avoiding Actions Stalling

Move slowly when someone asks for your cooperation. Overconforming

Sticking to the strict letter of your job description Passing the buck

Having someone else take action. Buffing

Carefully documenting information showing that an appropriate course of action was followed.

Scapegoating Blaming others when things go wrong.

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Machiavellianism

A set of cynical beliefs about human nature, morality, and the permissibility of using various tactics to achieve one’s ends.

A stable personality trait. High Machs use their tactics best in the

following kinds of situations: Face-to-face encounters. Fairly emotional circumstances. The situation is fairly unstructured, with few

guidelines for appropriate forms of interaction.

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Question

How does the concept of machiavellianism relate to ethics?

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Ethics in Organizations

Systematic thinking about the moral consequences of decisions

A substantial number of employees believe they have been pressured to compromise their own ethical standards when making organizational decisions.

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Causes of Unethical Behaviour

Gain: anticipation of healthy reinforcement for following an unethical course of action

Role conflict: Employee vs. professional Competition for scarce resources: Stiff

competition for scarce resources Personality: Personality types more prone

to unethical behaviour (e.g., economic values)

Org Industry and Culture: Corporate cultures that reward unethical behaviour

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Question

You are the entire information technology department for a small firm with 20 employees. The president of the company believes some of the employees are spending far too much time on the Internet doing tasks not related to work. The president asks you to start monitoring employees' Internet usage without their knowledge, something you could easily do from a technological standpoint.

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Question

What Do You Do?A.Start monitoring employees' email and

Web usage, as the president has asked. B.Suggest that an acceptable Internet-use

policy be developed. C.Talk to employees and tell them what

the president has in mind so they'll change their habits.

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Difference between Ethics and Morals

Ethics Something you choose to comply with An acceptable set of standards/behaviours Sometimes established by a body Standards of conduct

E.g., It is ethical to recycle Morals

Taught to you from an early age Deals with people Embedded and personal

E.g., It is wrong to make promises you can’t keep

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Ford Example

Pinto video

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Ford Example

Pinto cars (1973) bursting into flames after rear collisions; could have possibly been avoided by adding an $11 part; execs ignored the principal design engineer’s spoken and written statements

Proposed lawsuit cost to Ford: 180 burn injuries @ $67,000 180 burn deaths @ $200,000 Total Cost: $48,100,000

Pinto Repair Cost: 12,454,545 cars @ $11 = $137,000,000 (It was thus cheaper to pay the lawsuits)

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Summary

People do not always make rational decisions

Different types of power can lead to higher commitment

Some people may behave for political gains and may behave unethically

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For Next Class

Read Chapter 13 on conflict and stress

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