Chapter 12 & 14: Leadership & Power Organizations
Leadership vs. management
Leaders are endowed with capabilities to produce extraordinary results and
influence others in order to achieve a common purpose.
Management: Use of authority inherent in designated formal rank to obtain
compliance from organizational members
o
Trait theories of leadership
Researches have attempted to build a theory that not only explains observed
leadership patterns but also identifies the characteristics of a universal leader.
Great Man theory: Explained leadership by examining the traits and
characteristics of individuals considered to be historically great leaders.
Researches believed that these leaders were born with extraordinary
qualities and that they descended from genetically superior family lines,
but this theory didnt last long then led to
Traits-based theory: Tries to reveal a set of universal traits and skills
that are relevant in all leadership situations. The most common trait
identified in leader is self-confidence. An example of Johnson &
Johnson, the CEO was transparent with the public and recalled all
Tylenol, a medicine which resulted several deaths, so the CEO made
crucial decisions in order to navigate J&J through a potential
catastrophe. J&J finished by being the most trusted brand in the world
thanks to its leader (the CEO), who could overcome crisis with his selfconfidence.
Common leadership traits: Self-confidence Initiative Risk taking
Persistence High level of physical energy Motivation to complete
tasks Integrity and accountability Emotional intelligence.
o
Leadership skills
A core set of learned skills or capabilities that are relevant to effective leadership:
Cognitive skills: a leaders ability to gather and process large amounts
of information, create suitable strategies, solve problems, and make
correct decisions. The leader makes sense of the environment, he or she
can then direct subordinates toward activities that result in
organizational success like Samsung in 1990, Samsung electronics
stores in US went from cheap commodities to the best store in
innovation and design.
Technical skills: leaders knowledge about an organization, (including
rules, structure, and management systems) and job-related activities, it
improves his or her ability to prioritize information and make decisions.
Interpersonal skills: leaders ability to interact with others, such as
effective communication (symbolic, verbal, nonverbal communication)
and social competency (be aware of how other peoples attitudes are
related to their motivation). Leaders are more effective at empathizing
with others, facilitating teamwork and improving team spirit.
o
-
Behavior theories of leadership and leadership grid
Behaviors refer to what leaders do
Leadership styles: the pattern of behaviors that leaders use in situations.
Researchers have found that they stem from 2 categories of behavior.
Task-oriented behavior: behaviors that prioritize the
accomplishment of a task in an efficient and reliable way (focusing
on the task), they are concerned with group goals by: - doing shortterm planning (they must prioritize objectives and strategies, assign
responsibilities, schedule activities by using budgets, written plans
and staff meetings). Clarifying roles and objectives (ensure that
their subordinates understand their tasks). Monitoring operations
and performance (observe if workers accomplish their tasks
correctly)
Relations-oriented behavior: Behaviors that prioritize
interpersonal relationships, the value of workers as humans, and a
strong commitment to the unit and its mission (focusing on the
people). Lower turnover, higher motivation to work, more creativity,
more self-regulation, more long-term success, deeper commitment
and strong loyalty are the benefits. They: - Support subordinates
(maintain effective relationships, increase satisfaction to influence
subordinates self-confidence, trust in the leader and commitment to
the organization). - Developing subordinates (coach, mentor
subordinates and treats them as equals). Recognizing work (show
appreciation and give praise to employees)
Relationship
Managerial Grid: a two-dimensional grid showing leaders different levels of
task-oriented and relations-oriented behavior, which results in particular styles of
leadership.
Hig
h
High-Relationship, Lowtask
These individuals are most
concerned about the needs
and feeling of others. They
operate under the assumption
that as long as people are
happy and secure, they will
work hard
High-Relationship, High-Task
These individuals integrate
production and people concerns in a
mutually reinforcing effort where all
behaviors enhance each other. This is
a goal-centered, team approach.
Orientation
Low
Low-Task, Low-Relationship
These individuals do not have
a high regard for creating
systems, getting the job done,
or developing relationships
with others.
Low
High-Task, Low-Relationship
These individuals believe that work is
simply a means to an end. They
believe that employees needs are
secondary to the need for efficient
and productive workplaces.
High
Charismatic leadership
Individuals who arouse strong followership through inspirational visions or
compelling personal attributes. Steve Jobs was one leader who motivated his
employees to reach far beyond what they thought they were capable of, and he
motivated customers to expect more from Apple.
Patterns in Charismatic leaders
Exhibit extreme self-confidence about their values Possess willingness to
take personal risks Have a strong moral conviction to exercise their power
positively Communicate vision through powerful imagery, symbolism, and
metaphor.
-
Not all charismatic leaders are positive role models, they are characterized
as narcissistic, they exert power over others.
Transformational vs. transactional leadership
Transformational Leaders: The set of behaviors that leaders use to transform,
or change, their organization and individuals for the better.
-
Charisma and vision (shared vision adds meaning to activities)
Inspirational motivation (communicate values and maintain integrity in the
face of pressure)
Intellectual stimulation (in an environment of trust and respect, leaders
stimulate creativity and innovation)
Individualized consideration (leaders effort to understand each followers
needs for achievement, growth by listening, monitoring)
Transactional Leaders: The process of a leader providing something the
subordinates want. For example, managers provide the promise of a raise or a
promotion in return for hard work and quality products.
-
Contingent reward or carrot-and-stick method (leaders offer rewards to
subordinates in exchange for their services, such as votes respect
commitment)
Management-by-exception is a method of leadership, engaged either
actively or passively, that dictates when leaders should intervene to
increase a subordinates effort to meet standards.
Active management-by-exception (managers take immediate action to
correct performance, this approach improves self-esteem and long-term
achievement to negative criticism)
Passive management-by-exception (managers should take corrective
action only when subordinates fall below expectations, and subordinates
learn from mistakes and become more functionally independent, the
approach is more effective in the long-term,)
Best leader display both transactional and transformational leadership
behaviors, like Henry Ford, while he gave workers a high wage (5$ per day)
and controlled activity with rigid rules and procedures, he transformed the
automobile industry by using the assembly line and hiring the disabled and
illiterate.
Transactional
- Create order, maintain
efficiency, produce consistent
results
- Use the existing framework to
get results
Transformational
- Elevate performance by
introducing an emotional
element
- Will change the framework to
pursue new opportunities and
avoid crises
- Have better relationships with
their subordinates
Leader-member exchange theory (not included in the slides)
A method of leadership in which leaders treat each follower differently,
and as a result, develop unique relationships with each member.
In-group form: when subordinates are assigned more interesting tasks,
gain greater responsibility and authority and receive more tangible
rewards
Out-groups: suffers from a low level of mutual influence
Relationship life cycle: a concept marked by the stranger, acquaintance,
and mature partnership phases in which a leader and follower undergo a
process that dictates whether followers become part of the in-group or outgroup
Contingency theories of leadership
While trait and behavior theories do help us understand leadership, an important
component is missing: the environment in which the leader exists. Contingency
Theories deal with this additional aspect of leadership effectiveness studies
Fiedlers Contingency Model: a contingency theory in which leaders are
more effective depending on the favorability of a leadership situation,
which is described by leader-member relations, task structure, and
positional power of the leader.
Hersey and Blanchards Situational theory (important): they believe that
leaders have the flexibility and range of skills to adapt their behavior to the
maturity of their subordinates.
Situational leadership: a leadership theory based on the interplay among
(1) the amount of task-related behaviors a leader exhibits; (2) the amount
of relationship related behaviors a leader exhibits; and (3) the level at
which followers are mature enough to perform a specific task, function, or
objective.
This theory is a model that focuses on follower readiness
-
Followers can accept or reject the leader
Effectiveness depends on the followers response to the leaders actions
Readiness is the extent to which people have the ability and willingness
to accomplish a specific task
A paternal model:
-
As the child matures, the adult releases more and more control over the
situation
As the workers become more ready, the leader becomes more the leader
becomes more laissez-faire
Guide
Hig
h
Employee Will
Direct
Low
Low
Delega
te
Suppor
t (up or
out)
Hig
h
Employee Skill
Houses Path-goal theory: a theory that states that the most important
aspect in leadership is the followers expectation that a task can be
accomplished and that it will lead to rewards
Task
characterist
ics
Leadership
behaviors
Follower
characterist
ics
Expecctati
on of
completin
g task
Rewards
and
satisfacti
Leadership substitutes: Aspects of a situation that render leadership
unnecessary
Leadership neutralizers: aspects of a situation that hinder a leaders ability
to act a particular way
Power and form of interpersonal power
Power: -The potential of one individual or a group to influence the behavior,
thinking, or attitudes of another individual or group. - used by leaders to
set goals, prioritize activities, and decide who should be given certain
assignments, when tasks should be completed
Influence: The means or vehicle by which power is exercised
Forms of interpersonal Power:
In 1959, John R.P.French and Bertram Raven developed a typology for describing
interpersonal power that has been used by many researches to study group
behavior; it includes five bases of power:
Legitimate power: based on the formal position that an individual holds
in an organization. An individual can have more legitimate power when
their subordinates respect his or her position in the organization, but can
have less legitimate power when his or her authority is questioned.
Ex: Keith Ferrazzis peers indicate their disbelief in his legitimate
power by remarking who is this guy, why is he here... He acquired
more legitimate power as he attained higher positions of leadership.
Reward power: exists when one person had the ability to reward another
for his or her behavior. To effectively use it, the leader should understand
what motivates others.
Ex:
Coercive power: exists when one person has the ability to punish another
for his or her behavior. It leads to more short term results and can be
effective in a crisis situation.
Expert power: based on a significant difference in the knowledge level of
two or more individuals in a particular area. A person who has abilities,
skills and is highly regarded because of his or her expertise has expert
power.
Referent power: based on the personal liking an individual has for
another. A person who others would like to emulate has high referent
power.
Classify and explain interpersonal power, developed by David Whetten and
Kim Cameron (not included)
Positional power: power that comes from an individuals formal
place within an organizations structure.
Personal power: power that is obtained from having personal
attributes that others desire.
Relational power: power gained from the types of networks to which an
individual belongs, the types of people in those networks, and the strength
of the relationships within the networks.
Reactions to Power
Top executives: Power at the top
- Determine the distribution of resources
- Maintain centrality in the organization
- Have broad access
- Control decision criteria
Employee reactions to the exercise of power
- Resistance: Managers tend to rely on coercive power to overcome passive
(pretending to agree but doing nothing) or active (refusing to do what is
asked) resistance.
- Compliance: Managers tent to rely on positional power (formal authority)
and the use of rewards and punishments to foster compliance.
- Commitment: managers tend to use personal power (including likability
and expertise) and appeal to employees values to encourage
commitment. Its the most preferred outcome and occurs when employees
work hard to ensure that they are implemented properly. Empowerment is
a way to increase commitment
Empowerment: The process of sharing power with subordinates and
pushing decision making and implementation to the lowest possible level,
increasing the influence and autonomy of all employees. Changes the role
of the leader by forcing him or her to delegate more. Example: Rod Sharpe,
director of sales training of Black & Decker, gave to the members of his
sales team a flip video camera and free video editing software to fil and
edit videos of competitors products. Besides providing some interesting
competitive intelligence, the videos also determined the way in which
future sales tram members would be trained, enabling them to highlight
the comparative benefits of Black & Decker products.
Power tactics
Ways in which individuals translate power bases into specific actions. There are 9
influence tactics:
-
Legitimacy
Rational persuasion*
Inspirational appeals*
Consultation*
Exchange
Personal appeals
Ingratiation
Pressure**
Coalitions
Factors promoting political behavior
Political Behavior: Activities that are not required as part of ones
formal role in the organization, but that influence, or attempt to
influence, the distribution of advantages or disadvantages within the
organization
Legitimate Political Behavior: Normal everyday politics complaining, bypassing, obstructing
Illegitimate Political Behavior: Extreme political behavior that
violates the implied rules of the game: sabotage, whistle-blowing,
and symbolic protest
*Most effective
** Less effective
Factors
o Steps of using influence
Step 1: Choose an Influence Style and Influence Tactics
Pushing styles: Persuading - Creating solutions and making strong
arguments Asserting - Setting expectations, providing feedback,
and exchanging assistance
Pulling styles: Bridging - Engaging others, listening, and sharing
personal information Attracting - Creating a common ground and
communicating goals
Moving away style: Disengaging - Postponing, changing the
subject, taking a break, or avoiding interaction altogether
Step 2: Use Specific Influence Principles as Weapons of Influence
Reciprocation principle: Doing something for someone now creates
a future obligation for that person to repay the act
Commitment and consistency principle: Once a choice is made, an
individual will encounter personal and interpersonal pressures to
behave consistently with the commitment
The social proof principle: Individuals evaluate what is correct by
listening to or observing others
Liking principle: Suggests that someone will be more likely to say
yes to another individual whom they like
Authority principle: Assumes that individuals will follow orders
even when they dont agree with the other persons position and
authority in the organizational hierarchy
Scarcity principle: Asserts that opportunities seem more valuable
when their availability is limited
Step 3: Build Sources of Interpersonal Power
Enhance personal power by: Building expertise Improving
attractiveness Increasing effort Developing legitimacy over time
Step 4: Assess Performance
Performance measures: Input and feedback from others Formal
feedback from supervisors Self-monitoring
Chapter 13: Becoming a Leader: Knowing yourself
Self-awareness: an understanding of ones thoughts, feelings, and
behaviors.
Interpersonal effectiveness: the ability to acknowledge and take
responsibility for ones role in cultivating relationships and in
communicating effectively with others.
o Intelligence, IQ, and multiple intelligences
Intelligence: a persons ability to profit from experience, acquire
knowledge, think abstractly, and adapt to changes in the environment.
Intelligence quotient (IQ): a measure of the overall quality of an
individuals mental abilities, designed by Alfred Binet in the early 1900s
68% of the population has an average IQ score between 85 and 115
Multiple intelligence: Howard Gardners 1983 book Frames of mind
rejected the notion of a single type of intelligence. He proposed that there
are 8 kinds of intelligence that can be indicators of career success.
Type of
intelligence
Description
In a company
setting, you can
volunteer to
Write reports
Linguistic
Word smart
Mathematicallogical
Number/reasonin
g
Create
spreadsheets or
analyze data
Spatial
Picture smart
Kinesthetic
Body smart
Musical
Music smart
Interpersonal
People smart
Intrapersonal
Self-smart
Naturalist
Nature smart
Create charts or
slide
presentations
Organize and
coach a
company sports
team
Organize a
company talent
show
Present to a
large audience
Participate in
employee
satisfaction
focus groups
Develop a
companys
recycling
program
Associated
careers
Lawyers,
journalist,
politicians
Scientists,
mathematicians,
economists,
technologists,
engineers
Artists,
architects, pilots
Dancers,
athletes,
personal
trainers, builders
Musicians,
signers
Teachers,
diplomats
Philosophers,
psychologists,
theologians
Gardeners,
farmers
The way in which information is processed in the brain varies; the left
hemisphere of the brain is the processing center for logical, rational, and
analytical thinking. However the right side of the brain is responsible for
intuitive, spatial, and abstract thinking
o Characteristics of creative people and individuals creativity
Creativity: The ability to combine or link ideas in new ways to generate
novel and useful alternatives. Being creative isnt limited to individuals
working in artistic fields. Creativity is an evolutionary trait that is wired into
our brains and can be cultivated and increased through practice.
Individuals who actively utilize their creative capacity have been shown to
not only use their existing knowledge and technical skills to generate
ideas, but also the following 4 characteristics:
Self-confidence and perseverance in the face of obstacles
Willingness to take risks
Willingness to grow and openness to new experiences
Tolerance of ambiguity
Creativity can also be evaluated according to 3 indices:
Fluency: The ability to generate many solutions that fit some
requirement
Flexibility: The ability to change approaches to a problem (being
able to solve a series of tasks when each task requires a different
strategy)
Originality: The ability to generate novel or unique propositions,
ideas, or solutions
Example: Pixar, creator of iconic and award-winning films (Toy story,
finding nemo..), has built a sterling reputation for creativity. Their success
attributes to the companys ability to discover and unleash the creative
power and ingenuity in all employees, which called slice of genius, in all
parts if the company. They believe that their product is the result of the
collective work.
o Triarchic theory of intelligence
Psychologist Robert Sternberg was the origin of this theory, he based on
multiple dimensions of cognitive functioning. He believes that individuals
possess 3 components of intelligence:
Computational intelligence (analytic): Knowing what questions to
ask and what information to seek to solve a problem
Experiential intelligence (creative): the ability to identify and react
to novel situations and stimuli and to connect with the external
world. Being open to new ideas and willing to engage in experiential
learning and development
Contextual intelligence (practical/big-picture thinkers): Ability to
shape and be shaped by the external environment. They seem to
know what is required to accomplish tasks and the best methods for
getting them done. Individuals who possess it: - Take time to
understand the environment and its potential impact on the
business landscape - Possess personal characteristics to seize
opportunities the context presents or to shape the context to fit a
new possibility - Have the capacity to adapt and change their
leadership style/approach as the context change.
Cultural intelligence: The ability to understand and respond appropriately
to different cultural contexts and situations. Involves an understanding of
oneself and ones own cultural values, an appreciation for others culture
and values, and an ability to adapt ones leadership style to a particular
cultural context.
o Components of emotional intelligence
The capacity for recognizing our own feelings and those of others, for
motivating ourselves, and for managing our emotions and relationships in
a productive manner. It consists of 4 components:
Selfmanagement
Self
-
Relationship
management
Actions
Social
awareness
Emotiona
l
intelligen
ce
Self-awareness
Awarenes
s
Others
Self-awareness: the ability to recognize ones own emotions and
understand how those emotions impact others
Self-management is composed of 2 main components: (not included)
Regulation: includes self-control, which is the ability to keep
destructive emotions in check especially during times of crisis. It
helps channel emotions appropriately.
Motivation: includes the desire for achievement and the ability to
push oneself despite obstacles and setbacks
Social awareness: manifested on both individual (empathy, sensing others
feelings and perspectives, taking interest in their concerns) and group
basis (ability to understand group dynamics and relationships)
Relationship management: includes the abilities to influence and inspire
others, manage conflict, cultivate productive teams.
Emotionally intelligent leaders :
Listen more than they talk
Emphasize the hows and whys of assignments and tasks instead of
simply telling people what to do
Engage team members and recognize contributions rather than
criticize and correct mistakes
Understand what energizes and engages people and create
environments that foster that creativity
o Personality, locus of control, and resilience
Personality: A system of enduring inner characteristics, tendencies, and
temperaments that are both inherited and shaped by social, cultural, and
environmental factors
- Robert McCrae and Paul Costa tried to identify certain traits that common
in all people to explain effective and ineffective approaches to leadership.
According to them, each persons personality can be broken down into 5
factors (Big Five Personality Model)
Carl Jung suggested in his theory that human behavior was regular and
predictable. According to him, there are 6 fundamental psychological
processes that impact an individuals cognitive process and ultimately
influence his or her leadership style. Myers and Briggs extended Jungs
research and added Judgment (J) and Perception (P)
From these 8 processes, 4 personality dimensions are created: E-I, S-N, S-F,
J-P. The 4 dimensions are considered polar opposites of each other, for
example, a person cannot be equally strong in thinking and feeling.
The MBTI assessment results in 16 possible personality types, but within
each personality type, there is one generally one dimension that is
considered dominant.
Lotus of control: The extent to which an individual believes that he or she
can control or influence the outcome of events. Different individuals
attribute outcomes of events to one of four causes: personal ability, effort,
task difficulty and luck or chance. Their attribution is impacted by 2
dimensions: stability (the predictability of change over time) and locus of
control. Individuals who believe in their ability to control events are called
internals.
Person
Stabl
al
e
ability
Task
difficult
y
Effort
Unstabl
e
Luck or
chance
Interna
l
Externa
l
Resilience: The belief that one can control or adapt to certain events and
outcomes and be able to bounce back from difficulty. Resilient people tend
to be very persistent; they push forward regardless of setbacks and
obstacles.
An example of Nelson Mandela, who was imprisoned for 27 years for
his activism against apartheid in South Africa. As the apartheid
crumbled, he was released and went to become the president of the
country. His post imprisonment speeches were filled with
reconciliation and forgiveness, rather than anger. Instead of revenge,
he promised of a better future for the country. He channeled his
adversity into moving forward, not backward.
o Adversity response hierarchy
Adversity stimulate learning and development, it also can undermine
confidence and impede an individuals ability to move forward in a
productive manner
learned helplessness: people who believe that there is nothing they can
do to rectify a bad situation, consequently, they tend to do nothing
universal helplessness: blame the situation and believe that no one
could do anything to adequately respond
personal helplessness: blame themselves, believing that there might be
an appropriate personal response but that it is beyond their reach or
repertoire skills and abilities.
To understand your own tendencies is to consider the ways in which you
react to difficult situations
Key dimensions of managing adversity
Control: the extent to which you think you can influence whatever
happens next
Ownership: the level of accountability or responsibility that you assume
to improve the situation.
Reach: the extent to which the adversity impacts other aspects of your
professional or personal life.
Endurance: the expected length of the adversity.
Self-monitoring (not included):
The ability of individuals to read cues from their behavior. People
can vary from being high self-monitors to being low self-monitors
Chapter 15: Decision making
Decision making: The process of identifying issues and making
choices from alternative courses of action
Management is all about making decisions. (Herbert A. Simon, 1978
Nobel Laureate in Economics) ->Life is all about making decisions.
Nothing is more difficult, and therefore more precious, than to be
able to decide." (Napoleon Bonaparte)
Among every 100 bankrupt companies, 85% of them failed because
of poor decisions. (RAND Corp.)
Being an MBA candidate means to become a better decision maker.
o
Rational decision making (not included)
Theory of rational choice: the theory that individuals make decisions
based on a rational thought process that optimizes self-interest. It
follows a set of process:
1. A problem or opportunity is defined
2. Objectives and goals are identified
3. Objectives are weighted according to the importance of each
4. Possible courses of action or alternatives are considered
5. Each objective is rated according to how well it will achieve
the desired course of action
6. The optimal decision is chosen
How managers make decisions (not included)
Bounded rationality: a set of boundaries or constraints that tend to
complicate the rational decision-making process
Satisficing: the act of choosing a solution that is good enough
Conditions of certainty: conditions in which individuals have all of
the information they need to make the best possible decision
Ambiguity: situations that are characterized by uncertainty and risk
and where the optimal decision is not clear or obvious
Conditions of risk: conditions in which individuals have information
about an organizations goals, objectives, priorities, and potential
courses of action, but they dont have complete information about
the possible outcomes for each course of action
Conditions of uncertainty: conditions in which individuals have
information related to an organizations objectives and priorities, but
they dont have complete information about alternative courses of
action or about the possible outcomes for each one
Intuitive decision making: insights that are tapped through intuition
and are not always fully understood by the decision maker.
Challenges for decision making
1. High stake: Outcomes of life or death
2. Risk: Outcomes subject to chance
3. Uncertainty: Information incomplete and unclear
4. Ambiguity: Goals unclear, alternatives difficult to define, and information
unavailable
5. Conflict: Points of view or values in conflict
6. Stress: Emotionally demanding, worrying, anxious
7. Change: Ever changing circumstances for decisions
8. Judgment: Not just about analysis, but your final guts to bet
Four decision making models and their contents
The framework of reference or primary principles that guide a
managers decision making and judgment. Decision making in
organizations depends on whether the decision is programmed or
nonprogrammed. In organizations, managers approach decision
making using one of four models:
Classical (rational/scientific/economic) model: a model of decision making
that seeks to maximize economic or other outcomes using a rational
choice process. The decision maker aims to accomplish and make
decisions that will maximize organizational goals, use logic to assign
values
Administrative model: a model of decision making that acknowledges that
managers may be unable to make economically rational decisions even if
they want to because they lack sufficient information on which to base
their decision. It describes how managers make nonprogrammed decisions.
Managers often rely on their base of knowledge and experience or intuition
to make decisions. Key concepts of this model (Bounded rationality,
Satisficing, Intuitive decision making)
The political model: valuable for making nonprogrammed decisions. Most
organizational decisions involve many managers who have different goals
and ho have to share information to reach an agreement.
Garbage can model (ethical model): making whereby problems, solutions
participants, and choices flow throughout an organization. This decision
process is not viewed as a sequence of steps that begins with a problem
and ends with a solution. Four decision making criteria:
1. Utilitarianism : Decisions solely based on the outcome; seeking the
greatest good for the greatest number
2. Individualism: Individualism is believed to lead to honesty & integrity
since that works best in the long run.
3. Moral Rights: Decisions must respect and protect the basic rights of
individuals such as employees and customers.
4. Justice: Imposing and enforcing rules fairly and impartially; equitable
distribution of benefits and costs; distributive, procedural, &
compensatory justice
Type I vs. Type II Errors in Decision Making
Type I error = false positive (needless blunder) , e.g., to cry wolf
Type II error = false negative (missed opportunity), e.g., failure to
forecast an earthquake
Type I and Type II errors are complementary; reducing the chance for
one error might open the door for the other.
The key for better decisions is to understand which error is more
critical to your goals and set either a high or low trigger accordingly.
No decisions are perfect; no shortcuts; good decision makers are
made through practice and experience (including failure).
Other biases and errors in decision-making and how to manage them
We are all likely to deviate from rationality due to persuasive biases that
influence each of us to varying degrees. These biases are usually hidden from us
and we often dont realize when we are influenced by them.
Heuristic: rules of thumb or short-cuts that individuals use to save time
when making complex decisions. The primary rules of thumb that most
people use are:
Availability: when making decisions, managers remember vivid events
(emotional memories, childhood memories, good or bad performance of
an employee..). the rule of thumb that contends that individuals assess
the frequency, probability, or likely cause of an event by the degree to
which instances or occurrences of that event are readily available in
memory.
Representativeness heuristic: the rule of thumb that contends that
individuals tend to look for traits in another person or situation that
correspond with previously formed stereotypes. Managers may predict
the success of a new product based on that products similarity to past
successful and unsuccessful products.
Adjustment: the rule of thumb that contends that individuals make
estimates or choices based on a certain starting point. It is one of the
primary reasons that making a good first impression is vitally
important. It can also be helpful in ace
Confirmation bias: a bias in which people tend to seek information that
confirms a decision before seeking information that disconfirms a decision,
even if the disconfirming a information is more powerful and important. It
occurs when people have already made up their mind about a decision.
Escalation of commitment: occurs when decision makers commit
themselves to a particular course of action beyond the level suggested by
rationality as a means of justifying previous commitments. Arises when we
are in situations where we have already invested a lot and are faced with a
choice of continuing to invest or exist.
Status Quo Bias: the tendency to favor the here and now and to reject
potential change.
Framing: alternative presentations of the same information that can
significantly alter a decision. When we examine two choices as choosing
between possible losses, when we frame those same choices as choosing
between possible gains, we take the risk-averse option.
