Psychology & Business Article Summary Module 1 : Heuristics & biases Tversky & Kahneman (1974) : Judgement under uncertainty Decisions are often based on beliefs regarding the likelihood of uncertain events such as the outcome of an election. To reduce complexity of these decision tasks, people rely on heuristic principles to assess the probability and predicting values of decisions. Use of these heuristics can sometimes lead to severe systematic errors. The current article describes three types of these heuristicss that are employed in making judgements under uncertainty : 1. Representativeness Employed when people are asked to judge the probability that an object of event A belongs to class or process B. 2. Availaibility of instances or scenarios Employed when people are asked to assess the frequency of a class or the plausibility of a particular development. 3. Adjustment from an anchor Employed in numerical prediction when a relevant value is available. People make estimates by starting from an initial value that is adjusted to yield the final answer. Different starting points yield different estimates, which are biased toward the initial values. This phenomenon is called anchoring. Dhar & Gorlin (2013) : A dual-system framework to understand preference pconstruction processes in choice The dual-system theory of judgement proposes that certain choice effects can be attributed primarily to rapid, unintentional, and intuitive processing (System I), while others arise from intentional and deliberate processing (System II). When System I does not generate a strong peference, System II is used to exert more effort to evaluate options. The defining property for this distinction between the two systems is the degree in which mental processes engage the working memory. Choice effects arise in System II due to the engagement of working memory. The current article proposes that manipulations that impair working memory should decrease the amount of System II processing. Literature analysis confirms this hypothesis. Besides that, choice effects arise in System I require little engagement of working memory. So, any experimental maniputlation that reduces the decision maker’s ability to deliberate should increase the reliance on intuitive processing and the size of these effects. For example, the attraction effect refers to the situation where the addition of an inferior, or dominated third alternative A’ to a set of alternatives (A, B) enhances the choice of alternative A, to which A’ is the most similar. The researches suggest that the attraction effect is primarily a more intuitive System I effect. The attraction effect arises due to intuitive processing, since System II is less likely to modify the intuitive response under time pressure, cognitive load, and depletion. Literature research confirms this finding, the attraction effect has been shown to increase both under time pressure and depletion of mental resources. Connection System I and System II in forming preferences Although certain choice effects arise when a specific option stands out from others intuitively, people in most choice situations do have the opportunity and ability to continue to engage in at least some effortful processing. Two situations are possible : System I can either generate an intuitive preference for a certain option, or fail to generate one. First, lets discuss how System II impacts outcomes when System I generates a preference. System II can reject, leave unchanged, or support the outcome. The exact outcome will depend on whether System II favors the same considerations that were intuitively attractive under system I. In other context where System I generates a preference, options that are favored by System I may be different from the ones favored by System II, in this case, an increase in effortful processing or need for justification can reduce System I effects. Finally, consider how System II affects choice outcomes when System I does not provide an intuitive preference, such as in the case of detraction effects, where trade-off contrasts between x and z makes option y look relatively worse because y provides a smaller gain on one of the attributes in exchange for giving up a certain amount on the other atribute than either x or z. Illustration : Suppose that a consumer faces a choice among three types of gasoline : 87 octane for $1.01 a gallon, 93 octane for $1.21 a gallon, and 90 octane for $1.14 a gallon. The 90 octane option is relatively unattractive when viewed in the context of the 87 and 93 octane. The 90 option does worse when assessed together with the other two options instead of when assesing in pairs (87/90, 90/93) because there is no opportunity to compare tradeoffs within a pair of options. The 90 option had a relatively higher share in the triad options than in either of the pairs in the scenario and a relatively lower share in the triad than in either of the pairs in the detraction scenario. In the case of detraction effects decision makers will rely more on System II heuristics and simplified choice strategies, or will choose at random, because no option intuitively stands out as the superior one. This kind of choice process may occur under extreme time pressure. The enhancement effect and the attraction effect have been used interchangeable in literature, but the current research suggests that the enhancement effect requests deliberate prosessing in order to arise and would attenuate under time pressure or load, whereas the attraction effect would increase under time pressure and load. Module 2 – Decisions under risk Kahneman, D. and Tversky, A. (1984) Choices, Values, and Frames Decision problems can be described or framed in multiple ways that give rise to different preferences. Risky choices – Are made without advance knowledge of their consequences. Because the consequences of such action depend on uncertain events, the choice of an act may be construed as the acceptance of a gamble that can yield various outcomes with different probabilities. Risk averse - Preference for a sure outcome over a gamble that has higher or equal expectation. Risk seeking – The rejection of a sure thing in favor of a gamble of lower or equal expectation. A model of risky choice treatment : Prospect theory Central assumption : it is not the outcome that matters but subjective value changes in terms of gains or losses. The value function describes gains and loses. It is steeper for losses than for gains, this reflects the intuititon that a loss of $X is more aversive than a gain of $X. A second important assumption in this model are decision weigths. Decision weights assume two things : 1. Underweighting of moderate and high probablities 2. Overweighting of low probabilities This model moves away from rational choice which assumes : - Dominance : if prospect A is at least as good as prospect B in every respect and better than B in at least one respect, then A should be preferred to B. - Invariance : the preference order between prospects should not depend on the manner in which they are described. Losses and costs Endowment effect – describes the reluctance of people to part from assets that belong to their endowment (it is yours). When it is more painful to give up an asset than it is pleasurable to obtain it, buying prices will be significantly lower than selling prices. Kahneman, D. (2003). A perspective on judgment and choice: mapping bounded rationality The central results of prospect theory can be explained by two related concepts : an analysis of accesibility, the ease with which thoughts come to mind and a distinction between effortless inuititon and deliberate reasoning. Intuitive thoughts are highly accessible. Complex judgments and preferences are called intuitive in everyday language if they come to mind quickly and effortlessly. Judgments and intentions are normally intuitive in this sense that they can be modified or overriden in a more deliberate mode of operations (System I/ II). Highly accessible impressions produced by System I control judgements and preferences unless modified by System II. To understand judgment and choice, we must study the determinants of high accessibility, the conditions under which System II overrides System I and the rules of these corrective operations. Framing effects were attributed to the fact that alternative formulations of the same situation make different aspects of it accessible. The core idea of prospect theory, that the normal carriers of utility are gains and losses, invoked the general principle that changes are relatively more accesible than absolute values. System I is called intuition and System II is called reasoning. Module 3 Principles of Persuasion Cialdini, R. B. (2001). Harnessing the science of persuasion. Persuasion works by appealing to a limited set of deeply rooted human drives and needs and it does so in protictable ways. Persuasion is governed by basic principles that can be taught, learned, and applied. Below six fundamental principles of persuasion and their appliances are being disucssed. Liking People like those who like them. Application : uncover real similarities and offer genuine praise. Reciprocity People repay in kind. Application : give what you want to receive. Social proof People follow the lead of similar others. Application : use peer power whenever it’s available. Consistency People align with their clear commitments. Application : make their commitments active, public, and voluntary. Authority People defer to experts. Application : expose your expertise ; don’t assume it’s self-evident. Suprisingly often, people mistakingly assume that others recognize and appreciate their experience. Scarcity People want more of what they can have less of. Application : highlight unique benefits and exclusive information. Putting it all together The six principles should be applied in combination to combine their impact. Ethics should be kept in mind when doing so. Cialdini, R., & Cliffe, S. (2013). The uses (and abuses) of influence. The article discusses everyday uses of persuasion inside businesses. The interviewer runs various scenarios to explore how perople can influence others more effectively at work. Caldini, the author from the previous article, replies to these scenarios. How do you get people to help ? - Reciprocity Don’t wave it away when people thank you – we’re given serious persuasive power immediately after someone thanks us : say ofcourse ; it’s what partners do for each other. You should manage the discrepancy between generosity and productivity. Convincing of a change in direction Moving people under uncertainty is difficult – people freeze : scared of what they might lose. It is good to tell people what they will lose if they fail to move. Peers are often more convincing than executives. How do you get people to commit beyon the ‘feel-good’ moment Get it in writing and get people to see themselves as part of a larger group with shared identity. Module 4 – Choice Architecture Ly, K., Mazar, N., Zhao, M., & Soman, D. (2013). A practitioner's guide to nudging. “A nudge is any aspect of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic consequences. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level [to attract attention and hence increase likelihood of getting chosen] counts as a nudge. Banning junk food does not.” Nudges share characteristics that can be classified across four different dimensions 1. Boosting self-control vs. Activating a desired behaviour Helps individuals follow through with a decision, infuence a decision that an indidvual is indifferent or inattentive to 2. Externally-imposes vs. Self-imposed a. Self-imposed : volutary adopted by people who wish to enact a behavioural standard that they feel is important b. Externally-imposed : do not require people to voluntarily seek them out. Passively shape behaviour 3. Mindful vs mindless a. Mindful : guide individuals towards a more controlled state and help people follow through with a behaviroural standard that they would like to accomplish but have trouble enacting. b. Mindless : use of emotion, framing, anchoring to sway the decisions that people make 4. Enchouraging vs. Discouraging a. Encouraging – facilitate the implementation or continuation of a particular behaviour b. Discouraging – hinder or prevent behaviour that is believed to be undesirable Nudge development process Behavioural Insights Team (2014). EAST. Four Simple Ways to Apply Behavioural Insights. To encourage behaviour make it Easy, Attractive, Social and Timely (EAST). The principle 1. Easy o Harness the power of defaults – people have a strong tendency with going with the default or pre-set option. o Reduce the ‘hassle factor’ of taking up a service – the effort required to perform an action often puts people off o Simpliy messages – identify how a complex goal can be broken down into simpler, easier actions. 2. Attractive o Attract attention – include images, colour or personnalisation o Design rewards and sanctions for maximum effect 3. Make it social o Show that most people perform the desired behaviour o Use the power of networks o Encourage people to make a commitment to others 4. Timely o Prompt people when they are likely to be most receptive o Consider the immediate costs and benefits o Help people plan their response to events EAST framework cannot be applied without a good understanding of the nature and context of the problem. Four main stages for developing projects : 1. Define the outcome – what behaviour is to be influenced ? 2. Understand the context 3. Build your intervention – use the EAST framework 4. Test, learn, adapt – reliable measurement Module 5 – succesful teamwork Hackman, R. (2009). Why teams don't work. Interview by Diane Coutu People turn to teams immediately to tackle a task, but people are often bad at teamwork. Teams need to be set up carefully to ensure that they hav a compelling direction : - Getting agreement on the job to be done is the leaders job. - Small teams whose members stay together for long periods of time perform best. - Great HR-departments do not necessarily mean more effective teams because HR tends to focus on improving individual rather than team behavior. Five critical conditions that make the difference between success and failure : 1. Teams must be real People have to know who is on the team and who is not. It’s the leader’s job to make that clear. 2. Teams need a compelling direction Members need to know and agree on, what they’re supposed to be doing together. Unless a leader articulates a clear direction, there is a real risk that different members will pursue different agendas. 3. Teams need enabling structures Teams that have poorly designed tasks, the worng number or mix of members, or fuzzy and uenforced norms of conduct invariably get into trouble. 4. Teams need a supportive organization The organizational context, including the reward system, the human resource system, and the information system, must facilitate teamwork 5. Teams need expert coaching Most executive coaches focus on individual performance, which does not significantly improve teamwork. Teams need coaching as a group in team processes – especially at the beginning, midpoint, and end of a team project. Common fallacies about teams : - People generally think that teams that work together harmoniously are better and more productive than teams that don’t. - Bigger teams are better than small ones because they have more resources to draw upon - At some point team members become so comfortable and familiar with one another that they start accepting one another’s foibles, and as a result performance falls off. However, the problem almost always is not that a team gets stale but, rather, that it doesn’t have the chance to settle in, e.g. teams do not frequently need an influx of new talent. Woolley, W., Chabris, C. F., Pentland, A., Hashmi, N., & Malone, T. W. (2010). Evidence for a collective intelligence factor in the performance of human groups. Woolley et al. Conduct two studies on teams performing cognitive tasks and identify a general collective intelligence factor that explains a group’s performance on a wide variety of tasks. This ‘c’ factor is not strongly correlated with the average or maximum individual intelligence of a groups members, but is correlated with the average social sensitivity of group members, the equality in distribution of converstational turn-taking, and the proportion of females in the group. Module 6 – Team information processing and decision making De Dreu, C. K., Nijstad, B. A., & Van Knippenberg, D. (2008). Motivated information processing in group judgment and decision making. In the article a model is developed for explaining groups as motivated inormation processing groups (MIP-G). The model emphasizes the mixed-motive structure of many group tasks and the idea that individuals engage in more or less deliberate information search and processing. The article proposes that group judgement and decision making is a function of motivated information processing. They argue that a variety of cognitive processes including creative generation, dissemination, and integration of information are driven by two global motivations - Epistemic motivation, which refers to the willingness to expend effort to achieve a thorough, rich, and accurate understanding of the world, including the group task or decision problem at hand - Social motivation, defined as the individual reference for outcome distributions between oneself and other group members and can be proself or prosocial. The model assumes that social motivation drives the kind of information that group members attend to, encode, and retreive. Besides that epistemic motivation drives the degree to which new information is sought and attended to, encoded and retreived. Social- and epistemic motivation are expected to influence, alone and in combination, generating problem solutions, disseminating information, and negotiating joint decision. * disseminating = spreading Sunstein, C. R., & Hastie, R. (2014). Making dumb groups smarter. Group decision making is assumed to be smarter because different people take note of different ‘parts’, if those parts are properly aggregated, they will lead the gropu to know more (and better) than any individual. Unfortunately, groups all too often fail to live up to this potential. Groups err for two main reasons : - Information signals : naturally enough, people learn from one another ; groups often go wrong when some members receive incorrect signals from other members - Reputational pressures ; lead people to silence themselves or change their views in order to avoid some penalty, often the disapproval of others. As a result of information signals and reputational pressures, groups run into four seperate though interrelated problems. When making errors one or more of these problems are usually to blame : - Groups do not merely fail to correct the errors of their members ; they amplify them. - They fall victim to cascade effects, as group members follow the statements and actions of those who spoke or acted first. Two types of cascades o Informational : people silence themselves out of deference to the information conveyed by others o Reputational : people silence themselves to avoid the opprobrium of others *opprobrium = harsh critisism - - They become polarized, taking up positions more extreme than those they held before deliberations. Three main reasons for this : o Information signals with a twist : arguments in any group with an initial predisposition will invevitably be skewed in the direction of that predisposition o Reputation : people want to be perceived favorably by others, once they hear what others believe, they will adjust their positions at least slightly in the direction of the dominant position in order to preserve their self-presentation o The close link among confidence, extremism and corroboration : when people lack confidence, they tend to be moderate. As people gain confidence they usually become more extreme in their beliefs. The agreement of others tends to increase confidence and thus extremism. They focus on what everybody knows already, and thus don’t take into account critical information that only one or a few people have. Wittenbaum, G. M., Hollingshead, A. B., & Botero, I. C. (2004). From cooperative to motivated information sharing in groups: Moving beyond the hidden profile paradigm. The article proposes a revised framework for understanding information sharing in groups which is presented in figure 2. This revised framework is an extension of earlier work on : suboptimal decisions in taks structured as hidden profiles. In these situations, team members tend to discuss and incorporate into their decision shared information at the expense of unshared (known to a single member) information. This erlier research however, is a poor reflection of reality and based on strong theoretical assumptions that bear litle resemblence to natural decision-making groups. That is why the framework is revised. According to this revised framework, information exchange in decision-making groups is a deliberate process in the interest of members’ goal attainment. Group members intentionally select particular members with whom to share information and determine what information to share and how to share it in order to satisfy goals evoked by features of the context (e.g., member characteristics, task type, communication technologies). Members’ information-sharing strategies then influence task outcomes (e.g., group decision quality, member influence) and social outcomes (e.g., member relations). Moreover, the particular goals of members vary within groups, with some members embracing group goals and others acting in the interest of individual or competitive goals. Some groups may be relatively more group- or member-centered depending on norms in the organization and characteristics of members. Module 7 – Team conflict de Wit, F. R. C., Greer, L. L., & Jehn, K. A. (2012). The paradox of intragroup conflict: A metaanalysis. This article is a meta-analysis of 116 empirical studies on intragroup conflict. Intragroup conflict can broadly be defined as the process emerging from perceived incompabiities or differences among roup members. Three froms can be distinghuished : relationship-, task-, and process conflict - Relationship conflict Involves disagreements among group members about interpersonal issues, such as personality differences or differences in norms and values. - Task conflicts Entail disagreements among group members about the content and outcomes ofthe task being performed - Process conflict Disagreements among group members about the logistics of task accomplishment, such as the delegation of tasks and responsibilities Effects of these conflicts can be positive as well as negative. Task-related conflicts, for example, may facilitate innovativenes and superior group decsion making because they prevent premature consensus and stimulate more critical thinking. When examining the effects of intra-group conflicts on group outcomes, we distinguish between two types of outcomes: distal group outcomes and more proximal group outcomes. In terms of distal group outcomes, this means focus on group performance, which includes outcomes such as innovation, productivity, and effectiveness. In terms of more proximal group outcomes, the focus lies more on group emergent states and group viability. Group emergent states include the cognitive, motivational, andaffective states of groups, such as intragroup trust or cohesion. Distal group outcomes Group performance Task conflict The findings of the negative effects of task conflict on more distal group outcomes, support the informationprocessing perspective which suggests that task conflicts are a distraction and require resources that cannot be directly invested into task performance. As task conflict increases cognitive load, it also interferes with effective cognitive processes and may result in narrow, black-and-white thinking and, thereby, obstruct distal group outcomes. Benefit : increased understanding of the task at hand and a more critical evaluation of each other’s ideas. It Proximal group outcomes Group emergent state (identification/ trust) and viability The negative effects of task conflict on proximal outcomes, such as satisfaction, can be explained by self-verification theory which suggests that group members become dissatisfied when they in-terpret challenges of their viewpoints by other group members as a negative assessment of their own abilities and competencies. Relationship conflict Process conflict can overcome confirmatory biases in group decision making Reduces collaborative problem solving and because the time group members spend responding to nontask related issues could be spent more efficiently on task accomplishments *negative effects may be reduced under conditions : when members employ effective conflict management strategies or have low emotionality surrounding relationship conflicts The negative effects of process conflict on group outcomes are thought to occur because the issues at the heart of process conflicts, such as task delegation or role assignment, often carry personal connotations in terms of implied capabilities or respect within the group. Disagreements about personal issues heighten member anxiety and often represent ego threats. This increases hostility among group members wich is likely to affect proximal group outcomes *See Distal group outcomes Proces conflicts might become personal and may have negative effects on functioning. It may harm the quality of emergent states and group viability **See Distal group outcomes *negative effects may be reduced under conditions : disagreements about who is responsible for what and how things should proceed might faciitate crucial reevalutaions of processes, standards, and task and resource assignments Weiss, J. & Hughes, J. (2005). Want collaboration? Accept and actively manage conflict. Most companies respond to the challenge of improving collaboration in entirely the wrong way. They focus on the symptoms "Sales and delivery do not work together as closely as they should" rather than on the root cause of failures in cooperation: conflict. Conflict is key because it facilitates much of the value that can come from collaboration across organizational boundaries : differences in perspective, competencies, access to information, and strategic focus. There are a number of ways to constructively manage conflict that can be devided in to two categories : strategies for managing disagreements at the point of conflict and strategies for managing conflict upon escalation up the management chain Strategies for Managing Disagreements at the Point of Conflict The aim is to get people to resolve issues on their own through a process that improves – or at least does not damage – their relationships. Strategies : - Devise and implement a common method for resolving conflict - Provide people with criteria for making trade-offs : Even when companies equip people with a common method for resolving conflict, employees often will stillneed to make zero-sum trade-offs between competing priorities. That task is made much easier and less disputable when top management can clearly articulate the criteria for making such choices. - Use the escalation of conflict as an opportunity for coaching Strategies for managing conflict upon escalation - Establish and enforce a requirement of joint escalation - Let people present a disagreement jointly to their boss or bosses. This will reduce or even eliminate suspicion, surprises, and damaged personal relationships ordinaly associated with unilateral escalation. Ensure that managers resolve escalated conflicts directly with their counterparts Make the process for escalated conflict resolution transparent Video : Bad apples Can one person ruin the whole workplace ? Three bad apple behaviors : - Being a real jerk - Slacker, doing less than she can - Depressive pessimest A bad apple, at least at work, can spoil the whole barrel. And there's research to prove it. Will Felps, designed an experiment to see what happens when a bad worker joins a team. Felps divided people into small groups and gave them a task. One member of the group would be an actor, acting either like a jerk, a slacker or a depressive. And within 45 minutes, the rest of the group started behaving like the bad apple. Session 8 – Diversity van Knippenberg, D., De Dreu, C. K., & Homan, A. C. (2004). Work Group Diversity and Group Performance: An Integrative Model and Research Agenda. *This article is really well elaborated on in the video of session 8. Diversity : differences between individuals on any attribute that may lead to the perception that another person is different from self. There are two main traditions in work-group diversity and performance research : social categorization perspective and the information/decision-making perspective. The social categorization perspective This perspective entails that similarities and differences are used as a basis for categorizing the self and others into groups, with ensuiing categorizations distinguishing between one’s own in-group and one or more outgroup. People tend to like and trust in-group members more. As a result, the more homogenous the work group, the higher member commitment and group cohesion will be, the fewer relational conflicts will occur which results in higher overall group performance. This perspective focuses on relational aspects. The information/decision-making perspective This perspective states that diverse groups should outperform homogenous groups. The idea is that diverse groups are more likely to posses a broader range of task-relevant knowledge, skills, and abilities that are distinct and nonredundant and to have different opinions and perspectives on the task at hand. This not only gives diverse groups a larger pool of resources, but may also have other beneficial effects. This perspective focuses on task-related aspects. Because problematic intragroup relations and low group cohesiveness (social categorization) are detrimental to performance (information/decsion) it is difficult to see how diversity could negatively affect relationships while at the same time stimulate performance. The Categorization-Elaboration Model This model tries to adress why research has not been able to adequately account for the positive and negative effects diversity in work groups can have. It integrates both perspectives. The model proposes that diversity within a group is postively related to the elaboration of taskrelevant information and perspectives within the group, exchange, discussion, and integration of ideas. Elaboration of taks-relevant information and perspectives is, in turn, proposed to be related to group performance, especially creativity, innovation and quality. There are factors that moderate this relationship : information-processing and decision-making, motivation and ability. Another moderating factor is the social categorization, it is based on three factors : - Cognitive accessibility The ease with which the social categorization implied by the differences is cognitively activated - Normative fit The extent to which categorization makes subjective sense to group members - Comparative fit The extent to which the categorization yields subgroups with higher intragroup similarity and higher intergroup differences. Intergroup biases that may result from social categorization disrupt elaboration of task-relevant information and perspectives. Thomas, D. A. (2004). Diversity as strategy. Case illustration : diversity as a strategy for IBM IBM changed their strategy from a long-term tradition of minimizing differences to amplyfying them and seize on the business opportunities they present. IBM already had various task forces to resolve a range of strategic choices and issues. They used the same structure to refine and achieve IBM’s diversity related objectives. It was successful because of the following four factors : 1. Strong support from company leaders. 2. An employee base that is fully engaged with the initiative. 3. Management practices that are integrated and alinged with the effort 4. A strong and well-articulated business case for action.
