Marcus Selart

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.

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.

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.

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

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.

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

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

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

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.

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

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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

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.

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.

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.

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

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.

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.