Midterm I Review Sheet

Midterm I Review Sheet - Pay incentives : Individual...

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Pay incentives : Individual productivity – Correlation .32 Top management commitment to “management by objectives” (goal-setting, participative decisions, feedback) : Organizational productivity – Correlation .67 I. Decision-making (I) a. Escalation of Commitment – “saving face” a.i. Irrational Behavior – people have a hard time letting go and admitting they made a mistake. They want to recoup loss, turn things around, and prove it was a good idea in the first place. a.i.1. Resources committed to initial course of action a.i.2. Does not produce desired return a.i.3. Commit more resources to turn things around and recover initial investment a.i.4. Cost of failure increases a.i.5. More resources are invested a.ii. Examples a.ii.1. Vietnam, dating, repairing used cars, sending poor employee to training sessions instead of firing a.ii.2. People tend to allocate more money and energy to failing projects than successful ones, especially when they are personally responsible b. Mindlessness b.i. People are motivated to see the world in particular ways, influences decisions, info is processed in biased ways consciously and unconsciously b.ii. Mindless decision-making occurs in everyday life b.ii.1. “Have a nice trip. You too” b.ii.2. Sometimes deadly b.ii.2.a. Firemen not thinking to drop heavy tools b.iii. Implicit egotism – we tend to make decisions that unconsciously remind us of ourselves b.iii.1. Similarity to self “greases” attraction process, more appealing b.iv. **LESSON: Be mindful of unconscious influences on your decisions II. Decision-making (II) a. Escalation in real life a.i. Challenger a.i.1. Failed to realize they didn’t have all the relevant info because… a.i.1.a. time pressure a.i.1.b. expert disagreement a.i.1.c. mixed up data a.i.1.d. differential desirability of outcomes a.i.2. Why? Conditions for escalation of commitment: a.i.2.a. Previous failures a.i.2.b. Significant potential gain from success a.i.2.c. Public nature of commitment and outcomes a.i.2.d. Personal responsibility for prior decisions a.ii. Other escalation examples a.ii.1. NBA team – spend more money on player give him more playing time despite performance a.iii. Cognitive dissonance fuels escalation a.iii.1. Police officers and prosecutors rejecting DNA evidence that would exonerate criminals they imprisoned a.iii.2. People don’t want to hold two contradictory ideas so they rationalize their decisions and escalate commitment b. Cost of overconfidence
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b.i. Challenger b.ii. Organizational Issues b.ii.1. Past success made them willing to accept higher risk b.ii.2. Lack of communication – culture of silence not voice c. **LESSON c.i. Easy to make bad decisions even with good intentions c.ii. Good decisions require asking the right questions, not just giving good answers c.iii. Learn from your mistakes and the mistakes of others III. Decision-making (III) a. Maximizers vs. Satisficers a.i. Maximizers – want to be better than others, focus on outdoing others
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This document was uploaded on 11/04/2011 for the course BUSI 405 at UNC.

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Midterm I Review Sheet - Pay incentives : Individual...

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