Objective 5: Communication and Organizational Behavior

Describe the expectancy disconfirmation model.

(SDM190)

Rule of thumb for decisions

3 futures, 3 objectives, 3 options for each decision scenario (SDM185)

Describe the following action-oriented biases: · Excessive optimism · Overconfidence

Action-oriented biases · Excessive optimism: Overestimate likelihood of positive events/outcomes/plans & underestimate negative ones. · Overconfidence: overestimate our skills affecting future outcomes. Take credit for past positive outcomes & ignore role of chance. (SDM184)

Describe the different approaches to associates' involvement in managerial decisions, and the Vroom Yetten method.

Approaches - Low to High level of associate involvement: · AI: Manager solves alone, use information available · AII: Associates provide information, but not informed of problem or engaged for alternatives/evaluation. · CI: Manager explains problem one by one to associates, requests their input individually (not as a group), manager makes decision alone. · CII: Manager explains to associates as a group, obtains ideas/suggestions in group setting, makes decision alone. Input may or may not be reflected in manager's decision · GII: Manager explains to group. Work together to generate & evaluate alternatives & agree on solution. Manager acts as facilitator. Does not force group to accept his solution & will accept alternative from group. Manager must decide how much agreement should exist within group. Majority is speedier w/less risk of impasse than unanimity. Vroom-Yetton: Manager diagnoses problem & then associate involvement determined. Optimal involvement depends on quality of decision, acceptance or commitment subordinates have when implementing, amount of time making decision (OB10)

Describe the following Negotiation Strategy & its Tactics · Attitudinal bargaining

Attitudinal structuring: Influencing attitudes & relationships of negotiating parties Tactics: Use language similar to other party's ; Dissociate oneself from others not liked by opponent; Associate with others' likes; Reward opponent's behavior; Express appreciation (OB12)

Describe the following biases related to the framing of alternatives: · Loss aversion · Sunk-cost fallacy · Escalation of commitment · Controllability bias

Biases related to framing of alternatives · Loss aversion: Feel losses more acutely than gains of same amount à more risk-averse than rational · Sunk-cost fallacy: Pay attention to historical unrecoverable costs when considering future actions · Escalation of commitment: Invest add'l resources in losing proposition because of sunk costs already (time, effort, money invested already) · Controllability bias: We can control outcomes more than so, so we misjudge riskiness of action (SDM184)

Describe the following biases related to perceiving & judging alternatives: · Confirmation bias · Anchoring & insufficient adjustment · Groupthink · Egocentrism

Biases related to perceiving & judging alternatives · Confirmation bias: Emphasize evidence consistent with favored belief, less on contradictory evidence. Fail to search impartially for evidence · Anchoring & insufficient adjustment: Rooting in initial value & insufficiently adjusting our thinking from that value · Groupthink: Strive for consensus at cost of realistic appraisal of alternative courses of action · Egocentrism: Focus on own perspective & can't imagine how others affected by policy / strategy - everyone has same information access. (SDM184)

Describe group decision-making techniques

Brainstorming: Generate large number of ideas. Encourages imagination - bad ideas lead to good ones, building on others' ideas, evaluation comes after. Individual brainstorming helps avoid criticism & silencing. Combating problems of group brainstorming: 1) Brain writing: Everyone stops during meeting & writes down all of their ideas. Introduces anonymity, less talking/distraction 2) Electronic brainstorming: Ideas entered into database & ideas put on large screen. Anonymity, less distraction/talking Nominal Group Technique: Structured discussion, but final decision decided by silent vote: · Ideas written down silently · First round - One member one idea. Repeat until all ideas presented. No discussion until finished. · Ideas recorded & discussed. Clarify & evaluate. · Conclude with silent & independent vote / ranking of alternatives. Decision determined by summing or pooling votes. Delphi Technique · Members solicited for judgements remotely, i.e. through questionnaire. · Results fed back to group, & members can respond & change their judgements. · Good when members geographically dispersed, can constrain input, (i.e., using questionnaire) Constructive conflict approaches: May lead to lower satisfaction than other approaches due to conflict, still effective. · Dialectical inquiry: Two points of view / recommendations developed by subgroups, then debated. Helps ensure thorough review. · Devil's advocacy: Member/subgroup argues against others' recommendation. Only generates one set of assumptions/recommendations. (OB10)

Describe the following potential biases when offering rewards programs · Norm of reciprocity · Expectancy disconfirmation model · Loss aversion

Consider biases when offering rewards program: Err on side of caution & be conservative in terms of type, amount & frequency: · Norm of reciprocity: Once rewards introduced, expected & seen as contractual: Customers hold up their end, company must do the same · Expectancy disconfirmation model: Dissatisfaction when reward is removed - The gap between actual & expectation of product experience. · Loss aversion can come into play - loss of reward more painful than gain of reward. (SDM190)

Describe the following Negotiation Strategy & its Tactics · Distributed bargaining

Distributive bargaining: Approach w/competing & win-lose. Used when goals of one in conflict w/another. Tactics: "Breaking negotiation would be costly to you"; Preventing other from committing to their target; convincing other to commit to your target; Convince other that your target is fair (OB12)

Describe the following step of the five prong problem solving approach. · Design the solution: Choice architecture & nudges · Design the solution: Choosing the right lever

Choice architecture & nudges: · Nudge people in a way that encourages certain decisions / actions without taking away freedom to make decisions for themselves. · E.g. Google has sign saying 'those who choose larger plates eat more than those using smaller plates.' à +50% increase in small plate use. E.g. Auto enrolling employees in retirement plan & opt-out vs. opt-in How to choose the right lever · If possible, bypass both systems so solution implemented automatically - requires no effort for decision-makers; may not be feasible, or staff may be resentful for decisions being made for them or using a one-size-fits-all. · E.g. automatically renewing loans instead of using loan officers - they may know more than the automatic process, but may also be biased. · Using system 2 has cognitive costs & is limited. E.g. Simply thanking for work is enough of System 1 to improve performance (SDM184)

Describe the following predisposition in decision-making: Cognitive Biases

Cognitive Biases: Mental shortcuts to simplify. · Confirmation bias: Seek info supporting own beliefs · Recall bias: Rely on info easily recalled for decision · Anchoring: Emphasizing first piece of info in decision. · Sunk cost bias: Weighing past investments on current decision. (OB10)

Describe how to reduce human error in capital decision-making.

Cognitive biases lead to excessive capital usage, difficult maintaining steady / above-avg. returns, etc. Recommendations: 1) Broaden portfolio of submissions for capital; 2) Use consistent metrics to level playing field for proposals. (SDM189)

Contrast dysfunctional conflict and functional conflict.

Dysfunctional Conflict · Creates doubt in s/h mind about firm's performance · Power/political conflict/behavior to win at all costs · Negative effects on interpersonal relationships · Consumes time, resources & emotional energy to deal w/conflict on interpersonal & firm level Functional conflict · Encourages innovation · Facilitation of change · Improved problem solving / decision making · Enhanced morale & cohesion within a group · More spontaneity in communication · Stimulation of creativity & productivity (OB12)

Describe the causes of dysfunctional conflict within a firm.

Communication (talking vs. listening) Cognitive Factors: Expectations of profession/career vs. what firm values. Perceptions of others' goals, agendas, etc. Structural Factors Specialization: Complex firms w/specialized units/departments create potential for conflict Interdependency: Limited resources or required coordination for dividing up tasks/resources Centralization vs. Decentralization of authority: · Centralization: May lessen dysf. conflict, but can arise if individuals have less control over their work. · Decentralized: Can reduce dysf. conflict if subordinates manage work more, but can lead to conflict among units as well · Physical Layout: Working too closely (physically, lack of privacy) or too far (virtual, lack of face-to-face) Individual Characteristics · Personality (e.g. competitive, impatient, etc.) · Dispositional trust - Low trusting people less likely to cooperate/concede; high trusting people concede more easily b/c of positive expectations of others' motives; · Planners vs. less organized · Perception differences about conflict (i.e. if it's helpful or hurtful) · Goals that are competing or contrary History: · Poor past performance · Past conflicts · Distrust developed from prior interactions (OB12)

Characterize communication media in interpersonal communication

Communication Media Richness: How much info medium conveys. Depends on Order of richness 1) potential for immediate feedback, 2) multiple cues, 3) use of natural language (vs. numbers) 4) extent communication has personal focus Order of richness · Face to face: Richest - cues, tone, semantics, facial expressions, body language. · Video conferencing, phone / radio · Email / text · Personal written text · Formal written text · Formal numerical text (graphs, stats, printouts) Tradeoff: Richness has a tradeoff of cost/benefit · Emotionally stable: Richer media requiring social skill · Emotionally unstable: Leaner media independent of situation · Deceiving use richer media · May depend on firm norms/requirements (OB9)

Describe communication networks in Organizational Communication.

Communication Networks: Patterns of communication, correspond with firm, affect innovation, coordination, performance. Characterized in terms of density: Sparse: Few connections; Dense: many connections Centralization: Central points for better control - Better for dense networks: · Wheel (i.e., w/spokes, no outside), · Y-network (communicate w/multiple, while others communicate w/only one - speed/efficiency) Decentralization: No single member of network dominates information exchanges. · Circle · Well-connected (wheel w/tire) (OB9)

Describe the different communication styles in interpersonal communication.

Communication Styles: How communication is conveyed. May vary w/ type of work. Expressiveness: Vivid, verbose, conversational dominance, humor, unpretentiousness Preciseness: Thoughtful, careful, structured Verbal aggressiveness: How opinions are advocated - authoritarian, angry, unsupportive Questioning orientation: Degree of curiosity - inquisitive, argumentative, philosophical Emotionality: Reflection of emotion - worry, tense, defensive Impression management: Calculated, guarded, dominating, charm, concealment (OB9)

Describe communication technology in interpersonal communication

Communication Technology · Rapid advancements in technology (Internet, video, etc.) also lead to concerns over its misuse, failure & overload of information. (OB9)

Describe conflict escalation, conflict outcomes and responses to conflict.

Conflict Escalation: Conflict grows worse over time. E.g., Cultural differences, History of antagonism, Insecure self-images, Informal ties, Status differences, Don't identify with one another, Both have goal of escalating conflict in the other Conflict Outcomes Lose-Lose - no one gets what they desire Win-Lose or Lose-Win: One party gains at expense of another Compromise: Giving in to some degree on set of issues Win-Win: Both parties get what they want (e.g. union gets productivity incentives with cash bonuses) Responses to Conflict Competing/forcing/dominating: Winning at other's expense Accommodating: Forging own concerns so other party's concerns are met Avoiding: Neglects his and other's concerns Compromising: Partially meeting own and other's concerns Collaborating: Working to meet both concerns (OB12)

Describe how to fight motivated bias.

Counterattacks: Blinding: Eliminate influence from stereotypes, idiosyncratic associations & irrelevant factors. (audition behind curtain) Checklists: Reduce forgetfulness, memory distortions; focus on relevance. (critiera for pitches, structured interviews w/standard rating for responses). Algorithms: Consistency w/focus on how much emphasis each piece of information gets. (credit scores, hiring algorithms). Trip wires (announce deadline/consequence in advance to avoid "present bias" - tendency to focus on immediate preferences & ignore LT consequences. Sunk costs ignored). Decision points (if trip wire is too binding, take break & reassess objectives/options, e.g. bidding). (SDM185)

Describe some debiasing techniques.

Debiasing Techniques: · Mindfulness of biases: Awareness in self & others · Practice debiasing as a group to remove emotion. · Teach bias as something that's there, not as a defect. · Assign obligation to dissent (may need to be pushed): Designated devil's advocate w/ factual dissent - project team (why case should be made for the project) and devil's advocate w/risk-reward analysis. · Premortem: We're here five years later. What went wrong? · Red team vs. blue team: Internal team vs. independent external team. Written materials read beforehand, avoids emotion, easier discussion · Start in small ways, start at the top, take it seriously, be open to it. · Other ideas: Controlled risk-taking, more agile, rapid proto-typing (SDM186)

Describe decision-making steps, and contrast optimal vs. satisfactory decisions

Decision-Making Steps · Define problem & desired state · ID criteria & information for solution & decisions · Evaluate alternatives, gather feedback, follow up, monitor results, repeat. Optimal vs. Satisfactory Decisions: Typically limited to satisfying decisions due to lack of 100% complete information/alternatives, & tend to choose 1st alternative since we're busy & conserving resources. Satisfying: Timely, acceptable, satisfy criteria Optimal: All information & alternatives. (OB10)

Describe the following predisposition in decision-making: Decision-Making Styles

Decision-Making Styles: Relating to how individuals gather information & evaluate alternatives. How individuals gather information: · Sensing: Relies on senses w/focus on experience, rules, steps, & fact-checking to support decisions. Practical, realistic, enjoy gathering information, creativity difficult. · Intuition: Dislike details & time-sorting, information seen in chunks, holistic, integrated abstractions. Imaginative, creative. Adjusts to rapid changes/crises. Useful where facts/direction/time ambiguous or different alternatives exist. How individuals evaluate alternatives: · Thinking: Rational, impersonal. Objective, analytical, logical, firm. Easy to critique others, difficult dealing w/people's feelings. Standards, policies, discipline, detached, impersonal, organized. Improves performance. · Feeling: Emotion-based, personal, subjective. Emphasize harmony, influenced by their/others' likes/dislikes, sympathetic, appreciative. Improves morale of those around us. (OB10)

Describe the following step of the five prong problem solving approach. · Define the problem

Define the problem Before using behavioral economics, determine the following: · Human behavior is at core of the problem, e.g. employee burnout can be resolved by changing perception / response to situation. · People are acting in ways contrary to own best interests. Resolved by gently guiding people to different choices & more aligned with their best interests. · Problem can be narrowly defined: Break problem down into smaller, more manageable pieces. E.g. heath care customers having prescriptions mailed to them rather than pharmacy pickup saves company money & customers time (SDM184)

Describe the following predisposition in decision-making: Degree of Acceptable Risk

Degree of Acceptable Risk: Those inclined to lower risk-taking & require more information. Reference points are used to evaluate current standing, goal, min. level, and the average - Amount of risk depends on individual. (OB10)

Characterize the three directions of organization communication.

Direction of Organizational Communication Downward Communication: · Top-down communication to managers & associates. · Often deficient & can lead to organizational problems. Upward Communication: · Bottom-up communication. Difficult to do and fear of retaliation, but helped along by open-door policies, surveys, decision participation, encouragement of honesty Horizontal Communication: · Between people at same level - overlooked in design of firms. · Important for setting boundaries, recognizing dependencies, etc. · 360 degree evaluations can lead to political ratings of superiors or peers, or managers may retaliate for poor feedback. (OB9)

List the three types of negotiation strategies

Distributive bargaining Integrative bargaining Attitudinal structuring (OB12)

List and describe the elements of communication.

Elements of communication: Encoding: Translating information into message or signal Decoding: How message is interpreted Medium / channel: Means by which message sent Receipt & Feedback: Process message is received and response sent back (OB9)

Describe the following cognitive biases, the practical context, and considerations w.r.t. financial incentives · Expectancy disconfirmation & Loss aversion

Expectancy disconfirmation / Loss Aversion Practical Context: Sustainability of chosen acknowledgment methods (type, amount, timing) Expectancy disconfirmation: Considerations: Understand long-term resource requirements and anticipate customer participation rates Loss Aversion Considerations: Err on the conservative side when launching a customer acknowledgement program (SDM190)

Describe the following bias and how to address / mitigate it: · Expert bias

Expert bias • Relying on a single decision • "Chasing" a person's or group's past performance How to address it: • Pool recommendations from a diverse set of qualified individuals - usually better than one decision-maker • Do not chase past performance (SDM189)

Describe some potential pitfalls of using groups for decision-making

Groupthink: Decision is the consensus, and comes at expense of discussing honestly. Doesn't guarantee poor decision, but increases chances of it. Occurs when, · Group incongruence: Members don't get along / don't want to criticize. · Members more passive: Yield more easily, derive satisfaction from membership, try to prevent division. · Image at stake: Group w/pos. image under threat, i.e. competition, adverse engagement. · Symptoms: Self-censorship, pressure on dissonant members, unanimity, complex rationalization, perception of member invulnerability (ignore dangers from optimism), mindguards - shielding members from factors, morality of group & immorality of opposition, stereotypying others Common Information Bias: Emphasizing information held by majority & ignoring/neglecting information from minority. Diversity-Based Infighting: Unproductive, negative conflict over differing views Risky Shift: More risk-taking as group than individual would alone. Leads to shifting blame to group & taking less responsibility. (OB10)

Contrast deductive and inductive reasoning: · How each works · When they should be used

Ideas connect to each other in a pyramid up, down, & sideways. Deductive Reasoning: "...therefore". Points derive from each other. Makes use of syllogism (conclusion from major/minor premises i.e., this leads to this leads to this). How it works: · Make a statement about a situation in the world · Make another statement about a related situation at the same time in the world. · Relates to the first by commenting on its subject or predicate · State implications of these two in the world at the same time. When to use it · In deductive reasoning, recommendations follow from conclusions/findings of a problem · Use primarily in paragraphs for key lines/points (lowest part of pyramid) · Use inductive reasoning to support subject because easier on the reader (stringing together A then B then C, and asking reader to old onto all of these). Present recommendation first (what reader cares about) & follow with why. Inductive reasoning: Infer something about sameness of pieces. Points don't derive from each other. Requires more creativity to bring things together by 1) developing ideas into a grouping and 2) identifying misfits among them How it works · Use one word to describe all the things - will be a plural noun since it's a thing and there's more than one item in the group · Check reasoning by questioning from bottom up, i.e. can you infer ___ from the groupings? · One piece of evidence will always force deductive reasoning · Hold subject/predicate constant & vary the other predicate/subject How they compare: · Deductive: __+___ = __ · Inductive: __~___~__--> (PP5)

Describe the following cognitive biases, the practical context, and considerations w.r.t. financial incentives · Illusion of control & Mere-reaction effect

Illusion of control & Mere-reaction effect Practical Context: Any response—even a negative one— is better than no response Considerations: Timing trumps frequency (SDM190)

Describe the individual barriers to effective communication.

Individual Barriers to Effective Communication 1) Individual perceptions/frames of reference 2) Semantic Differences: Dif. word/gesture meanings, jargon, symbols 3) Status differences hinder upward communication, & source credibility 4) Consideration of self-Interest: Information provided that is biased toward their own self-interest 5) Poor Listening Skills: Receivers don't always listen or take the message in. 6) Personal Space: Different perceptions of personal space may lead to lack of paying attention (OB9)

Describe the following Negotiation Strategy & its Tactics · Integrative bargaining

Integrative bargaining: Collaborative win-win approach. Used when problem permits attractive solution for both. Tactics: Concerns are aligned/important; show how your target too important to compromise; show win-win is possible; show you're flexible to solutions; insist fair criteria for deciding among solutions (OB12)

Describe the two types of interpersonal communication.

Interpersonal Communication: Direct verbal/nonverbal Formal Communication: Formal structure, sanctioned information. Weaknesses: Slow, loss of morale/ dissatisfaction in company, difficult to overcome. Informal Communication: Spontaneous interaction. Strengths: Solidarity, easier to share & reach multiple people. Weaknesses: Rumors (unsubstantiated), gossip (presumed factual, communicated privately). (OB9)

Ways to think/evaluate your options, avoid functional fixedness & cognitive rigidity.

Joint evaluation: Separate options --> people focus on what's easily evaluated. (Two applicants, high/low GPA, low/high programs). Focus on what's missing if a choice is made (opportunity cost) Vanishing options test: If options weren't available, what else would you do with __? (SDM185)

Describe the following steps of the five prong problem solving approach. · Design the solution: Levers/Ways to Trigger System 1 Thinking

Levers/Ways to Trigger System 1 Thinking: Arouse emotions: E.g. Group of new hires split into 2: One told on first day of orientation to think about their strengths & how to apply them in new jobs - Other group not told anything. Increase in performance & lower turnover. Due to emotional bond w/firm. Harness biases to executives' advantage · Loss aversion: Losses hurt more than gains. · Vividness bias: Pay more attention to flashy data than less flashy data. · E.g. "Pay your taxes or lose your car" at top of letters with picture of car in question. · Highlighting downside of failing to take action, e.g. salespeople perform better if they know there's another waiting for their job in the pipeline Simplify the process: Doctors more likely to keep patient information updated if it's shared across departments (SDM184)

Describe the following steps of the five prong problem solving approach. · Design the solution: Levers/Ways to Trigger System 2 Thinking

Levers/ways to Trigger System 2 thinking 1) Simultaneously evaluate alternatives using joint decision-making (avoids biases). 2) Create opportunities for reflection: · Forcing employees to make a decision about something can cause reflection, assist in training & development - Writing notes & reading back can increase performance. 3) Use planning prompts · E.g. letters mailed about flu shots at company. Providing a prompt on the letter - even if not creating an appt. led to increase in flu shots by 13%. · Or having team members write out map for their goals that detail when & how. 4) Inspire broader thinking: · Using 'could' instead of 'should' inspires more than one alternative for thinking - Less focus on a single solution. 5) Increase accountability: · Helps employees eliminate bias from their decision-making from accountability. E.g. proportion of women in mgmt through clear responsibility for diversity. 6) Encourage consideration of disconfirming evidence: · Confirmation bias: We tend to interpret information as being supportive of an action thought to be correct. · Escalation of commitment: Once we invest resources, we tend to justify investments continuing down that path even if new information suggests otherwise · Counteracted by encouraging counterfactual thinking, e.g. how might have events unfolded if we took a different course of action? And making sure employees consider disconfirming evidence or have one member ask tough questions, i.e. where were flaws in planned course of action 7) Use reminders: Avoid biases from relying on system 1 too much, highlight goals & increase motivation. E.g. signing form on reporting of miles for insurance premium - those who signed at top reported higher. 8) Bypass both systems: Setup systems to skirt system 1 & 2 · Set the default: Automatically enrolling staff in retirement plan, etc. , preventing staff from working on same projects. · Build in automatic adjustments to account for poor system 1 & 2 thinking · Planning fallacy: Underestimating how long a project/task will take. Add buffer time to the projects, e.g. 30-50% of the schedule, depending on complexity of the project (SDM184)

Describe how monetary acknowledgements can backfire, and how to mitigate it.

Monetary acknowledgements can backfire: Trivialization effect: · Lower satisfaction: In an experiment, one group receiving thank-you note experienced higher than those receiving thank-you plus a nickel. · People have two sets of norms about how behavior & world should work: · Social norms: Simple requests, favors of each other, followed by 'thanks' · Market norms: Fair exchange, expectation of comparable benefits for effort How market norms affect loyalty: Financial perks ok to use as long as not considered too small by customer. Mitigating the trivialization effect: · Gauging how much is challenging - Could look at competitors, but may be subject to anchoring · Informing how their discount compared to others comparable to informing that firm gave to charity - Didn't mitigate that much. · If in doubt, leave financial rewards out (SDM190)

Describe the following predisposition in decision-making: Moods vs. Emotions

Moods vs. Emotions Moods: States of being w.r.t. pos/neg. feelings. Moods are generic in nature. Disconnected from any particular event. May lead to more creativity, risk-taking, less consistent, etc. Emotions: States of being w.r.t. people & events. Emotions are discrete (e.g. fear, anger). May face regret & react by avoiding choice again in future, or engaging in self-management: · Protecting ego by trying to reverse decision, · Run from responsibility, · Hindsight 20/20, · Ignore/suppress outcome, · Self-justification, anger. (OB10)

Describe how a pyramid structure helps the reader move down levels of abstraction.

Moving down levels of abstraction: · Higher level of abstraction (e.g. moving from five items to three categories) easier to recall because higher level suggests those under it. · Allows reader to think of a paragraph as one idea (the point you want to make) rather than the compilation of sentences (leading to re-reading). · Three rules for accomplishing this: 1) ideas at any level always summary of those that fall below them; 2) ideas in group are of the same kind (shortcut: can you group ideas as a plural noun?); 3) ideas logically ordered. (PP1)

Describe the following bias and how to address / mitigate it: · Narrow framing

Narrow framing • Focusing on a single attribute / problem in isolation for decision - even when interdependent and/or expected outcomes are the same (e.g., $240 gain vs. 25% of $1000). How to address it: • Use consistent evaluation elements/metrics aligned w/firm's goals • Make capital decisions in aggregate rather than individually or one at a time. (SDM189)

Characterize what nonverbal communication in interpersonal communication.

Nonverbal Communication conveys attitudes / emotional mental state information. Vary based on culture, but basic emotions the same for all: fear, disgust, surprise, happiness, anger · Expressions/gesturing: Facial expressions, tone, personal appearance, body language, paralanguage (how something is said - voice tone, pitch, silence), gestures (sign to convey a meaning). Easier to control. · Leaky behaviors: Behaviors we can't control - more likely to express true feelings through nonverbal means than verbal means. (OB9)

Describe the following bias and how to address / mitigate it: · Optimism / Overconfidence

Optimism / Overconfidence • Overly favorable perspective, comes w/overconfidence in estimates, & uncertainty avoidance. • Narrow range of prediction. How to address it: • Survey past performance: Are estimates optimistic w.r.t. reality? • Track predictions against reality - Focus on narratives & not data. • Remove anecdotal "proof points" from the decision-making process (SDM189)

Describe organizational barriers to effective communication.

Organizational Barriers to Effective Communication Information overload: · Occurs if facing uncertainty & requiring more information. · Tasks increasingly complex call for more information / specialists, · Face tech developments increasing available information Information Distortion: · Moving through technology, · Associates/competition withholding information, network breakdown (traveling through mult. people) · Specialty jargon, impairing communication · Time-pressure · Cross-cultural barriers, (OB9)

Describe how organizations can overcome communication barriers.

Overcoming Communication Barriers Encourage Proactive Individual Actions: · Knowing the audience, · Anticipating how message will be received, · Using the appropriate medium of communication, · Regulate information flow (avoid overloading) · Encourage/reward/cultivate feedback, active listening Conduct communication audits: · Evaluate communication capabilities / practices to determine needs & assess quality. · Meetings/commitment from major parties, · Conduct interviews w/top mgmt. & associates · Collect/analyze communication inventory/material, surveys. · Improve Communication Climates & understand perceptions of communication quality to improve mutual trust with associates. (OB9)

Describe why problem-solving arises and the routine for problem-solving.

Problem-Solving arises from either 1) you don't like the results or 2) you can't explain the results. Drawing out structure helps see which relationships fit, and matching the points to the structure. Problem Solving Routine · What is the problem? Gap actual/desired (how to direct analysis & write introduction). Results aren't the problem - what's causing gap is the problem. · Where does it lie? Situation giving rise to gap. Major analyses & data gathering to complete before forming recommendations to answer question. Can draw schematic of process. Relationships may not be obvious. Requires 1) identify all parts in the system, 2) arrange them in sequential order and 3) show inputs/outputs · Why does it exist? Structure of underlying processes giving rise to problem. · What could we do about it? Alternative ways structure could be changed - depends on feasibility & likelihood of success · What should we do about it? Changes required to accommodate alternative chosen. Not all solutions are worth cost vs. benefit - Evaluate risks (e.g. assumptions, failure to achieve objective, retaliation, etc.) (PP8)

Describe how a pyramid structure speeds up the process of discovering ideas.

Pyramid structure: Speeds process of discovering ideas through, Vertical relationship between points & subpoints: · · · · · Capture reader's attention by setting up a question in reader's mind so he wants to keep reading (with answer coming on lines below). · Question & answer continues until writer assume there are no other questions left from the reader. · Pyramid forces you to present information only as reader needs it to raise questions & subsequently answer them below. · Don't raise questions before ready to answer & don't answer questions before raising the question. Horizontal relationship within set of subpoints: Two types of logical relationships within a grouping: 1) Deductive: "If this and that, it follows that..." Second following first and reader can deduct the third from first two points 2) Inductive: "Given 1, 2 & 3, infer this..." Groupings are alike & can be designated by plural noun Narrative flow of introduction: · Question must be relevant to someone, or will have no need to read or ask. · Introduction traces history (time/place) of question's origin. · Tells reader what he already knows in story form (or could be expected to know), so as to set him up for the question to be asked. Vertical sets up each grouping, horizontal sets up ideas that are of a like kind, and narrative brings together ideas/questions that are relevant. (PP2)

Describe the following cognitive biases, the practical context, and considerations w.r.t. financial incentives · Reciprocity theory, Pricing discount cycle, Crowding out effect

Reciprocity theory & Pricing discount cycle Practical Context: Setting the stage on fair exchanges Crowding out effect Practical Context: Adding financial incentives causes customers to lose sight of intrinsic product benefits Reciprocity theory, Pricing discount cycle, Crowding out effect Considerations: If you lead with money, money will likely always be a factor in the relationship (SDM190)

Describe the following stability biases: · Status quo bias · Present bias

Stability biases · Status quo bias: prefer status quo in absence of pressure to change it · Present bias: value immediate rewards very highly & undervalue long-term gains (SDM184)

Describe ways to structure an analysis of the problem in writing.

Structuring the Analysis of the Problem: Difficult to view relationships. Could use logic trees to reveal where problem is, why it exists & what to do about it in one picture: · Financial Structure: Break down one component into subcomponents. Create mutually exclusive & collectively exhaustive group of causes at each branch. · Task structure: Similar to financial structure, but divide each component into discrete task, then decompose further and further to analyze numbers in the tree · Activity Structure: Trace activities producing an undesirable effect, visualize causes bringing effect and decompose their causes further & further · Choice Structure: Similar to activity structure - Splitting it into right/wrong choices & consequences (i.e. decision tree) until reach level with knowledge of likely causes · Sequential structure: Move top-down through elements to ensure correct choice/activity is performed. (PP8)

Contrast System 1 and System 2 Thinking.

System 1 thinking: · Automatic, instinctive & emotional. Uses mental shortcuts to intuitive answers as they arise · Effortlessly reaches solutions using intuition & rules of thumb, but can lead us astray. · Too often our emotions go unchecked leading to bad decisions. · Also leads us to poor follow-through on plans, since focused on concrete immediate payoffs distracting us from long-term & abstract consequences. System 2 thinking: · Slow, logical & deliberate. · Useful to tell us when our intuition is wrong or our emotions have clouded our judgement, and to correct poor snap judgements. · Requires exerting cognitive effort, which is a scarce resource - Not enough to govern all decisions called to make - leads to problems of bias & inadequate motivation when system 2 energy is depleted (SDM184)

List and describe the three types of conflict.

Types of Conflict · Personal conflict: Personal differences. · Substantive conflict: Work content, tasks & goals. Can be turned positive if managed correctly · Procedural conflict: How work should be completed (OB12)

Describe the following steps of the five prong problem solving approach. · Testing the solution

Test the solution: Test proposed solutions, helps avoid costly mistakes. Three key elements: Identify desired outcome: Outcome should be specific & measurable, e.g. increasing % of employees for home delivery of prescriptions Identify possible solutions & focus on one: Focusing on too many things at once à difficult to determine which piece of complex change produced desired result. Use one change at a time. Introduce the change in some areas of the firm ("treatment group") and not others ("control group"): · Divide individuals, teams, etc. into two groups randomly or using ethics, cost or sample size if not random · Insidious biases & insufficient motivation are main drivers for problems, but difficult to change people's brains - change environment in which people make decisions. (SDM184)

Describe the three pillars of thanking customers.

Three pillars of thanking customers: Post-purchase experience & appreciation is important · Type and amount (the "how"): When in doubt, leave money out. Too much sets unhealthy relationship & can crowd out intrinsic value of product, and set unrealistic expectations for future discounts/rewards. · Timing & frequency (the "when"): Timing trumps frequency: Response tied to desired behavior · Sustainability ("the how long"): Conservative when launching program so it's sustainable - Don't want to pull back or give less in future (SDM190)

Contrast the top-down approach with the bottom-up approach when building a pyramid in writing.

Top down approach/method · Draw a box: Subject discussing · Decide the question: Who are you writing to, and what's the question? · Write down the answer if known · Identify the situation: Statement reader will agree upon, historically true or easily verifiable · Develop the complication: "So what?" What problem arose? · Recheck the question & answer: Statement of complication should raise the question you wrote. Bottom up approach: If can't decide what subject is or question isn't clear, think of key lines or ideas: · List all the points you think you want to make · Connect: Work out the relationships between them · Conclude: Draw conclusions, & determine subject, question, answer, situation, complication & key lines. Caveats for beginners · Always try top down first · Use the situation as the starting point for thinking through the introduction · Don't skip thinking through the introduction · Always put historical chronology in the introduction, since can only talk about events if spelling out cause-effect relationships (indicates analysis) · Limit the introduction to what the reader will agree is true or what they know · Be sure to support all key line points with deductive or inductive arguments & answered each question raised. (PP3)

Describe the practical context and considerations of the following cognitive biases w.r.t. financial incentives · Trivialization effect / social norms vs. market norms · Anchoring

Trivialization: Practical Context: Low financial incentives as acknowledgments can backfire in instances where social norms might have been just fine. Considerations: When in doubt, leave financial incentives out Anchoring: Practical Context: Setting incentive amounts and expectations; incentive degree & sustainability Considerations: Look for opportunities to capitalize on incentive reference points (SDM190)

Describe the role of timing & frequency of incentives & rewards on customer behavior.

When to thank depends on timing Timing, consistency, & frequency of thank-you's · Acknowledgement quickly follows desired behavior · Reward tied to desired behavior & acknowledgement. · Some response better than no response Mere-reaction effect: · People like to repeat behaviors generating actions even if those reactions are negative or not useful. · Any reaction typically better than no reaction. · Illusion of control - Desire to have control over environment & seek opportunities to do so - Reaction is more about response vs. content itself (SDM190)

Describe why using a pyramid structure in writing is beneficial/useful.

Why a pyramid? Pyramid structure reflects how mind works: · Mind automatically sorts for comprehension; · Pyramid clearly communicates message. · Pyramid makes for easier comprehension: Mental energy is finite & will be used up connecting ideas by the reader on his own if it's not done for him - This will lead to fatigue & him giving up, or not holding onto what it is he read. Magic #7+-2: ST memory can hold about 7 ideas. Categorizing ideas à easier to remember all ideas since higher categories suggest subsequent items/ideas. (PP1)

Describe the advantages & disadvantages of using groups for decision-making.

· Advantages: · Accumulate more knowledge for better alternatives · Often superior judgement evaluating alternatives (espec. when complex), · Higher level acceptance & satisfaction, · Personal growth for group · Disadvantages: · More time for decisions, · Challenging gathering, · Costlier, · Possible premature compromise & not considering all alternatives, · Subject to groupthink/bias, · Can be dominated by "decision leaders" reducing quality/satisfaction/acceptance, · Managers may rely too much on group & lose own decision/implementing skills. (OB10)

Describe the following: · Availability heuristic · Conservatism bias

· Availability heuristic: Rely on information available · Conservatism bias: Favor prior evidence over new evidence. Slow to accept new information. (SDM187)

Define the following: · Blind-spot bias · Choice supportive bias

· Blind-spot bias: Failing to recognize your own cognitive bias - notice much more in other people · Choice supportive bias: You feel positive about choices you make, even if they have flaws (e.g. your dog). (SDM187)

Ways to think/evaluate your objectives.

· Broaden objectives: Reflect/generate many objectives, bring together, align/sort later. · Seek advice, but outline own first so not anchored by advice. Don't share own obj. beforehand. · Cycle through objectives one at a time, leads to alternatives vs. one solution checking all objectives. (SDM185)

Describe the following: · Clustering illusion · information bias

· Clustering illusion: Seeing patterns in random events (generating gambling fallacies) · Information bias: Seeking information even when it does not affect action. More information not always better and less information sometimes makes better predictions (SDM187)

Define the following biases related to perceiving/judging alternatives: · Confirmation bias · Anchoring bias · Bandwagon/groupthink effect · Egocentrism

· Confirmation bias: Listen to what confirms our beliefs (e.g. sides of climate change) · Anchoring bias: Rely on initial value, e.g. first person to establish salary estimate in negotiation loses · Bandwagon/groupthink effect: One impacts whole group's belief. Strive for consensus. · Egocentrism: Focus on own perspective & can't imagine how others affected by policy / strategy - everyone has same information access. (SDM187)

List the four predispositions of Carl Jung that impact decision-making.

· Decision-Making Styles · Degree of Acceptable Risk · Cognitive Biases · Moods vs. Emotions (OB10)

Describe the ways a pyramid structure helps to order sets of ideas.

· Four ways to order sets of ideas: 1) Deductively (major premise, minor premise, conclusion), 2) Chronologically (first, second, third), 3) Structurally (boston, NY, Washington), 4) Comparatively (first most important, second most, etc.) (PP1)

Describe how a pyramid structure connects items & groupings.

· Logic connects items to their grouping via logic that acts as a bridge: If logic isn't stated, reader won't see groupings the way you do, will misinterpret the message or will receive wrong message automatically. (PP1)

Describe the following biases related to framing of alternatives · Loss aversion · Sunk-cost fallacy · Escalation of commitment · Controllability bias

· Loss aversion: Feel losses more acutely than gains of same amount --> more risk-averse than rational · Sunk cost fallacy: Pay attention to historical unrecoverable costs when considering future actions · Escalation of commitment: Invest add'l resources in losing proposition because of sunk costs already (time, effort, money invested already) Controllability bias: We can control outcomes more than so, so we misjudge riskiness of action (SDM187)

List the ways a pyramid structure helps the reader move through writing.

· Moving down levels of abstraction. · Logic connects items to their grouping via logic that acts as a bridge · Ordering sets of ideas (PP1)

Define the following: · Ostrich effect · Outcome bias · Placebo effect

· Ostrich effect: Ignoring dangerous or negative information (e.g. investors check holdings less during recessions) · Outcome bias: judging decision based on outcome rather than how decision was made (e.g. gambling doesn't make it a smart decision even if you win) · Placebo effect: Simply believing something has an effect causes it to have an effect (SDM187)

Define the following biases: · Overconfidence · Over-Optimism · Champion · Sunflower

· Overconfidence: Overestimate our abilities affecting future outcomes, take credit for past outcomes, ignore chance. (Experts more prone to this bias since more convinced they are right.) · Over-Optimism: Overestimate likelihood of positive events/outcomes/plans & underestimate negative ones. · Champion: The tendency to evaluate a plan or proposal based on the track record of the person presenting it, more than on the facts supporting it · Sunflower bias: Following the leader, rare push-back, rare contributions of original thought, don't speak out til leader has. (SDM186)

Define the following: · Pro-innovation bias · Recency · Salience · Selective perception

· Pro-innovation bias: Overvalue innovation usefulness, undervalue its limitations · Recency: Weighing latest information more heavily (e.g., investors think market always look they way it does today, leads to unwise decisions) · Salience: Focus on recognizable features (e.g. thinking about dying by lion than what's more likely) · Selective perception: Expectations influence how we perceive the world (e.g. other team commits more infractions) (SDM187)

Define the following stability biases: · Status quo bias · Present bias

· Status quo bias: prefer status quo in absence of pressure to change it · Present bias: value immediate rewards very highly & undervalue long-term gains (SDM187)

Define the following: · Stereotyping · Survivorship bias · Zero risk bias

· Stereotyping: Expecting X to have certain qualities without real information. · Survivorship bias: Focus on surviving cases, leads to misjudging situation (e.g. being an entrepreneur is easy because we haven't heard of those failing) · Zero risk bias: Eliminating risk, focusing solely on ensuring certainty (can be counterproductive) (SDM187)

Definitions: · System 1 · System 2 · Functional fixedness · Cognitive rigidity · Joint evaluation · Vanishing options test · Planning fallacy · Motivated bias

· System 1 (automatic/intuition), · System 2 (reasoning). · Functional fixedness: Focus on only one solution, · Cognitive rigidity: Focus w.r.t. yes-no framing, one solution. Pressure, time, negativity, exhaustion, stressors; avoid loss. · Joint evaluation: Comparing two options together. · Vanishing options test: If options weren't available, what else would you do with __? · Planning fallacy: narrative of success & managing for it, even if odds are against you · Motivated bias: Cognitive biases arising from psychological needs. Difficult to move on. Results from overconfident (1 - too much weight to information we have, and 2 - when we can't see, trouble imagining other ways to frame problem). (SDM185)

Ways to avoid one future/objective/option.

· Three estimates/obj/options: Low/med/high. Wider ranges, more realistic middle & extreme estimates. · Think twice: Project once, ignore, project again. Justify why 1st is wrong. Average the two. · Use premortems: Imagine future failure, explain cause ("prospective hindsight"). Results: Tempers optimism, realistic risks, backup plans, factors success/failure, more control/preparation. Take outside view: Your project w/the best plan for success! Outside view: Someone else, similar project - After considering similar ventures, what advice would you give them? What if odds are against them? Helps avoid planning fallacy. (SDM185)