Seminar 1 reading: Think about thinking -organ donation e.g. striking diff in rates, why? Opt-in policy vs opt-out policy. Subcat: Decisions, decisions -understanding the influence of default settings on choices we make is important because our beliefs about what people choose and why they choose it affects all explanations of social, economic and political outcomes. Subcat 2: common sense and rationality Rational choice theory: include not just self-interests but also social and political behavior All human behaviour can be understood in terms of individuals’ attempts to satisfy their preferences If we want to understand why people do what they do, we must understand the incentives they face and hence their preference for one outcome versus another. When we think about how we think, we reflexively adopt a framework of rational behavior. Subcat 3: thinking is about more than thought Rationalizing (putting ourselves in other people’s shoes to understand their choices) works only on human We instinctively emphasize consciously accessible cost and benefits while defaults are largely invisible to the conscious mind, therefore largely absent from our commonplace explanations of behavior. Individual preference can be influenced drastically by changing the way a situation is presented. (e.g stimulis like words, sounds, options presented, ease of recalling info, digest new info in ways that tend to reinforce what they alr think (names: priming, framing, anchoring, availability, motivated reasoning, loss aversion, confirmation bias...) Subcat 4: what is relevant? Many factors affect our behavior but are out of our conscious awareness. Need to understand how they interact with one another but with so many of them that can be at play together.. How do we do that? The frame problem: To begin with, what is relevant abt a situation are the features it shares with other comparable situations. But then determining which features are relevant need us to associate it with a situation that is comparable. But finding the comparable situation depends on which feature is relevant e.g. artificial intelligence Subcat 5: We don’t think the way we think we think Not all the incentives we create will bring about the changes we intended. We all think that when something don’t work, all we need to do is the change something and it will work next time. Conclusion: common sense explains why people do wat they do but it doesn’t really allow us to predict what they will do either. But once they do it, the reasons will be obvious and we would conclude that “if only we have known about something” we would have predicted the outcome. But it is untrue because of the frame problem: we will never know everything that is relevant and that what could be relevant may lie beyond the reach of our conscious minds. Diff between making sense of behaviour and predicting it Summary of seminar 1--> Gut feeling of experienced ppl are impt. Don’t ignore them even if they don’t have the facts. Sometimes stats don’t give the full story as well. Seminar 2 reading: - case study: - where conner is facing a moral dilemma of increasing company's production output and hence profit vs ensuring the safety of the workers. -this could backfire when the majority of the workers become injuired and end up not being able to help with increasing production output -conner should present stats of the risks to the higher management and detail the possible consequences Tof neglecting the workers' safety. -analyse how individuals' backgrounds and philosophies influence their decisions. People often use their individual moral philosophies to justify decisions or explain their actions. Teleology (consequentialism). Two important teleological philosophies that often guide decision making in individual business decisions are egoism and utilitarianism. Enlightened egoists take a long-range per-spective and allow for the well-being of others although their own self-interest remains paramount. E.g.an enlightened egoist could become a whistle-blower and report misconduct to a regulatory agency to receive a reward for exposing misconduct. Rule utilitarism argue that general rules should be followed to decide which action is best. act utilitarians examine specific actions, rather than the gen-eral rules governing them, to assess whether they will result in the greatest utility Deontology (non consequentialism). In short, teleological philosophies consider the ends associated with an action, whereas deontological philosophies consider the means. The difference between deontology, teleology, and virtue ethics is the first two are applied deductively to problems, whereas virtue ethics is applied inductively(from specific to general). -Moral philosophies are per-son-specific, while business ethics is based on decisions made by groups or when carrying out tasks to meet business objectives. More often than not, there are conflicts between a person's ethics and companies ethics cos of the profit segment. Impt to figure how to navigate that. -discuss the stages of cognitive development (6) as they relate to these moral philosophies. We also explain why cognitive moral development theory may not explain as much as we thought. Additionally, we examine white-collar crime as it relates to personal morals and philosophies. Conclusion: individual's moral decisions are much more complex than the moral philosophies. (2) Sandel, M. (2009) What matters is the motive / Immanuel Kant. Chapter 5 In M. Sandel, Justice: What’s the right thing to do? (pp. 103- 139) New York: Farrar, Straus & Giroux. (CANVAS) -kant’s political theory: reject utilitarianism in favour of a theory of justice based on a social contract. Second seminar- ethical foundations for leadership Morality: one's personal sense of right and wrong, not imposed by outsiders Ethics: Standards of good and bad, right or wrong, that are imposed by some outsider group as a society or profession - E.g., Business ethics that say what you should or should not do based on what the business c community says is right and wrong. Ethics and morality can conflict with one another. E.g. amos yee Fundamental questions of ethics How do ethical considerations enter into and shape our decisions? - How should I live my life? - What sort of person should I strive to be? - What values are important? - What standards or principles should I live by? Business ethics: The study of good and bad, right and wrong, just and unjust actions in business. High prevalent and costly unethical behavior in workplaces. Ethical behavior is positively associated with performance. Economic framing (e.g. healthy meals should improve our employees’ productivity!) vs moral framing (it is the company’s moral imperative to increase our employees’ well-being) More support in terms of leadership: moral framing. Importance of having a bottom-line. THINKING ABOUR ETHICS Three approaches on how we think about ethics: intuition ethics, consequentialism and deontology. Intuition ethics: what is good and bad felt by intuition. - a good starting point and embedded in codes of conduct at many organizations o “Do I feel uncomfortable with this course of action? If the answer is yes, don’t do it. o o “What feels right or wrong?” “If you do it, will you feel bad?” The trolley dilemma- pull the lever? Consequentialism (utilitarism/teleology): - - - - Locates morality in the consequences of an action o The ends justify the means e.g. use painful ways (means) like water-boarding to force a terrorist to tell us their alliances or companions so that our country can be protected (end)? Cheap clothing (end) through low wages, tough hrs(mean) o Impartiality (fairness, equal treatment, not taking sides) What is a good consequence? o Pleasure, beauty, material equality, political liberty o The greatest good for the greatest number Consequentialism requirement o Identify all stakeholders o Identify benefits and harms associated with action o Integrate/sum across stakeholders to understand social consequences o Appropriate consideration of long- and short-term consequences Limitations o Can you make sure that you have all information? o Can you maintain impartiality and place your biases in check? The trolley problem (consequentialism): Things to consider: - What consequences does this action have for each stakeholder group? - How might the “good” be defined? In other words, what outcomes deserve my attention? - How do the short-term consequences of the action compare against the long-term consequences? Deontology: - Immanuel Kant Locates morality in certain duties and obligations, which much be adhered to on principle. Focuses on standards of conduct regardless of the consequences. We follow these standards of conduct for their own sake and without reference to their consequences. e.g. don’t threaten and intimidate others: People are on a spectrum (could be a mix of deontology and consequentialism. Kant’s categorical imperative: Imperative: a command. - Hypothetical imperative: conditional (if u are hungry, go eat. If u wanna go medical sch, study biology in college.) Categorical imperative: unconditional (e.g. don’t lie). Denotes an absolute, unconditional requirement that must be obeyed in all circumstances and is justified as an end in itself o Categorical imperative 1: Universalize your maxim Kantians ask 2 questions before they decide to act: 1) Can I rationally will that everyone act as I propose to act? (If no, then we must not perform the action.) 2) Does my action respect the goals of human beings rather than merely using them for my own purposes? (If no, then we must not perform the action.) Formula of Universal Law: “Act only according to that maxim by which you can at the same time will that it should become a universal law” (We should only act on principles that we can universalize without contradiction) Maxim: a rule or principle that gives the reason for your action Example: Murder, theft, and lying are absolutely prohibited even in cases where the action would bring about more happiness than the alternative o Categorical imperative 2 (Practical Imperative): Treat persons as ends Formula of Humanity as an Ends: “Act in such a way that you treat humanity always at the same time as an end and never merely as a means” (In general, every rational being, exists as an end in himself, not merely as a means for arbitrary use by this or that will) Example: When William promise to repay the money, knowing that he won’t be able to, he is manipulating John. He is using John as a means to his financial solvency, not treating John as an end, worthy of respect - The golden rule: “Do unto others what you would have them do unto you” The deontologist considers - What basic standards of conduct might apply here? What specific duties might I have to each stakeholder group? What are their rights and potentially legitimate claims? Is the action “universalizable”? Could it be applied to everyone, and would I be willing to have it applied to me? MORAL PHILOSOPHY APPLICATION Four corner analysis The battle between ends and mean: Consequentialism: The study of the ends - The ends The consequences The total good Deontology: The study of duty or obligation - The means The standards The rights of individuals IMPROVE ETHICAL DECISION MAKING Our moral philosophy seems to be.. - We want to view ourselves as honest, honourable people (deontological) - We want to benefit when opportunities present themselves (utilitarianism) - If we cheat only a little bit, we can benefit from cheating and still view ourselves as marvelous human beings (cognitive flexibility) It’s all about rationalization! Create ethical enablers - Increase psychological immediacy - Use honor codes and religious reminders - Sign first, then complete the details Remove ethical barriers - Situational pressures (Group and authority relations) - Depletion of resources for self-regulation (e.g., low blood sugar, exhaustion, lack of sleep, social disconnection) When u are doing business, be careful and try to align with the values of the society u are operating in. Seminar 3- HBR CASE ON CHRIS AND ALISION WESTON The company individuals were encouraged to use resources entrepreneurially within the organization, which meant that I had broad authority to use whatever vendors I needed to get the job done. The objective was get the positions filled, because they were affecting our ability to make a profit in this organization. The environment was: ‚get it done‛. Chris asked Alison to help with the company’s needs by setting up a business (in her maiden name) that would provide research services identifying potential candidates to fill the large volume of open positions the company urgently needed to fill to manage its growth. There was not a specific written policy at that time that said if you contract with a family member you have to get special approval. So they didn’t tell anyone about it. The Westons began to overbill (her getting paid despite not doing as much work or not doing any work) for Alison’s services more regularly. In addition to his other reasons, Chris also felt that his actions were justified by the company’s culture. He was exposed to a variety of questionable practices at the leadership level, along with specific actions he knew were unethical and illegal. Being in a culture that didn’t model high ethical standards made it easier for Chris to rationalize his own behavior. Alison: I wish Chris had come home and said, ‚I want to steal $1,600,200,‛ because I would have said, ‚Absolutely not.‛ But it just doesn’t work that way. Those little small decisions, every single one, can either lead you towards the path you want, or further away. It’s really recognizing the smaller, seemingly insignificant acts and identifying them that allows you to stay on the right path. But I allowed that kind of stuff to go on, because when I did raise my hand, I raised it to Chris. You’re trusting someone to give you an accurate reflection of your behavior, but that wasn’t happening with us, on either side. We were distorted mirrors for each other. If you’re going to have an accountability partner, and it’s really just someone who tells you what you want to hear, it’s not a true portrayal of reality, and that’s what I think led us down this horrific path. They didn’t feel like they were committing a crime. -------When we see unethical behaviour... a few bad apples are not what drives scandals (lay belief- aka subjective belief) its about regular people convincing themselves they are not doing anything wrong. Research findings: most of us feel comfortable engaging in a certain degree of unethicality. We like to think of ourselves as good people. Our view of ourselves- Dunning Kruger Effect (psychological bias) - People tend to hold overly favorable views of their abilities in many social and intellectual domains. Why? Deficits in metacognitive skill, or the capacity to distinguish accuracy from error e.g. A classic example of the Dunning-Kruger effect would be an amateur chess player overestimates their performance in the upcoming chess tournament compared to their competent counterparts The Dunning-Kruger thought process. “knowing others is wisdom, knowing yourself is enlightment” Reasons for unethical behaviour (commitment to ethical behavior may be short-lived) (1) Lack of self control- depleted resources for self-regulation a. Self-control: the ability to override or change one’s inner responses, and to interrupt undesired tendencies and refrain from acting on them. b. limited- less sleep, multitasking, surface acting- e.g. service ppl need to smile to their customers all the time, air pollution, late phone use) (2) Situational pressure- group and authority relations a. Normative conformity- When everyone agrees we might go along even if we don’t agree with it to fit in with a group and gain acceptance) -> problematic when connected to ethics b. Informational conformity is the change in opinions or behavior that occurs when we conform to people whom we believe have accurate information. c. Asch conformity experiment- The experiments revealed the degree to which a person's own opinions are influenced by those of a group. Asch found that people were willing to ignore reality and give an incorrect answer in order to conform to the rest of the group. Power of the group came not merely from its numbers but from the unanimity(consensus) of its opposition (aka if there is one other person that agrees with you, you might not conform as opposed to nobody being on your side.) (3) Rationalization to justify our action- moral disengagement (an aspect of behavioural ethics) Behavioral Ethics: A field that seeks to understand how people actually behave when confronted with ethical dilemmas (offer insights on why we often behave contrary to our best ethical intentions). Moral disengagement: a set of strategies we use to help us view our actions as morally acceptable. 3 categories of strategies: - Restructuring behaviour to appear less wrong (1) Moral justification (reframing unethical acts being in the service of a greater good) e.g. “It’s OK to spread rumors to defend those you care about” “actually doing them a favour since layoffs were imminent for many” (2) Euphemistic labelling (using sanitized language to rename harmful actions so they seem more benign) e.g. “Taking something without the owner’s permission is OK as long as you’re just borrowing it” (3) Advantageous comparison (making behaviour seem innocuous by comparing to an even worse behavior) e.g. “Considering the ways people grossly misrepresent themselves, it’s hardly a sin to inflate your own credentials a bit” - Minimizing victim’s distress (1) Distortion of consequences (minimizing the seriousness of the effects of one’s action) E.g. “Taking personal credit for ideas that were not your own is no big deal.” (2) Dehumanization (arguing that the victims of an unethical action don’t deserve basic human consideration) E.g. “Some people have to be treated roughly because they lack feelings that can be hurt.” cost and benefit analysis - Obscuring moral agency (1) Displacement of responsibility (ceding responsibility for unethical behaviour to an authority figure) E.g. “People shouldn’t be held accountable for doing questionable things when they were just doing what an authority figure told them to do.” “we were not in violation of the law at that time” (2) Diffusion of responsibility (ceding responsibility for unethical behaviour to an entire group) E.g. “People can’t be blamed for doing things that are technically wrong when all their friends are doing it. (3) Attribution of blame (blame victims for what befalls them) e.g. “People who get mistreated have usually done something to bring it on themselves.” The ford pinto case: They knew that car will explode when hit from the back but they feel it is cheaper to pay for injuries than to improve their product. -> consequentialism. But inaccurate calcuations as they didn’t consider other consequences, defined it purely by profitability. They also didn’t take all the stakeholders into account. Underestimated the cost of lawsuits. -> violated deontology ->moral disengagement strategies used: We have a “condition”, not “problem” (Euphemistic labelling) Cost and benefit analysis (Dehumanization) We were not in violation of the law at that time (Displacement of responsibility) With the oil crisis, layoffs were imminent for many (Moral justification) They used euphemistic labeling, dehumanization, displacement of responsibility, moral justification. Workplace- people have different range of standards of conduct. U need to know where u stand. “slippery slope” of unethical behaviour - If we allow something relatively harmless today, we may start a trend that results in something currently unthinkable becoming accepted Preventing moral disengagement - Attend to one’s moral intuition (if something doesn’t feel right, back away) Surround yourself with good “mirrors,” people who will let you know when your actions appear inconsistent with your values Think carefully about the contexts you choose to be in, since they will likely encourage or facilitate either disengagement or moral engagement Moral decoupling: A thought process whereby an individual separates judgement of a person’s performance from the judgements of that person’s morality. e.g. academy award for best director and drugged and raped a 13 yr old - Especially so when occupation is not linked to unethical behaviour (e.g. baseball player evading tax vs governor evading tax) Ethical intention vs behavior - The discrepancy between our expected reaction to something unethical vs our actual reaction. (reaction to interview that contains sexual harassment) Seminar 5 - models of judgement & decision making 1 First, you examined the background information and available evidence provided by Nick Bay, SVP of Marketing, and determined that the problems associated with inaccurate readings using the monitor were due to consumers misusing the device in the field. Next, you worked with Nick Bay, VP of Marketing, on how to allocate the emergency marketing expenditure authorized by the Board. You determined spending amounts for updating packaging instructions and initiating a communication campaign with our doctors. In total, you spent $500,000.00 on packaging and $150,000.00 on communication campaigns across initiatives. Then, you worked directly with myself and the VPs of Marketing and Operations to prevent layoffs by shipping a replacement device to users. Finally, you worked with Rich Montella, Engineering Manager, to investigate customers' problems syncing their glucose meters to their smartphones. You helped identify that approximately 80% of smartphone-using customers wait a month between syncing their readings. Dollar auction: The highest bidder pays what they bid and receives $10. The second highest bidder pays what they bid. show how irrational ppl can be What can we learn from this? To make sense of a decision, we need to look at… The social context in which the decision is made The way in which decision makers perceive and understand the situation Motivational factors influencing those making decisions Alternatives considered by decision makers The historic context of a given decision – what else has happened -we should try to recognize the cognitive biases that will affect out decision making. System 1 vs system 2 System 1 (intuition- What you see is all there is, Effective until biases kick in): spontaneous, unconscious, automatic, error prone, everyday decisions, often affected by mood/emotion, holistic, based on experience. Effective when experience is high and situation matches experience, less effective otherwise. System 2 (rational decision making- Necessary counterbalance to check on to System 1, Effortful and resource intensive): slow thinking, conscious, effortful, reliable, complex decisions Step 1. Completely define the problem Step 2. Identify complete set of decision criteria Step 3. Allocate objective weights to criteria Step 4. Develop complete set of alternatives Step 5. Evaluate alternatives simultaneously Step 6. Select best alternative - Expected utility refers to the utility of an entity or aggregate economy over a future period of time, given unknowable circumstances. Expected utility theory is used as a tool for analyzing situations in which individuals must make a decision without knowing the outcomes that may result from that decision. - An optimization model has three main components: An objective function. This is the function that needs to be optimized. A collection of decision variables. Bounded rationality - Allows us to respond to a complex qn by reducing it to a level at which it can be readily understood. is a prevalent model humans use because of cognitive limitations, info imperfection and time constraints. -> bounded rationality-> leads to suboptimal decisions Satisficing - Focus on a narrower set of criteria Evaluate smaller set of options Inexact estimation in evaluation Select first acceptable solution, even if it is not optimal Maybe use previous solution Heuristic and biases - Heuristic: mental shortcut/rule of thumb that allows people to solve problems and make judgments quickly and efficiently. It is evolutionarily adaptive as it allows us to react quickly to the environment. Heuristics are helpful in many situations, but they can also lead to cognitive biases. 3 general human heuristics (1) Availability heuristic: the easier it is to consider instances of class y, the more frequent we think it is. (e.g K as the first letter vs K as the 3rd letter) A mental shortcut for making frequency or probability judgments based on “the ease with which instances or occurrences can be brought to mind” While availability has more to do with memory of specific instances, representativeness has more to do with memory of a prototype, stereotype or average. (2) Representativeness heuristic: The more object X is similar to class Y, the more likely we think X belongs to Y (e.g. a person is a librarian because shy and does not like interacting with people) cause stereotyping. Estimating likelihood of event through comparing it to an existing prototype that exists in our mind. a. Cause baseline neglect (e.g. far more teachers than librarian) b. Cause conjunction fallacy - the probability of two events occurring in conjunction is always less than or equal to the probability of either one occurring alone but we link things up. e.g. (3) Anchoring heuristic: initial estimated values affect the final estimates, even if it is irrelevant/ even after considerable adjustments (e.g. sales strategy. Putting a bigger figure and cancelling it.) (e.g. Last two digits of Social Security Number, and then bidding.) depends on relationship with person also. (u anchor on someone u feel comfortable with?) Biases Prospect theory (loss aversion): prefer avoiding losses to acquiring equivalent gains. Implications: we should “bundle losses” and “unbundle gains” (because we value gain less and value loss more) this will Maximize the psychological perception of gains and minimize the perception of losses because after a while people start to discount the losses. Endowment effect: value items we own more than if something does not belong to us. (because when its ours, giving it away is a loss). o o Caused by: Reference point theory: People evaluate the potential change as either being a gain or a loss. In line with prospect theory, changes that are framed as losses are weighed more heavily than are the changes framed as gains. Caused by: Attachment theory: Ownership creates an association between the self and the good. The good becomes incorporated into the self-concept and becomes part of ones identity. One develops emotional attachment to the good. Once an attachment has formed, the potential loss of the good is perceived as a threat to the self Framing: Tendency to evaluate risk differently depending on how decision is framed - When there is a sure game and a gamble: we are risk-averse When there is sure loss and a gamble: we gamble, we are risk seeking Cos loss is more painful than the happiness we get from gains We evaluate options against a reference point o Positive rp: risk-averse, take the gain o Negative rp: risk-seeking, gamble to try to remove loss Seminar 5 - MODELS OF JUDGMENT & DECISION MAKING II Press release- cannot remain silent. Thing leaders should do: Demonstrate empathy for the plight of the customers in these situations. Focus on the topic of taking responsibility and acknowledging mistakes. Demonstrate transparency with regard to the causes of the problem. Define the key steps being taken by the firm to remedy the situation. Apology: different when u are clearly at fault (“I’m sorry that we caused u harm”) and the cause of failure is not clear (Such an apology will become a liability in court should the firm face lawsuits about the matter. If an executive wishes to demonstrate empathy without accepting blame, she or he might say “I’m very sorry that this situation happened to you.) Confirmation bias - the tendency to favour information that confirms what one already believes and to avoid data that do not confirm one’s preexisting views and beliefs. (can relate to the carter case and the simulation we did—how we got a balanced view but we sticked to the first piece of info we got) we see what we want to (or expect) to see. Escalation of commitment (does not involve cost. Things that are quantifiable) - the tendency to remain committed to our past behaviors, particularly those exhibited publicly, even if they do not have desirable outcome. (e.g. joining business school and discovering computing is more suitable but not willing to change major.) Sunk cost fallacy - justification of increased money, lives, time etc (e.g. continuing to climb mount everest despite poor health, bad conditions because of how expensive the climb is.) But largely the same ^those 2 above(sunk cost, escalation of commitment) “dont cling to a mistake just because you spent a lot of time making it” How to counteract confirmation bias? - darwin’s method: In one notebook, he wrote down observations in support of his emerging theory. In another notebook, he wrote down observations inconsistent with his emerging conclusions. - Actively seek out information that disapproves what u believe. How to counteract sunk cost fallacy? - Seek out the views of people who are not involved with the earlier decisions - Examine why admitting to an earlier mistake distresses you. If the problem lies in your own wounded self-esteem, deal with it. Be aware of potential sunk-cost biases in the decisions and recommendations from subordinates. Reassign responsibilities to someone else when necessary How to counteract anchoring effect? - Think about the problem yourself before consulting others Seek info from a variety of people Avoid anchoring ppl (“is this good or not?” U want them to say good, hence they might be anchored and say “good”) Decide on your own standpoint before others anchor your negation, also look for opportunities to use anchors to your advantage how to counteract framing? - Don’t automatically accept initial framing Challenge people who frame decisions as either gains or losses with questions anchored in another frame Ask urself, especially enar the end of the decision process, how ur thinking will change when framing change Overconfidence - Overconfidence bias is the tendency for a person to overestimate their abilities. Gambler's fallacy or randomness error - - - The tendency to believe that the probability of a random event occurring in the future is affected by previous instances of that type of event when The problem is, the two aren’t causally connected e.g. monte carlo fallacy ->last 10 spins land on black. Gamblers thought red was long overdue so started betting on red. Ended up loosing a lot. e.g. financial analysis (sell winners too early—stock rising too much, maybe gonna fall and hold losers too long- its gonna increase soon. Theres no causality between rise and fall. Its past price trajectory in itself does not determine its future trajectory) e.g. hot hand fallacy (players are no more likely to make a shot after making the previous shot than after missing the previous shot. They forget that because the sample size is small, such coincidences are not only unsurprising, they are inevitable.) Fundamental attribution error - - Individual’s tendency to attribute another’s action to their character or personality, while attributing their own behavior to external situational factors outside of their control. Neglect the situational constraints of others; behaviour. e.g. u late for work-> traffic jam. Others late- they lazy. Decoy effect - The tendency to change in preference between two options when also presented with a third option that is asymmetrically dominated e.g. vs - Adding a third options causes u to choose a more expensive one^ Present effect - - Individuals’ tendency to over-estimate the value of what they can have today, relative to what they can have tomorrow. We tend to value immediate rewards very highly and undervalue longterm gains. If the present is too valuable, there may be ways to leverage the future. e.g. ask someone for lunch tgt now vs lunch a long time later-> more likely to agree for long time later.) How do we decide whether to choose the smaller but sooner vs larger by later rewards? o Compute net present value (NPV) of larger later option using continuously compounded interest rates o Choose larger later option if NPV > market interest rate, otherwise choose smaller sooner Status quo bias - - An emotional bias, preference for the current state of affairs. The current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived as a loss Why? o A) Too lazy to make decisions, so accept the default o b) Too difficult to make decisions: The more choices you are given, the more pull the status quo has o Rule of satisficing (“Good enough”), not optimizing e.g. organ donation. Opt in/opt out. When it is opt in u are less likely to opt in. When it is opt out u don’t opt out. Counteracting biases in general - everyone is vulnerable to cognitive biases. Intelligence, experience, and/or expertise in a particular field does not shield people from these decision traps. they are rooted in human nature -begins with awareness - do you understand and can you recognize these biases in yourself and others? - Do you have an outside, unbiased adviser to serve as a sounding board during a critical decisionmaking process, someone without vested interests in this situation? - Techniques such as devil’s advocacy (when someone pretends, in a discussion or argument, to be against an idea or plan that has a lot of support in hopes of uncovering flaws or mistakes.) and dialectical inquiry(The group is divided into two subgroups, and each subgroup develops a set of assumptions and recommendations that oppose each other.) can help stimulate constructive debate and protect against cognitive biases. Lecture 7 - GROUP DECISIONS: COLLABORATING The wisdom of the crowd- grps often make decisions that are superior to those made by individual e.g. guessing the number of beans in container- ppl alone can be far of the mark but when u take avg it gets much closer to the actual number. When groups are ineffective? -poor decision making and norms -ineffective members -biases and traps in group decision making PART 1: DECISION MAKING PROCESS AND NORMS Video on google researching on how to build the perfect team. - - - Team membership does not correlate to team success. As long as there's a certain culture, a team will gel. equality in conversational turn-taking: everyone talk around the same amount. (including minority (e.g. exchange students vs singaporeans in a conversation. Exchange students who don’t know English very well may find it hard to match our speed of talking.) Ostentatious listening -> acknowledging your members. (when members of a team demonstrate they are actively listening by repeating what has just been said and making eye contact.) listen and talk. -> leads to psychological safety. Without this, members don’t trust one another (afraid the things shared are not received properly, or they will be judged) Effective group decision making 1) Members solicit others’ views 2) Members listen to and fully consider each other’s views 3) All members (including minority) receive sufficient opportunity to provide input 4) Influence is accorded in proportion to people’s expertise about the current decision Inquiry approach is important!!! Advocacy: leader pushing his/her view. Inquiry: more of a collaboration. Recognise leaders may not be the most well informed in the area, ask for opinions instead of telling members what to do. 6 stages model (in effective group decision-making) (1) The step on defining the problem is often neglected, you just think everyone is thinking in the same way. (2) Generate solution alternatives and determining the optimal solution are neglected as well -> too many ideas, how to know which to choose. Types of conflicts -task vs relationship conflict. Task conflict can lead to relationship conflict sometimes. We don’t want relationship/mood related conflict. “The strongest lesson I learned at McKinsey that I now share with every new hire is what they call the 'obligation to dissent,'” he told the New York Times. “It means that the youngest, most junior person in any given meeting is the most capable to disagree with the most senior person in the room.” PART 2: inactive members The ringelmann effect (social loafing) - tendency for individual members of a group to contribute less as the size of their group increases. - Max Ringelman’s Experiment: people pulling ropes. Individual pulling rope put in more effort in comparison to when they were pulling rope with others (avg of each person’s efforts falls) o When people think the grp’s effort is evaluated instead of individual effort, they will exert less effort in the task. Free-rider - Group member who gets benefit without contribution Why do members engage in social loafing? - - Unhappiness with team itself You feel like someone else can do it better so u don’t do it. individual outputs cannot be evaluated they expect their co-workers to perform well they work on tasks that are perceived as low in meaningfulness or personal involvement a group-level comparison standard is not available they work with strangers Evaluation apprehension: Individuals expect their effort to be less likely to lead to valued outcomes when working collectively (Did you limit your contributions to the group discussion because you worried that people would judge your ideas? Did you limit your contribution to the group discussion because you felt that no one was paying any attention to you?) Production blocking: individuals’ idea generation is “blocked” while waiting their turn to talk (everyone can’t talk at once) and listening to other people is distracting. Based on the individual’s output, group productivity should have been much higher. How to counteract the tendency to loaf? - identifiability: People are motivated when they believe that their work is identifiable and separable from the work of others. - divide task - assign roles - measure individual inputs - limit group size e.g. People shout louder when each group member is wearing a microphone and believe that their personal output can be measured. e.g.2. Football coaches individually film and evaluate each player - gatekeeper: person who actively gets people to contribute. Promote involvement - reward individual perf - strength team cohesion: if u like the team v much, u will want to contribute - team charter: guidelines like mission, vision, objectives PART 3: Biases and traps in group decision making 1. Biases that prevent us from speaking up a. Conformity: we change our views towards the majority of the group e.g. E.g., if the majority thinks this way and I think another way, I must be wrong. Self-censorship b. False consensus: we overestimate the extent to which others share the same views I.e. What I know is also what everyone else knows, so there is no need to mention it. Illusion of unanimity. 2. Biases that prevent us from changing our mind A. Naïve realism/fundamental attribution error/egocentrism (close-minded): when u believe so strongly in your point, anyone who gives a diff pt is wrong. Aka I see the world as it really is. Other fair-minded and reasonable people will share my views. When other individuals do not share my views there are three possible explanations: (1) They haven’t been told the truth (2) They are too lazy or stupid to reach correct interpretations and conclusions, or (3) They are biased by their self-interest, dogma(principals) or ideology. 3. Group dynamics that hinder comprehensive information processing A. Common information effect - Team more likely discuss/overemphasis what everyone knows. Less likely discuss unique information -> Biased decision making. that could lead to a hidden profile: superior decision alternative but the superiority of the choice is hidden from group members because each individual member only has a portion of the information supporting the superior alternative choice. Information held in common by group members favours a particular choice, whereas unshared information contradicts the choice. B. Groupthink: used in a derogratory manner, being generally attached to poor decisions and not to collective successes,. When team members place decision consensus above all other decision priorities. Tends to occur in highly cohesive groups that are under high stress from an external threat and have low self-esteem due to an earlier failure or decision difficulty Avoiding groupthink - Monitor team size, Limiting premature seeking of agreement, Open style of leadership, Devil’s advocate, subgroup discussions, Using effective decision-making techniques, Invite different perspectives, Beware of time pressure C. The Abilene Paradox- A form of pluralistic ignorance in which group members adopt a position because they feel other members desire it; team members don’t challenge one another because they want to avoid conflict or achieve consensus. Factors such as selflimiting behavior (assumptions or perceptions we have about ourselves and the way the world works. These assumptions are “self-limiting” because by holding on to these beliefs, we are in some way holding ourselves back from achieving our goals e.g. “I'm not ready”, “I don't have enough experience”), or a person’s reluctance to air or defend their viewpoints, can lead to problems like the Abilene Paradox. Key causes of self-limiting behavior in teams: the pressure of someone with expertise. The presentation of a compelling argument. Lack of confidence in one’s ability to contribute. Group sees decision as unimportant or meaningless. How to avoid the abilene paradox- Confront the issue in a team setting. conduct a private vote. Minimize status differences. Provide a formal forum for controversial views D. Group polarization: tendency for group discussions to intensify group opinion, thus producing more extreme judgments that might be obtained by pooling individual’s views separately. Reducing these biases (1) NOMINAL GROUP TECHNIQUE (NGT) - Identify the specific problem -> Each person silently write down as many ideas/solutions as possible-> Share ideas with entire group in a round-robin fashion ->Record all ideas-> Once ideas are all listed, the team discusses each item, focusing on clarification-> Members privately choose the top solution/ideas and one member (leader) collects the card and averages the rating to yield a group decision (2) Second chance meeting- Hold a meeting after an initial agreement to allow members to express remaining doubts and concerns (3) Pre-mortem session- Ask members to imagine that the decision turns into a disaster and explain why as detailed as possible (Prospective hindsight) (4) Inquiry approach Lecture 8 – Negotiated decisions: cooperating and competing What is negotiation: interpersonal decision-process necessary whenever we cannot achieve our objectives without support from others. Any effort to influence or persuade someone else to a particular course of action. core leadership competency. Negotiation is a skill that can be improved. Rejection therapy -go out and seek rejection. Will help desensitize us to the pain of rejection. Staying engaged instead of running away. Things he learnt that helped him negotiate successfully included asking them why they rejected you and also Mentioning a doubt the other person have – gain trust. Basis of negotiation 1. Distributive negotiation – involve fixed-sum game (0ne person’s gain is another person’s loss). Almost directly conflicting interests – each party is attempting to maximize his/her share of the fixed-sum payoff/ Simply dividing the “pie” – the trick is, though, parties generally do not know exactly how large the “pie” actually is. Preparation b4 negotiation: access ur own... 1. goals or aspiration - target point 2. BATNA (best alternative to negotiated agreement)- what u can count on if u don’t reach an agreement with your counterpart. Do everything you can to improve BATNA before you negotiate. Do not fall in love with one alternative (make u not consider other alternatives.) Counterparts’ perception of your BATNA are also very impt (Do not let other people know what your batna is. -- if ur alternative is lower. If ur BATNA is really good, then use that as a counteroffer) 3. reservation price = BATNA + - transactional cost to enact batna. Your bottom line, the point where u are indifferent to whether you achieve a negotiated agreement or walk away. Anything worse than the reservation price, u prefer no agreement. Reservation point should never change unless…Your BATNA changes or the terms of the deal change. Assess your opponent’s: goals or aspirations, BATNA, reservation price - NEVER REVEAL YOUR RESERVATION PRICE, WRITE ALL THESE INFO DOWN IN A PLANNING DOCUMENT Bargaining zone- the space between the buyer’s reservation price (BR) and the seller’s reservation price (SR) – that is, the zone of possible agreement (ZOPA). If BR < SR, then there is no zone of possible agreement. If BR > SR, then a zone of possible agreement exists. The impacts of anchors – people make estimates by starting from an initial anchor value and adjusting from there to yield a final answer. However, they generally do not make sufficient adjustments. Anchors are usually based on whatever information, relevant or irrelevant, is available. In negotiations, final agreements are more strongly influenced by initial offers than by subsequent concessionary behavior. BUT, If you make the first offer, you run the risk of undercutting the bargaining zone, potentially leaving yourself with little room to make concessions(adjustments). To make the first offer or not? In general, do your research and make an aggressive first offer - Goals predict first offers which predict outcomes Make your first offer as extreme as you can possibly justify or explain based on your BATNA and goals Consider timing and other side’s alternatives Talk about your offer as long as possible The more complex the negotiation, the greater the anchoring advantage. “If the other party provides an unacceptable anchor, the negotiator must re-anchor the process – even if it means threatening to walk away from the table – rather than acknowledge an unacceptable starting point for the negotiation” Claiming vs creating values Tale of two sisters: two sisters fighting for an orange. Ultimately, u get half, I get half. But one used the peel while the other used the flesh. Dangerous assumptions shown - Fixed pie bias: The value in front of us is all that there is. We assume that whatever we lose is the other party’s gain. Their intentions must be hostile Interest must be opposed How to best claim as much value for yourself? We claim the most value for ourselves by working with others to create the most value possible. Be cooperative not competitive to be successful in the long term. Moving from positions to interests – instead of looking at the specific options each person wants we should look at Why they want it (underlying goals and conserns, can potentially be satisfied by bringing in new options) Expanding the pie: through bringing more issues into the negotiation. Single-issue negotiations (price) are inherently about claiming value. Bringing in new issues creates opportunities for creative trade offs Each side trades what they want least for what they want most. Both side’s interests are satisfied Other considerations: establishing liking (if they like u, easier to negotiate), having a cooperative mindset Do we stop after creating value during the negotiation? Post-settlement settlement – settlements that are reached after the initial agreement is signed. Why? - Can improve both parties’ outcome. the recently signed agreement becomes the new BATNA for both parties Already-signed agreement confirms the parties’ ability to work together After a signed agreement, parties feel less anxious and are often more willing to share information STEPS TO PROPOSE A POST-SETTLEMENT SETTLEMENT 1. Start by acknowledging the progress that was already made in reaching the initial agreement. 2. Suggest that there are aspects of the deal that you wish could be improved ,acknowledge that they probably feel similarly. 3. Suggest that you may have already conceded everything that you can afford, but that you are willing to try to think “outside the box” if that will help the other party. 4. State that it is important for both of you to realize that you are not looking for a new agreement, but for an improved agreement that both parties prefer to the current agreement. E.g. “Congratulations! I think that our hard work has really paid off in a great deal. We’re probably both ready to call it a day. I’m wondering, though, whether you might be open to an idea. Though we’re both satisfied with the agreement, there are inevitably aspects of the deal that I wish could have been better for me, and you probably feel the same way about other aspects. What if we spent a few more minutes talking about potential improvements to the deal that would make both of us better off? Maybe we’ve already exhausted those possibilities—but it might be a good idea to see if there are any stones left unturned. Of course, if we can’t find ways to make both parties happier, we’ll be even more confident that our signed agreement is the right one for everyone. If you’re up for it, let’s give it a try…” DISTRIBUTIVE VS INTEGRATIVE NEGOTIATION Multiple equivalent simultaneous offers (MESO): By making multiple equivalent simultaneous offers, the theory goes, you appear to be a lot more flexible, collect information about the other side's preferences based on which offer she likes best, and increase the odds of reaching a mutually beneficial negotiated agreement - Pitfall of multiple issue negotiation is to talk one issue at a time. Use packages. MESO is a great tool to help you negotiate. Benefits of MESO: Anchor and re-anchor the negotiation, Gather information from the other side about relative priorities, Help unskilled negotiators, Be aggressive and persistent while signalling cooperation, Test what the other side is telling you, Make “concessions” that are cheap for you, Highlight your own value added, Control the process of the negotiation. Deciding what to decide: What should be the objective of the meeting? What kind of questions are we asking? How do we ask difficult questions? When do we abandon individual interests over group interests? Negotiation practice where we each had different roles in a company and hence, different interests. We were supposed to decide whether to launch a new product and how to use the budget for it. We all ended up neglecting the unshared information that points to how improving the existing product was better than to produce a new product. (hidden profile) -----------------------------Biz 2 5-10 7-9. No internet access!!! 3 out of 6 qn!! INPUT NA FOR QN U ARE NOT ANSWERING. EACH THEME ANSWER 1 QN. CAN EVEN HAVE PRINTED NOTES YO. - NO ROUGH PAPER so bring ur ownnn
