This book is concerned with helping you improve your approach to decision-making. The author examines judgement in a selection of managerial contexts and provides important understanding that can help you make better leadership decisions. The book also pinpoints the in-house politics of organisational decision-making. Drawing on the very latest research, it introduces practical techniques that show you how to analyse and develop your own decision-making style. It will help you to deliver sharp and insightful analyses of your business and develop (...) effective solutions. In addition, it presents simple checklists that will give you vital insights throughout the decision-making process. Students and practitioners of leadership, management, and allied fields will find this book useful in order to understand and implement useful methods. (shrink)

Across two studies the hypotheses were tested that stressful situations affect both leadership ethical acting and leaders' recognition of ethical dilemmas. In the studies, decision makers recruited from 3 sites of a Swedish multinational civil engineering company provided personal data on stressful situations, made ethical decisions, and answered to stress-outcome questions. Stressful situations were observed to have a greater impact on ethical acting than on the recognition of ethical dilemmas. This was particularly true for situations involving punishment and lack of (...) rewards. The results are important for the Corporate Social Responsibility (CSR) of an organization, especially with regard to the analysis of the Stressors influencing managerial work and its implications for ethical behavior. (shrink)

The use of different response modes has been found to influence how subjects evaluate pairs of alternatives described by two attributes. It has been suggested that judgments and choices evoke different kinds of cognitive processes, leading to an overweighing of the prominent attribute in choice (Tversky, Sattath, & Slovic, 1988; Fischer & Hawkins, 1993). Four experiments were conducted to compare alternative cognitive explanations of this so-called prominence effect in judgment and choice. The explanations investigated were the structure compatibility hypothesis and (...) the restructuring hypothesis. According to the structure compatibility hypothesis, it was assumed that the prominence effect is due to a lack of compatibility between the required output from subjects and the structure of information in input. The restructuring hypothesis stated that the decision maker uses mental restructuring operations on a representation of decision options to make the options more clearly differentiated. In Experiment 1, a matching procedure was used to provide pairs of equally attractive options (medical treatments) for the following experiments. In Experiments 2, 3, and 4, preferences were elicited with two different response modes, choice and preference rating. Value ranges on the prominent and nonprominent attributes were manipulated to test the structure compatibility hypothesis. Accountability was also subject to manipulation as it was assumed to stimulate restructuring. Since the prominence effect was not restricted to choices, and effects of value ranges were obtained but not of accountability, the results were interpreted in line with the structure compatibility hypothesis. (shrink)

Purpose – The study aims at clarifying whether locus of control may act as a bias in organisational decision-making or not. -/- Design/methodology/approach – Altogether 44 managers working at Skanska (a Swedish multinational construction company) participated in the study. They were asked to complete a booklet including a locus of control test and a couple of decision tasks. The latter were based on case scenarios reflecting strategic issues relevant for consultative/participative decision-making. -/- Findings – The results revealed that managers with (...) low external locus of control used group consultative decision-making more frequently than those with high locus of control. There was also a tendency showing that high externals more frequently used participative decision-making than low externals. This was in line with the general trend, indicating that managers on the whole predominantly used participative decision-making. -/- Originality/value – The results of the present study are valuable for HRM practice, especially with regard to the selection of individuals to management teams. (shrink)

In a couple of classical studies, Keeney proposed two sets of variables labelled as value focused thinking (VFT) and alternative-focused thinking (AFT). Value-focused thinking (VFT), he argued, is a creative method that centres on the different decision objectives and how as many alternatives as possible may be generated from them. Alternative-focused thinking (AFT), on the other hand, is a method in which the decision maker takes notice of all the available alternatives and then makes a choice that seems to fit (...) the problem best. The impact of these two methods on idea generation was measured using a sample of employees. The results revealed that employees in the value-focused thinking condition (VFT) produced fewer ideas. Thus, value-focused thinking (VFT) is not only able to facilitate ideation fluency but also to constrain it. Factors such as cognitive effort and motivation may play a part here. However, the quality of the ideas was judged to be higher in terms of creativity and innovativeness. Hence, value-focused thinking (VFT) seems to have a positive impact on the quality of ideas in terms of creativity and innovativeness regardless of ideation fluency. Implications for the design of idea management systems are discussed. (shrink)

This article evaluates the effects of two types of rewards (performance-contingent versus engagement-contingent) on self-regulation, intrinsic motivation and creativity. Forty-two undergraduate students were randomly assigned to three conditions; i.e. a performance-contingent reward group, an engagement-contingent reward group and a control group. Results provide little support for the negative effects of performance rewards on motivational components. However, they do indicate that participants in the engagement-contingent reward group and the control group achieved higher rated creativity than participants in the performance-contingent reward group. (...) Alternative explanations for this finding are discussed. (shrink)

A violation of procedure invariance in preference measurement is that the predominant or prominent attribute looms larger in choice than in a matching task. In Experiment 1, this so-called prominence effect was demonstrated for choices between pairs of options, choices to accept single options, and preference ratings of single options. That is, in all these response modes the prominent attribute loomed larger than in matching. The results were replicated in Experiment 2, in which subjects chose between or rated their preference (...) for pairs of options which were matched to be equally attractive either in the same session or 1 week earlier. On the basis of these and previous results, it is argued that the prominence effect is a reliable phenomenon. However, none of several cognitive explanations which have been offered appears to be completely viable. (shrink)

The life-cycle theory of saving behavior (Modigliani, 1988) suggests that humans strive towards an equal intertemporal distribution of wealth. However, behavioral life-cycle theory (Shefrin & Thaler, 1988) proposes that people use self-control heuristics to postpone wealth until later in life. According to this theory, people use a system of cognitive budgeting known as mental accounting. In the present study it was found that mental accounts were used differently depending on if the income change was positive or negative. This was shown (...) both in a representative nationwide sample of households and in a student sample. Respondents were more willing to cut down on their propensity to consume when faced with an income decrease than to raise it when the income increased. Furthermore, contrary to the predictions of behavioral life-cycle theory, it was found that the respondents adjusted their propensity to consume the most when the income increases or decreases took place immediately. Hence, it is suggested that theories of intertemporal choice (e.g., Loewenstein, 1988; Loewenstein & Prelec, 1992) provide a better account of the data than does the behavioral lifecycle theory. (shrink)

This chapter focuses on the psychological mechanisms behind the construction of preference, especially the actual processes used by humans when they make decisions in their everyday lives or in business situations. The chapter uses cognitive psychological techniques to break down these processes and set them in their social context. When attributes are compatible with the response scale, they are assigned greater weight because they are most easily mapped onto the response. For instance, when subjects are asked to set a price (...) for a gamble this task is compatible with the information about the gamble payoff, which is also expressed in monetary values (e.g., dollars). Conversely, when the task requires a choice the payoff information is not easily mapped onto the response anymore and loses some of its salience. In fact, Slovic, Griffin, and Tversky (1990) could show that using non-monetary outcomes attenuates preference reversals when no compatibility between the pricing task and the outcome attribute was possible. An assumption of the compatibility effect is that response modes compatible with specific characteristics of the options (e.g., payoffs) draw attention to them. One of the main themes that has emerged from behavioral decision research during the past decades is the view that people's preferences are often constructed—not merely revealed—in the process of elicitation (see e.g. Slovic). This conception is derived in part from studies demonstrating that normatively equivalent methods of elicitation often give rise to systematically different responses. These "preference reversals" violate the principle of procedure invariance fundamental to theories of rational choice and raise difficult questions about the nature of human values. If different elicitation procedures produce different orderings of options, how can preferences be defined and in what sense do they exist? Describing and explaining such failures of invariance will require choice models of far greater complexity than the traditional models -/- . (shrink)

It is argued that the design of decisions is a process that in many ways is shaped by social factors such as identities, values, and influences. To be able to understand how these factors impact organizational decisions, the focus must be set on the management level. It is the management that shoulders the chief responsibility for designing collective actions, such as decisions. Our propositions indicate that the following measures must be taken in order to improve the quality of organizational decisions: (...) 1. The identity of the people, involved in organizational decision making, affects the quality of decisions and should be taken into account in the design of decisions. 2. The decision maker or designer of decisions should engage the members of an organization to create a shared vision. 3. Getting the members of an organization to express and share common values should improve the decision making process. 4. Being able to socially influence the members of an organization, or other stakeholders involved, as well as letting them participate in the process, should improve the quality of decisions. (shrink)

When a prominent attribute looms larger in one response procedure than in another, a violation of procedure invariance occurs. A hypothesis based on compatibility between the structure of the input information and the required output was tested as an explanation of this phenomenon. It was also compared with other existing hypotheses in the field. The study had two aims: (1) to illustrate the prominence effect in a selection of preference tasks (choice, acceptance decisions, and preference ratings); (2) to demonstrate the (...) processing differences in a matching procedure versus the selected preference tasks. Hence, verbal protocols were collected in both a matching task and in subsequent preference tasks. Silent control conditions were also employed. The structure compatibility hypothesis was confirmed in that a prominence effect obtained in the preference tasks was accompanied by a lower degree of attention to the attribute levels in these tasks. Furthermore, as predicted from the structure compatibility hypothesis, it was found that fewer comparisons between attribute levels were performed in the preference tasks than in the matching task. It was therefore concluded that both these processing differences may explain the occurrence of the prominence effects. (shrink)

This chapter discusses different perspectives and trends in social decision making, especially the actual processes used by humans when they make decisions in their everyday lives or in business situations. The chapter uses cognitive psychological techniques to break down these processes and set them in their social context. Most of our decisions are made in a social context and are therefore influenced by other people. If you are at an auction and bidding on a popular item, you will try to (...) guess how long the others will keep in the bidding race. Likewise, when you and another person have to coordinate your decision to win a card game you will also try to think about what the other person know and what s/he will do, so you can adjust your choice. In other words, you are trying to come up with a model of the person and his decision-making process. This involves the capability to think about the thoughts and intentions of others, to put yourself in another person's shoes (perspective taking), and to think recursively about your and another person's over several steps (like in a game of chess). Especially, recursive social reasoning is one of the hallmarks of social decision-making. Whereas observational, competitive and cooperative decision-making can all be seen as trying to maximize the own reward or profit, altruistic decision-making blatantly violates this axiomatic principle of behavioral economics. Yet, altruistic behavior is quite common throughout human society. -/- . (shrink)

In the present study it was shown that decision heuristics and confidence judgements play important roles in the building of preferences. Based on a dual-process account of thinking, the study compared people who did well versus poorly on a series of decision heuristics and overconfidence judgement tasks. The two groups were found to differ with regard to their information search behaviour in introduced multiattribute choice tasks. High performers on the judgemental tasks were less influenced in their decision processes by numerical (...) information format (probabilities vs. frequencies) compared to low performers. They also looked at more attributes and spent more time on the multiattribute choice tasks. The results reveal that performance on decision heuristics and overconfidence tasks has a bearing both on heuristic and analytic processes in multiattribute decision making. (shrink)

An important problem for decision-makers in society deals with the efficient and equitable allocation of scarce resources to individuals and groups. The significance of this problem is rapidly growing since there is a rising demand for scarce resources all over the world. Such resource dilemmas belong to a conceptually broader class of situations known as social dilemmas. In this type of dilemma, individual choices that appear ‘‘rational’’ often result in suboptimal group outcomes. In this article we study how people make (...) monetary allocation decisions between the community where they live and a neighbouring community, with the aim of finding out to what extent these decisions are subject to biased over-weighting. The manuscript reports four experiments that deal with the way individuals make such allocation decisions when the potential beneficiaries are such communities. The specific goal of these experiments is to gauge the amount of bias in the weights that people assign to the various beneficiaries. Taken together, the results from all the four experiments suggest that making the gain of the neighbouring community prominent to a higher extent de-biases the outcomes (the prominence effect) compared to when own community gain is made prominent. Place identity is discussed as a potentially important factor in this connection. Hence, it may be argued that there seems to be some kind of a pro-self component that is able to explain a large part of the variance observed for the prominence effect. Connections between such a factor and in-group favouritism are discussed. A strength of the study was that these major results appeared to be quite robust when considered as task effects, as the salience of the manipulated context factors in the studies (in terms of reliable main or interaction effects) did not distort them. (shrink)

Research on preference reversals has demonstrated a disproportionate influence of outcome probability on choices between monetary gambles. The aim was to investigate the hypothesis that this is a prominence effect originally demonstrated for riskless choice. Another aim was to test the structure compatibility hypothesis as an explanation of the effect. The hypothesis implies that probability should be the prominent attribute when compared with value attributes both in a choice and a preference rating procedure. In Experiment 1, two groups of undergraduates (...) were presented with medical treatments described by two value attributes (effectiveness and pain-relief). All participants performed both a matching task and made preference ratings. In the latter task, outcome probabilities were added to the descriptions of the medical treatments for one of the groups. In line with the hypothesis, this reduced the prominence effect on the preference ratings observed for effectiveness. In Experiment 2, a matching task was used to demonstrate that probability was considered more important by a group of participating undergraduates than the value attributes. Furthermore, in both choices and preference ratings the expected prominence effect was found for probability. (shrink)

This chapter makes it clear that a significant element of both leadership and decision making is the development aspect. Leaders develop in their decision making by being confronted with difficult decision situations. However, they also develop through various forms of systemized training and education. Different leaders tend to develop in different directions. For this reason, one can identify a number of key leadership styles based on different ways of leading. These different styles are appropriate for various types of organization. Some (...) organizations require a strict and authoritative style, while others are in greater need of a more democratic style. Senior leaders often have the capacity to switch between different leadership styles depending on how the situation develops. In addition, there are a number of key decision-making roles that leaders are expected to manage. These include the role of entrepreneur, problem-solver, resource-allocator and negotiator. Leaders must also learn to work with clarity, conviction, courage, and communication in order to facilitate their decisions. Research shows that leaders who face severe adversity in their careers often are forced to make many difficult decisions. As a result they develop. Being forced to make difficult decisions actually leads to reflection, self-awareness and self-knowledge of one’s own values. Leaders also develop by communicating their problems in a structured way with more experienced colleagues. The fact that leaders develop by making difficult decisions leads to various forms of action having a central role. It is by putting decisions into action that leaders develop, as well as by reflecting on what alternative decisions could have been made. An action perspective on leadership decisions is closely linked to the concept of sense-making. This phenomenon implies observation, action, revision and communication in the aftermath of a decision. There is research indicating that reflection, critical thinking, intuition, ethics and communication are important dimensions of leaders and decision makers who are generally perceived as wise. -/- . (shrink)

This paper investigates the relationships between organizational change and trust in management. It is argued that organizational change represents a critical episode for the production and destruction of trust in management. Although trust in management is seen as a semi stable psychological state, changes in organizations make trust issues salient and organizational members attend to and process trust relevant information resulting in a reassessment of their trust in management. The direction and magnitude of change in trust is dependent on a (...) set of change dimensions that reflect trust relevant experiences and information. We distinguish between dimensions related to trust relevant consequences of the change and trust relevant aspects of how the change process is performed. Empirical results indicate that increases in post change emotional stress and the use of referential accounts for justifying change are both negatively related to post change trust in management. The use of ideological accounts and participation were found to be positively related to post change trust in management, so was perceived decision quality. Findings also indicate that the effects of change on trust are negatively moderated by tenure. (shrink)

One hundred and ninety participants (95 undergraduates and 95 employees) responded to a factorial survey in which a number of case-based organizational allocation tasks were described. Participants were asked to imagine themselves as employees in fictitious organizations and chose among three allocations of employee development schemes invested by the manager in different work groups. The allocations regarded how such investments should be allocated between two parties. Participants chose twice, once picking the fairest and once the best allocation. One between-subjects factor (...) varied whether the parties represented social (i.e., choosing among allocations between two different work groups) or temporal comparisons (i.e., choosing among allocations between the present and the following year). Another between-subjects factor varied whether participants’ in-group was represented by the parties or not. One allocation maximized the outcome to one party, another maximized the joint outcome received by both parties, and a third provided both parties with equal but lower outcomes. It was predicted that equality, although always deficient to both parties, would be the preferred allocation when parties represented social comparisons and when choices were based on fairness. When parties represented temporal comparisons, and when choices were based on preference, maximizing the joint outcome was hypothesized to be the preferred allocation. Results supported these hypotheses. Against what was predicted, whether the in-group was represented by the parties or not did not moderate the results, indicating that participants’ allocation preferences were not affected by self-interest. The main message is that people make sensible distinctions between what they prefer and what they regard as fair. The results were the same for participating students who imagined themselves as being employees and participants who were true employees, suggesting that no serious threats to external validity are committed when university students are used as participants. (shrink)

Purpose – The purpose of this paper is to clarify how IT managers' decision styles affect their evaluation of information technology. Design/methodology/approach – Four different decision styles were assessed in a leadership test directed towards IT managers. Each style included two dimensions: confidence judgment ability and decision heuristic usage. Participants belonging to each style were interviewed and their answers analysed with regard to their reasoning about central areas of IT management. Findings – Results suggest that a decision style combining intuitive (...) and analytical capabilities lead to better evaluations of information technology. Originality/value – The results of the present study are valuable for the understanding of how decision styles impact on IT management in everyday life. (shrink)

The study examines the relative merits of a noncompatibility and a restructuring explanation of the recurrent empirical finding that a prominent attribute looms larger in choices than in judgments. Pairs of equally attractive options were presented to 72 undergraduates who were assigned to six conditions in which they performed (1) only preference judgments or choices, (2) preference judgments or choices preceded by judgments of attractiveness of attribute levels, or (3) preference judgments or choices accompanied by think-aloud reports. The results replicated (...) the prominence efTect for choices, but a prominence effect was also found for preference judgments. In accordance with the restructuring explanation, the think-aloud protocols indicated that options were more often restructured in choices than in preference judgments. However, restructuring could not explain the prominence effect observed for preference judgments. A modified compatibility hypothesis is offered as an alternative explanation. (shrink)

This volume presents research that integrates decision making and creativity within the social contexts in which these processes occur. The volume is an essential addition to and expansion of recent approaches to decision making. Such approaches attempt to incorporate more of the psychological and socio-cultural context in which human decision making takes place. The authors come from different disciplines and also belong to a broad spectrum of research traditions. They present innovative chapters dealing with both theoretical and empirical aspects of (...) decision making in different personal and organizational contexts. All chapters are written from the perspective that human decision making is inherently social and more or less creative. The volume addresses fundamental questions about the nature of human decision making as it occurs in different social contexts. Thereby, it becomes essential reading for researchers in decision making and for advanced students in psychology, management science, informatics, and related disciplines. (shrink)

Research on human decision making is at the present time undergoing rapid changes. From previously being much focused on models and approaches with an origin in economy, much of the present day research finds its inspiration from disciplinary approaches concerned with incorporating more of the context that the decision making takes place in. This context includes psychological aspects of the decision maker and social-cultural aspects of the situation he or she acts in. All human decision making occurs in dynamically changing (...) contexts. One factor contributing to this is that human beings or groups in many situations act as entrepreneurs trying to improve the situation for themselves or their organization. Given that this is the case, it is of increasing interest for both researchers and practitioners interested in the social aspects of decision making to consider the relation between creativity and decision making. (shrink)

Researchers have recognized that interpersonal trust consists of different dimensions. These dimensions suggest that trust can be rational, cognitive, or affective. Affect, which includes moods and emotions, is likely to have a direct impact on the affective dimension. On the other hand, there are also studies showing that affect indirectly influence cognitive judgments. Nonetheless, in this chapter we argue that the impact of affect on judgment will not be the same on all individuals. In effect, the impact varies, depending on (...) the individual's attention to affect, motivation to use or guard against affect, or regulation of affect. All this may suggest that an individual's abilities or tendencies to manage affect will have implication on his or her trust relationships with others. (shrink)

Crisis prevention plans are usually evaluated based on their effects in terms of preventing or limiting organizational crisis. In this survey-based study, the focus was instead on how such plans influence employees’ reactions in terms of risk perception and well-being. Five different organizations were addressed in the study. Hypothesis 1 tested the assumption that leadership crisis preparation would lead to lower perceived risk among the employees. Hypothesis 2 tested the conjecture that it would also lead to a higher degree of (...) well-being. Both hypotheses were supported. The results and their implications are discussed. (shrink)

This chapter includes a discussion of leadership decisions and stress. Many leaders are daily exposed to stress when they must make decisions, and there are often social reasons for this. Social standards suggest that a leader must be proactive and make decisions and not flee the situation. Conflict often creates stress in decision-making situations. It is important for leaders to understand that it is not stress in itself that leads to bad decisions, rather, bad decisions may be the result of (...) time pressure in the sense that leaders have not been able to gather enough relevant information. Thus, it is worthwhile for leaders to be able to prioritize properly in order to cope with stressful situations. In some situations, a leader chooses to delegate the decisions to his/her team and then it is important to guard against «groupthink», a phenomenon where members of a team put consensus before anything else as a result of the peer pressure. A number of methods are presented that enable leaders to avoid this phenomenon. Often leaders are involved in decision-making situations where they are forced to navigate between objectives that are in strong conflict with each other. We are talking about «decision dilemmas». These are characterized by the existence of a conflict between the top leadership's desire to control the activities and their wish to give autonomy and independence to the various units. It is important for leaders to be able to strike a balance in different dilemma situations and understand how to best manage conflicts when they arise -/- . (shrink)

In this chapter, it is demonstrated that the concepts of leadership and organization are closely linked. A leader should initially get to know the organizational culture as well as possible. Such a culture can for example be authoritarian and conformist or innovative and progressive in nature. The assumption is that leaders are influenced by their own culture. Strategic decisions are characterized by the fact that they are new, complex and open in nature, and being able to develop a strategy is (...) one of the most difficult tasks for a leader. Traditionally, it is primarily the top leadership in an organization that works with strategic decisions, and thus it is common that strategic issues are handled by top leadership teams. This is related to the globalization of business and to the fact that the pace of work has increased significantly. In order to exercise leadership, a leader must have access to power. A power base can be created through networking as well as by using different political tactics. However, it is important to use political tactics in order to promote the organization's interests. When a leader has built up a power base, it is essential that power is used properly. The decisions that leaders make must be ethically correct and not violate universal human values. For instance, they should not lead to negative consequences for others within or outside the organization. Evidence suggests that most leaders have the potential to develop as ethical decision makers. -/- . (shrink)

In this chapter it is demonstrated that the way in which leaders implement a decision largely depends on the nature of it, that is, whether it is strategic or not. Leaders must be as open as possible and not withhold information from the persons involved in the process. Therefore, they should distribute as much relevant information as possible to meeting participants before a meeting. At the same time, they must be able to steer the process. It is not unusual for (...) there to be a separation between the formulation and implementation of a strategic decision. Often, it is the top leadership that formulates the decision problem and the middle managers that implement its solution. For this reason, it is relatively common that the top leadership signals that the implementation has been successful as soon as the middle managers begin to report positive results. This can sometimes happen even though most of the implementation is incomplete. However, there are also cases where the top leaders rule out certain implementation processes as failures when in fact they prove later on to be successful. A common problem in organizations is that leaders often inherit the task of implementing decisions that past leaders have made. In order to succeed with an implementation, leaders must understand the importance of the process. They must communicate their vision clearly, evaluate and monitor continuously, and allow interested parties to participate actively in the process. They should also understand that what at first may look like a failure, at a later stage may prove to be a success -/- . (shrink)

Two studies investigated how planning affects intention-behavior consistency. In Study 1 an experimental group and control group which each consisted of 14 undergraduates were requested in computerized interviews to indicate which activities they intended to perform on the following day. Subjects in the experimental group were also requested in a second phase of the interviews to specify when and where they intended to perform the activities. The results showed that activities for which time and place had been specified were more (...) likely to be performed. In Study 2 another 75 undergraduates volunteered to participate in an experiment in which they were requested to perform an activity (reporting mood effects of reading a prose excerpt) by themselves on one of three following days. One group of subjects only agreed to perform the activity, another group agreed to perform the activity as well as indicated when and where they would do it, and a third group in addition to this indicated which other activities they would perform on the same day. In support of the hypothesis that planning an activity increases the likelihood that it will be performed, the results showed that subjects who indicated other activities more frequently performed the target activity. More efficient time management resulting from planning may account for the findings, although further research is needed to show this conclusively. (shrink)

Whereas there is extensive documentation that attribute framing influences the content of peoples thought, we generally know less about how it affects the processes assumed to precede those thoughts. While existing explanations for attribute framing effects rely completely on valence-based associative processing, the results obtained in the present study are also consistent with the notion that negative framing stimulates more effortful and thorough information processing than positive framing. Specifically, results from a simulated business decision-making experiment showed that decision makers receiving (...) negatively framed information had significantly better recall than those receiving positively framed information. Furthermore, decision makers in the negative framing condition were less confident than decision makers in the positively framed condition. Finally, compared to a no-framing condition, decision makers receiving positive framing deviated significantly more in evaluation than decision makers receiving negative framing did. (shrink)

In this chapter it is pointed out that leaders who make decisions normally rely on both their intuition and their analytical thinking. Modern research shows that intuitive thinking has the potential to support the analytical, if used properly. Leaders must therefore be aware of the possibilities and limitations of intuition. Fresh thinking and innovation are key elements in leadership analysis, thus creative problem-solving is an important complement to traditional leadership thinking. Creative leaders work extensively with both intuition and logic. They (...) also often work with metaphors, analogies, images and imagination to create dynamism in the analysis of a problem. Many leaders come in daily contact with problems that are not necessarily self-generated. It is therefore important that they have the opportunity to take an outside perspective on the situation. They must be able to define the problems which are of strategic importance for the activity. Leaders should not allow themselves to be stressed too much by various everyday problems, but be aware that they usually cannot just ignore them. After delineating a problem a leader should think through what trials ought to be conducted to test a given hypothesis about reality. This can be done by showing how different problems are related to each other. When analyzing various problems it is useful to clarify what kinds of decisions theyrelate to. Some decisions must be made directly, while others canbe postponed. Some decisions are reversible in nature while others are irrevocable -/- . (shrink)

Mental accounting is a concept associated with the work of Richard Thaler. According to Thaler, people think of value in relative rather than absolute terms. They derive pleasure not just from an object’s value, but also the quality of the deal – its transaction utility (Thaler, 1985). In addition, humans often fail to fully consider opportunity costs (tradeoffs) and are susceptible to the sunk cost fallacy. Why are people willing to spend more when they pay with a credit card than (...) cash (Prelec & Simester, 2001)? Why would more individuals spend $10 on a theater ticket if they had just lost a $10 bill than if they had to replace a lost ticket worth $10 (Kahneman & Tversky, 1984)? Why are people more likely to spend a small inheritance and invest a large one (Thaler, 1985)? According to the theory of mental accounting, people treat money differently, depending on factors such as the money’s origin and intended use, rather than thinking of it in terms of the “bottom line” as in formal accounting (Thaler, 1999). An important term underlying the theory is fungibility, the fact that all money is interchangable and has no labels. In mental accounting, people treat assets as less fungible than they really are. Even seasoned investors are susceptible to this bias when they view recent gains as disposable “house money” (Thaler & Johnson, 1990) that can be used in high-risk investments. In doing so, they make decisions on each mental account separately, losing out the big picture of the portfolio. (See also partitioning and pain of paying for ideas related to mental accounting.) . (shrink)

This chapter illustrates that in order to reach a decision a leader must decide which persons should be involved in the process and when. A relatively common method of involving others is delegating the decision to a group. A main objective of this is often to generate as many innovative ideas as possible, and different techniques can be employed for this, including brainstorming. The proposal generated must then be validated by the group using different criteria on the basis of which (...) it is then relatively easy to filter out proposals that do not reach the goals that have been set. However, a leader needs to collect additional information in order to reach a decision. By the use of information technology vast amounts of information may be accumulated. Thus, different kinds of filtering or weeding methods must be used in order to quickly obtain relevant information. This information can help leaders create forecasts and minimize risks. They must also be able to present their ideas in the most attractive way possible in order to be heard and arrive at decisions. The design of the presentation is therefore critical. Sometimes it is not enough for leaders just to present an idea, they are then obliged to negotiate in order to reach a decision. -/- . (shrink)

In the present study it was shown that both decision heuristics and social value orientation play important roles in the building of preferences. This was revealed in decision tasks in which participants were deciding about candidates for a job position. An eye-tracking equipment was applied in order to register participants´ information acquisition. It was revealed that participants performing well on a series of heuristics tasks (availability, representativeness, anchoríng & adjustment,and attribution) including a confidence judgment also behaved more accurately than low (...) performers in the fulfillment of the preference tasks. It was also established that the high performers were not as influenced by whether uncertainty was presented in terms of probabilities or in terms of frequencies as was the low performers. With regard to social value orientation the results revealed that decision processing differences were more systematic between cooperators and competitors than between cooperators and individualists. Also, the cooperators did not seem to attend more to proenvironmental goals than to profit goals in the evaluation of the candidates. Finally, it was shown that accountable cooperators invested more time in their decisions than those that were not accountable, and that no such difference was observed between accountable and not accountable competitors or individualists. (shrink)

According to normative decision theory there exists a principle of procedure invariance which states that a decision maker's preference order should remain the same, independently of which response mode is used. For example, the decision maker should express the same preference independently of whether he or she has to judge or decide. Nevertheless, previous research in behavioral decision making has suggested that judgments and choices yield different preference orders in both the risky and the riskless domain. In the latter, the (...) prominence effect has been demonstrated. The main purpose of the present series of experiments was to test cognitive explanations which account for the prominence effect. One of the explanations provided a psychological account based primarily on decision-strategy compatibility. Two other explanations built on information structuring approaches. In the first one, the general idea was that decision makers differentiate between alternatives by value and belief restructuring. In the second approach, violations of invariance were assumed to be attributed to the information structure of the task which in many cases demand problem simplification. A prominence effect was in most experiments found for both choices and preference ratings. This finding spöke against the strategy compatibility explanation. Instead, the different forms of cognitive restructuring provided a better account. However, none of these provided a single explanation. Yet, the structure compatibility explanation appeared to be the more viable one, in particular of the relation between experimentäl manipulations and response mode outcomes. The predictions of the value-belief restructuring explanation, on the other hand, seemed to be more valid for the prominence effect found in choice than for preference ratings. (shrink)

Two experiments with undergraduates as subjects were carried out with the aim of replicating and extending previous results showing that the implication of the behavioral life-cycle hypothesis (H. M. Shefrin & R. H. Thaler, 1988) that people classify assets in different mental accounts (current income, current assets, and future income) may explain how consumption choices are influenced by temporary income changes. In both experiments subjects made fictitious choices between paying for a good in cash or according to a more expensive (...) installment plan after they had received an income which was either less, the same, or larger than usual. In Experiment 1 subjects were supposed to have savings so that the total assets were equal, whereas in Experiment 2 the total assets varied. The results of both experiments supported the role of mental accounts in demonstrating that subjects were unwilling to pay in cash after an income decrease even though they had access to saved money. Thus, in effect they chose to pay more for the good than they had to. Indicating a need for further refinement of the concept of mental account, choices to pay in cash after an income decrease tended to be more frequent when the consumption and savings motives were compatible than when they were incompatible. Furthermore, increasing the total assets made subjects more willing to pay in cash after an income decrease. (shrink)

This paper seeks to expand our understanding of initial trust by looking at how variation in risk influences the nature of trust and the process of initial trust formation. Four hypotheses were tested in two experiments involving participants with and without work experience. A first hypothesis suggested a positive relationship between a general propensity to trust and initial trust; a second hypothesis, a negative relationship between risk and initial trust; whereas a third hypothesis posited that risk would increase the importance (...) participants place on benevolence and integrity. A fourth hypothesis suggested that risk would have a positive and moderating influence on the effect of out-of-role behavior when presented after role-conformant in-role behavior. Findings are presented and discussed and practical implications suggested. (shrink)

This paper attempts to delineate the interaction between trust, emotion, and ethical decision making. The authors first propose that trust can either incite an individual toward ethical decisions or drag him or her away from ethical decisions, depending on different situations. The authors then postulate that the feeling of guilt is central in understanding how trust affects the ethical decision making process. Several propositions based on these assumptions are introduced and implications for practice discussed.

Two experiments with undergraduates as subjects tested explanations of how a prior temporary income change influences choices between buying and deferred buying. In Experiment 1 predictions from the behavioral life-cycle theory (Shefrin & Thaler, 1988), the renewable resources model (Linville & Fischer, 1991) and the loss-sensitivity principle (Garling & Romanus, 1997) were contrasted. The results are inconsistent with the latter two explanations since the framing of buying as positive (buying a new model of a product) or negative (replacing a broken (...) product) did not interact with the income change. Congruent with the behavioral life-cycle theory, willingness to buy was greater when subjects received a temporary income increase than when they received a temporary income decrease although total assets were equal. Further support for the behavioral life-cycle theory is obtained in Experiment 2 where four income-change conditions and durable and nondurable goods are compared. (shrink)

This paper examines how different forms of performance evaluation relate to aspects of the creative climate in a major pharmaceutical company. The study was based on a large employee-attitude survey that was distributed to all company employees. The study analyses survey results from 5,333 employees at five R&D sites. The results indicate that management’s evaluation of employees (either dialogue-based or control-based) relates to the type of motivation (intrinsic or extrinsic) that drives employees, to their style of thinking (value-focused thinking) and (...) on their attitudes to organizational creativity. The paper then discusses implications of these findings for HRM. (shrink)

Trust has a great potential for furthering our understanding of organizational change and learning. This potential however remains largely untapped. It is argued that two reasons as for why this potential remains unrealized are: (i) A narrow conceptualization of change as implementation and (ii) an emphasis on direct and aggregated effects of individual trust to the exclusion of other effects. It is further suggested that our understanding of the effects of trust on organizational change, should benefit from including effects of (...) trust on the formulation stage. It should also benefit from exploring the structuring effects of trust in organizations. Throughout this chapter, ways to extend current research on trust in organizations are suggested. The chapter also provides examples of relevant contributions where available. In order to capture organizational effects of trust, it is suggested that trust should be studied over longer time intervals, and include several referents of trust, spanning both horizontal and vertical relationships in the organization. (shrink)

Organizational learning can be described as a transfer of individuals’ cognitive mental models to shared mental models. Employees, seeking the same colleagues for advice, are structurally equivalent, and the aim of the paper is to study if the concept can act as a conduit for organizational learning. It is argued that the mimicking of colleagues’ advice seeking structures will induce structural equivalence and transfer the accuracy of individuals’ cognitive mental models to shared mental models. Taking a dyadic level of analysis (...) authors revisit a classical case and present novel data analyses.The empirical results indicate that the mimicking of advice seeking structures can alter cognitive accuracy. It is discussed the findings’ implications for organization learning theory and practice, addressed the study’s limitations, and suggested avenues for future research. (shrink)

Trust has a great potential for furthering our understanding of organizational change and learning. This potential however remains largely untapped. It is argued that two reasons as for why this potential remains unrealized are: (i) A narrow conceptualization of change as implementation and (ii) an emphasis on direct and aggregated effects of individual trust to the exclusion of other effects. It is further suggested that our understanding of the effects of trust on organizational change, should benefit from including effects of (...) trust on the formulation stage. It should also benefit from exploring the structuring effects of trust in organizations. Throughout this chapter, ways to extend current research on trust in organizations are suggested. The chapter also provides examples of relevant contributions where available. In order to capture organizational effects of trust, it is suggested that trust should be studied over longer time intervals, and include several referents of trust, spanning both horizontal and vertical relationships in the organization. (shrink)

By adopting social exchange theory and the affect-infusion-model, the hypothesis is made that emotional intelligence (EI) will have an impact on three perceptions of trustworthiness – ability, integrity and benevolence – at the beginning of a relationship. It was also hypothesized that additional information would gradually displace EI in forming the above perceptions. The results reveal that EI initially does not contribute to any of the perceptions of trustworthiness. As more information is revealed EI has an impact on the perception (...) of benevolence, but not on the perceptions of ability and integrity. This impact was observed to be negative when the nature of the information was negative. On the other hand, information alone was shown to have a significant impact on the perceptions of ability and integrity, but not on the perception of benevolence. Theoretical and practical implications of the findings are addressed. (shrink)

This article investigates the impact of different emotions on trust decisions taking into account the experience of betrayal. Thus, an experiment was created that included one betrayal group and one control group. Participants in the betrayal group experienced more intense feelings governed by negative emotions than participants in the control group did. Moreover, participants in the betrayal group significantly lowered their trust of another stranger. On the other hand, we found some evidence that neuroticism exaggerated the relationship between experienced betrayal (...) and subsequent trust. (shrink)

Several studies have shown that preference is not necessarily synonymous with choice. In particular, the most preferred object from a set of objects presented in a non—choice context is not necessarily chosen when the same objects are options in a choice situation (Lichtenstein & Slovic, 1971, 1973; Tversky, Sattah, & Slovic, 1988) . Our research on the choice—preference discrepancy replicates these findings and thus bears some resemblance to the study by Tversky, Sattah, and Slovic (1988). Two competing explanations are tested.

Intertemporal choice is the study of how people make choices about what and how much to do at various points in time, when choices at one time influence the possibilities available at other points in time. These choices are influenced by the relative value people assign to two or more payoffs at different points in time. Most choices require decision-makers to trade off costs and benefits at different points in time. These decisions may be about savings, work effort, education, nutrition, (...) exercise, health care and so forth. Since early in the twentieth century, economists have analyzed intertemporal decisions using the discounted utility model, which assumes that people evaluate the pleasures and pains resulting from a decision in much the same way that financial markets evaluate losses and gains, exponentially 'discounting' the value of outcomes according to how delayed they are in time. Discounted utility has been used to describe how people actually make intertemporal choices and it has been used as a tool for public policy. Policy decisions about how much to spend on research and development, health and education all depend on the discount rate used to analyze the decision. (shrink)

A path model of organizational creativity was presented; it conceptualized the influences of information sharing, learning culture, motivation, and networking on creative climate. A structural equation model was fitted to data from the pharmaceutical industry to test the proposed model. The model accounted for 86% of the variance in the creative climate dependent variable. Information sharing had a positive effect on learning culture, which in turn had a positive effect on creative climate, while there were negative direct effects of information (...) sharing on creative climate and on intrinsic motivation. This study suggests that information sharing and intrinsic motivation are important drivers for organizational creativity in a complex R&D environment in the pharmaceutical industry. Implications of the model are discussed. (shrink)

In this chapter, we argue that trust can be better understood in relation to people’s attempts to deal with vulnerability in social interactions. Different situations afford different forms of adaptation that correspond to different forms of trust. We describe three forms of trust: trust as a decision, trust as a performance and trust as an uncontrollable force. We show how these different types of trust differ with respect to assumptions about trust, trustworthiness and agency as well as with respect to (...) the accompanying emotions and outline a tentative process model of trust. We conclude the chapter by reviewing the contribution of the suggested framework as well as indicating questions for further research. (shrink)

Consider the following three claims. (i) There are no truths of the form ‘p and ~p’. (ii) No one holds a belief of the form ‘p and ~p’. (iii) No one holds any pairs of beliefs of the form {p, ~p}. Irad Kimhi has recently argued, in effect, that each of these claims holds and holds with metaphysical necessity. Furthermore, he maintains that they are ultimately not distinct claims at all, but the same claim formulated in different ways. I find (...) his argument suggestive, if not entirely transparent. I do think there is at least an important kernel of truth even in (iii), and that (i) ultimately explains what’s right about the other two. Consciousness of an impossibility makes belief in the obtaining of the corresponding state of affairs an impossibility. Interestingly, an appreciation of this fact brings into view a novel conception of inference, according to which it consists in the consciousness of necessity. This essay outlines and defends this position. A central element of the defense is that it reveals how reasoners satisfy what Paul Boghossian calls the Taking Condition and do so without engendering regress. (shrink)

The dominant theory of the evolution of moral cognition across a variety of fields is that moral cognition is a biological adaptation to foster social cooperation. This chapter argues, to the contrary, that moral cognition is likely an evolutionary exaptation: a form of cognition where neurobiological capacities selected for in our evolutionary history for a variety of different reasons—many unrelated to social cooperation—were put to a new, prosocial use after the fact through individual rationality, learning, and the development and transmission (...) of social norms. This chapter begins with a brief overview of the emerging behavioral neuroscience of moral cognition. It then outlines a novel theory of moral cognition that I have previously argued explains these findings better than alternatives. Finally, it shows how the evidence for this theory of moral cognition and human evolutionary history together suggest that moral cognition is likely not a biological adaptation. Instead, like reading sheet music or riding a bicycle, moral cognition is something that individuals learn to do—in this case, in response to sociocultural norms created in our ancestral history and passed down through the ages to enable cooperative living. (shrink)