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COMMERCE 2BA3
ORGANIZATIONAL BEHAVIOUR
Class 8
Decision-Making
Power, politics, and ethics
Dr. Christa Wilkin
Brain Teasers
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pa per
Bend
Backwards
sleeping
job
Last Class
3

Communication is more than what you say
THIS CLASS
 Decision Making
 Power, Politics and Ethics
Agenda
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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
Food for Thought
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
People usually make rational decisions. Agree?
Disagree?
A Rational Decision Making Model
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Identify a problem
Search for relevant information
Develop alternative solutions to the problem
Evaluate alternative solutions
Choose best solution
Implement chosen solution
Monitor and evaluate chosen solution
Perfect Rationality
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
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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.
Bounded Rationality
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
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
Satisficing
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
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
Risky Decision Making
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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
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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
Quiz Question
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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 considerations
B) Make a risky decision
C) Make a conservative decision
D) Ignore sunk costs
E) Ignore sample sizes
Justification
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
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
The Dollar Auction
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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?
Debrief
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
What was going through your mind during the
auction?
Sunk Costs
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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
Escalation of Commitment
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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
Escalation of Commitment
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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.
Preventing Escalation of Commitment
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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.
Hindsight is 20/20
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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
Types of Power
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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
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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
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Legitimate Power: Position or job in an organization
 E.g.,
President of your company asks you to do
something
Types of Power
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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
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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
Quiz Question
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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
Power
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Empowerment
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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
Who Wants Power?
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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
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The pursuit of self-interest in an organization,
whether or not this self-interest corresponds to
organizational goals
Avoiding Actions
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Stalling
 Move

slowly when someone asks for your cooperation.
Overconforming
 Sticking
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Passing the buck
 Having
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to the strict letter of your job description
someone else take action.
Buffing
 Carefully
documenting information showing that an
appropriate course of action was followed.
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Scapegoating
 Blaming
others when things go wrong.
Machiavellianism
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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.
Question
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How does the concept of machiavellianism relate to
ethics?
Ethics in Organizations
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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.
Causes of Unethical Behaviour
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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
Question
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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.
Question
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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.
Difference between Ethics and
Morals
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Ethics
Something you choose to comply with
 An acceptable set of standards/behaviours
 Sometimes established by a body
 Standards of conduct
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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
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Pinto video
Ford Example
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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
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Pinto Repair Cost:
12,454,545 cars @ $11 = $137,000,000
 (It was thus cheaper to pay the lawsuits)
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Summary
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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
For Next Class
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
Read Chapter 13 on conflict and stress