Module II:

Managerial Decision
Making Processes
and Individual
Differences
Atri Sengupta
IIM Raipur

Learning Objectives
n

n
n
n

Understanding decision making processes

and Creativity
Perception and Learning
Values, Attitudes, and Workplace Emotions
Self, Personality, and Stress Management

Managerial Decision Making

Problems
n Programmed
n NonProgrammed

Managerial Decision Making

q

Labour Dispute at Dr. Reddys Lab:

Decisional Dilemma
What to be the stand of management in case
of initial 25 charter of demands?
How to react to the strike called by contract
workers just before USFDA Audit?
How to restore operations smooth after the
strike?

Managerial Decision Making

Decision-Making Models
n Classical / Rational Model based on
economic assumption
Rationality model
n Administrative / Behavioural Model based
on uncertainty and ambiguity
Bounded rationality model
Satisficing model
Impulsive decision making

Managerial Decision Making

Situation 1:
n When faced with declining performance, some
business leaders respond through moves such
as aggressive marketing and new product
development. Other leaders respond by
focusing on extensive cost cutting including
laying off employees and selling assets. How
and why do leaders react differently in such
situations?

Managerial Decision Making

Situation 1: Strategic Choice
n Acceptance or decline
n Threat-rigidity perceived threat (risk of
loosing control) leads to stress or anxiety
regain control through centralization and
increased efforts to conserve resources
retrenchment based activities
n Failure-induced change non-traditional
routine from high aspirations to learned
helplessness to low aspirations more far
reaching strategy changes

Managerial Decision Making

Situation 1: Analysis
n Leaders cognitive, behavioural and knowledge
base
n Attributions of performance and assessment of
resource scarcity, urgency, or threat
n Attention pattern and casual attribution pattern
n Leaders information scanning, collecting and
processing techniques
n Judgment of leaders
n Leaders mental models and schema
n Threat vs. opportunity perception-based model

Managerial Decision Making

Situation 1: Analysis
n Older and experienced managers take more cautious
risks
n Personal characteristics leaders attitude towards
risk, self-centeredness, personality (e.g., locus of
control), values, beliefs
n Managers of different functional backgrounds have
different cognitive schema or knowledge structure
output-oriented managers opportunity seekers
more optimistic more tolerance of ambiguity
throughput-oriented managers perceives more
threats

Decision-Making
Situation 1: Analysis
n Embodiment -- the assumption that thoughts,
feelings, and behaviours are grounded in
sensory experiences and bodily states
n Tacit knowing -- human bodys system of
motor or perceptual powers -- behave
knowledgeable in terms of an I can
n Perception is dependent on a pre-reflective
knowledge of how to use the senses and
motor capabilities in order to have experiences

Managerial Decision-Making
Situation 1: Analysis
n Learning then is a process of reorganizing
possible actions within the environment by
exploring the world through seeing, hearing,
touching, etc.
n Organisation Perception Management

Managerial Decision Making

Situation 2:
n The WTC tragedy (9/11) resulted in nearly 3000 lives
lost, forced over 1000 firms to relocate from lower
Manhattan and resume operations elsewhere, and
put over 100,000 people out of work
n Human resource managers of affected companies
faced a myriad of questions requiring quick answers.
How would operations resume while maintaining
employee safety? Where would work locations be
moved? How would the work get done? Would new
employees need to be quickly hired? What obligations
does the firm have to its injured and deceased
employees?

Managerial Decision Making: Crisis

n
n
n
n
n

High ambiguity with unknown causes and effects;

Low probability of occurring
An unusual and unfamiliar event
Requires rapid response
Poses a serious threat to the survival of the
organization and its stakeholders
Presents a dilemma necessitating a decision that
will result in positive and/or negative change.

Managerial Decision Making: Crisis

n

n
n
n
n

Role of intuition
The ability to understand something immediately,
without the need for conscious reasoning.
A perceptual process, constructed through a
mainly subconscious act of linking disparate
elements of information.
Involves unconscious mind
Involves making holistic association
Accompanied by emotions
Domain knowledge task characteristics time
available for response

Managerial Decision Making: Factors

Affecting Right Decisions during Crisis

Managerial Decision-Making
Situation 3:
n Sustenance in todays highly competitive
business environment has become biggest
challenge to the organisation. Only high
performing organisations are able to earn the
sustainable competitive advantage. How to
motivate and align the workforce towards high
performance? How to transform nonperformers or average performers to starperformers?

Managerial Decision-Making: Hidden

Traps
q
q
q
q
q
q

The Anchoring Trap

The Status-Quo Trap
The Sunk-Cost Trap
The Confirming-Evidence Trap
The Framing Trap
The Estimating and Forecasting Traps
The overconfidence trap
The prudence trap
The recallability trap

Cognitive Biases in Decision Making

q
q
q

Overconfidence
Passion
Adaptability

How to Make Better Decisions

q
q
q
q
q

Identification & prioritization

Inventory
Intervention
Institutionalization
Mindfulness mindful observation, mindful
awareness, mindful listening

Creative
Problem
Solving

Creativity: The Truth

qIt

takes more than ideas

qIt takes an open mind
qInnovation is for everyone
qIts not magic, its a process
qCreativity is outcome of belief and self-efficacy

Creativity: The Definition

n

Creativity involves an ability to come up with

new and different viewpoints on a subject.
It involves breaking down and restructuring
our knowledge about the subject in order to
gain new insights into its nature.
The construct is multilevel in nature.

Creativity: The Theories

qGrace
qAccident
qAssociation
qCognitive
qPersonality

Creative Problem Solving: The

Process
q
q
q
q
q

I = Identify problems and opportunities

D = Define goals
E = Explore Possible Strategies
A = Anticipate outcomes and act
L = Look back and learn

Going Outside the Box

Going Outside the Box

Creativity: Thinking Outside the Box

Game
q

How to influence people to buy more of our

product?
Get crazy and generate ridiculous ideas
Use each one to stimulate a more practical idea

Creativity: The Blockages

q

Strategic blocks only one right answer thinking,

focusing on a narrow range of options, adapting
an over-serious approach to problems
Value blocks -- over-generalised rigidity
influenced by personal values
Perceptual blocks -- over-narrow focus of
attention and interest
Self-image blocks -- poor effectiveness through
fear of failure, timidity in expressing ideas, etc.

Creative Thinking Style

q
q
q
q
q

The Seer: The Power to Image

The Observer: The Power to Notice Detail
The Alchemist: The Power to Connect Domains
The Fool: The Power to Celebrate Failure
The Sage: The Power to Simplify

Assess Your Creative Thinking Style

Assess Your Creative Thinking Style

Assess Your Creative Thinking Style

Assess Your Creative Thinking Style

Assess Your Creative Thinking Style

SENSATION &
PERCEPTION

Individual Difference
n

Subjective vs. Perceptual World

Sensation
n

Sensation can be defined as the passive process of

bringing information from the environment into the body &
to the brain through touch, taste, sight, sound, and smell.
We cant recognize all the stimuli or the cues present in
the environment through our sensory organs. E.g., radio
waves, different odors, etc.
Animals can sense more stimuli as compared to human
being.
The thresholds are different between the human being and
animals and also between the individuals.

Sensation

Signal Detection Theory It states that complex decision

mechanisms are involved whenever we try to determine if
we have or have not detected a specific stimulus.
Detection of stimuli depends on their physical energy and
on internal factors.
Absolute threshold a point where environmental stimuli
becomes noticeable. This is the softest point at which a
stimuli goes from undetectable to detectable to our
senses.
Difference threshold the amount of change needed for
us to recognize that a change has occurred. This change
is referred to as Just Noticeable Difference.

Sensation
n

Subliminal perception the presumed ability to

perceive a stimulus that is below the threshold for
conscious experience.
Sensory adaptation reduced sensitivity to
unchanging stimuli over time.

Perception
n

Perception is a set of processes by which an individual

becomes conscious of and interprets information about
the environment.
Perception can be defined as the active process
of selecting, organizing, and interpreting the
information brought to the brain by the senses.

Sensation vs. Perception

Sensation refers to the responses of sensory receptors
and sense organs to environmental stimuli.
Perception, on the other hand, is a process
which involves the recognition and interpretation of
stimuli which register on our senses.
1) Sensation occurs:
n a) sensory organs absorb energy from a physical
stimulus in the environment.
n b) sensory receptors convert this energy into neural
impulses and send them to the brain.
2) Perception follows:
n a) the brain organizes the information and translates it
into something meaningful.

Perceptual Process
Organising Interpreting

Selecting

Receiving

Checking

Reacting

Perceptual Process
n
n

Perceptual selectivity or selective perception

Perceptual organisation

Perceptual Process: Selective Perception

n

Selective perception is a process of filtering out the

information which makes us uncomfortable or that is
contradictory to our earlier views and beliefs.
The selection of stimuli is determined by attention of
the individual conscious attention or controlled
processing & unconscious attention or uncontrolled
processing.
Attention of individuals depends upon certain factors
external factors and internal factors.

Role of Attention in Perception

External/situational/object related factors
n Intensity the more intense the external stimulus, the
more likely it is to be perceived. E.g., a loud noise,
strong odor, or bright light.
n Size the larger the object, the more likely it will be
perceived.
n Contrast external stimuli which stand out against the
background or which are not what people are expecting
will receive their attention.

Role of Attention in Perception

External/situational/object related factors
Repetition a repeated external stimulus is more
attention-getting than a single one.
n Motion people will pay more attention to moving
objects in their field of vision.
n Novelty & familiarity either a novel (new or
innovative) or a familiar external situation draws the
attention.

Role of Attention in Perception

Internal/person related factors
Learning & perception
Motivation & perception
n Psychological need
q People deprived of a need perceive it more frequently
n Need for establishing good relationships look for friendly people
n Need to control people attracted towards submissive people
Personality & perception
n Background
q People look for others from a similar background
n Experience
n Bad experience with person from a region

Role of Attention in Perception

Internal/person related factors
n Self-acceptance
q Higher self-acceptance leads
to more accurate perception

Perceptual Process: Perceptual

Organisation
n

The process of organising stimuli to draw meaning

Major dimensions:
q Grouping
q Figure-ground
q Perceptual Constancy
q Perceptual Context
q Perceptual Defense

Gestalt Psychology: German

psychologists conceptualised
perceiving sensory patterns as
well-organised wholes rather than
as separate, isolated parts.

Perceptual Organisation: Perceptual

Grouping
Perceptual Grouping a tendency to group several stimuli
together into a recognizable pattern.
n Closure tendency to perceive objects as whole
entities, despite the fact that some parts may be missing
or obstructed from view.
n Continuity tendency to perceive stimuli as part of a
continuous pattern.
n Proximity tendency to perceive items located together
as a group.

Perceptual Organisation: Perceptual

Grouping
Perceptual Grouping
n Similarity tendency to perceive similar items as a
group.
n Simplicity tendency to perceive complex patterns in
terms of simpler shapes.

Perceptual Process: Perceptual

Organisation
n

Figure-Ground relationship tendency to divide the

perceptual world into two distinct parts discrete
figures & the background against which they stand out.
Perceptual constancy (stability in the face of change)
tendency to perceive physical objects as unchanging
despite shifts in the pattern of sensations these objects
induce. E.g., size constancy, shape constancy,
brightness constancy.

Perceptual Process: Perceptual

Organisation
n

Perceptual context tendency to perceive any stimuli

with respect to its environment.
Perceptual defense tendency to defend against stimuli
in the context that are personally or culturally
unacceptable

Common Perceptual Distortions

n
n
n

Stereotypes
Halo effects
Projection

SOCIAL PERCEPTION &

ORGANIZATION PERCEPTION
MANAGEMENT

SOCIAL PERCEPTION AND

ATTRIBUTION
n

Johnson and Myklebust (1967) defined social

perception as the ability to identify, recognize,
and interpret the meaning and significance of
the behavior of others.
Attribution is the process through which we
link behavior to its causes - to the intentions,
dispositions and events that explain why
people act the way they do.

SOCIAL PERCEPTION AND

ATTRIBUTION
Two types of attribution:
n Dispositional or internal attribution -Explain in terms of something about the
person, e.g., personality, motivation or ability
of the person.
n Situational
or external attribution -Explain in terms of something about the
situation, e.g., equipment, environment,
social influence, etc.

SOCIAL PERCEPTION AND

ATTRIBUTION
Attributional Biases:
n Fundamental attribution error -- the tendency to
overestimate the impact of internal, personality
causes and to underestimate the impact of
situational causes when explaining another
person's behavior.
n The actor-observer difference error the
tendency of the actor to overestimate situational
causes, but it is dispositional causes to the
observer.

ORGANISATIONAL
PERCEPTION MANAGEMENT
n

Organizational perception management involves

actions that are designed and carried out by
organizational spokespersons to influence
audiences perceptions of the organization
(Leary, 1996; Schlenker, 1980; Tedeschi, 1981).
Definition includes four components (1)
perceptions of the organization, (2) actions or
tactics, (3) organizational spokespersons, and (4)
organizational audiences.

PERCEPTION OF THE ORGANISATION

Organizational perception management is
designed to influence audience perceptions of
the organization as an entity or whole.
- organizational images (e.g., organizational
legitimacy or trustworthiness),
- reputations (e.g., being known as a tough
competitor), and
- Identities (e.g., organizational categorizations,
such as being top tier).
n

SYMBOLIC ACTION
n

Symbolic actions include any activities by

organizational spokespersons that are used, at
least in part, to affect audience perceptions of the
organization.
Such actions may be primarily symbolic (e.g.,
changing the name Kentucky Fried Chicken to
KFCto minimize unhealthy images associated
with the word friedwithout actually changing the
menu)

SYMBOLIC ACTION
Four specific types of symbolic actions are used to
manage organizational impressions:
(a) verbal accounts (e.g., justifications for a corporate
downsizing included in an annual report),
(b) Distinctiveness and status-oriented categorizations or
labeling of organizations (e.g., defining a business school
as top tier in promotional materials),
(c) symbolic
business behaviors (e.g., contribution to
charitable foundations and causes), and
(d) the display of physical markers (e.g., hoisting Indian flags
in corporate building on independence day)
n

ORGANISATIONAL SPOKESPERSON
n

Organizational spokespersons convey symbolic

actions to organizational audiences.
Spokespersons include anyone who is
perceived by audience members as
representing the organization.
Spokespersons do not have to be members of
the organization or hold formal or official titles or
roles that designate them to speak on its behalf.

ORGANISATIONAL SPOKESPERSON
Most common types of spokesperson
(a) organizational leaders or public relations
professionals, and
(b) rank-and-file employees.
n

ORGANIZATIONAL AUDIENCES
n
n

External members of other organizations

Internal members within organisation

ORGANISATIONAL PERCEPTION
MANAGEMENT

Definition of Learning
n

Learning is usually defined as a change in an individual

caused by experience not by reflexes (Slavin, 2003)
A persisting change in human performance or performance
potential . . . (brought) about as a result of the learners
interaction with the environment (Driscoll, 1994, pp. 8-9)
The relatively permanent change in a persons knowledge
or behavior due to experience (Mayer, 1982, p. 1040)
An enduring change in behavior, or in the capacity to
behave in a given fashion, which results from practice or
other forms of experience (Shuell, 1986, p. 412)

Principles of Learning
n
n
n
n
n
n
n
n
n
n
n
n

Learning involves change

The change must be relatively permanent
Learning doesnt refer to changes resulting from maturation
Learning is concerned with behaviour
Learning can result from experiences
Learning is intangible, only can be observed
Learning can result from motivation
Reinforcement can result in learning
Schedules of learning
Whole vs. part learning
Meaningfulness of material
Transfer of learning

Theories of Learning
n Behavioural

Classical Conditioning Pavlov

Operant Conditioning - Skinner

n Cognitive

Theory

Edward Tolman

n Social

Theory

Learning Theory

Learning From Models - Albert Bandura

Classical Conditioning Theory Ivan Pavlov

A type of learning in which:
n an organism learns to connect, or associate stimuli.
n naturally occurring involuntary response becomes associated with a
previously neutral stimulus
q Focuses on the learning of involuntary emotional or physiological
responses. (fear, increased heartbeat, salivation, or sweating)
q Humans/animals can be trained to react involuntarily to a stimulus
that previously had no effect on them.
n This is a form of associative learning in which a neutral stimulus
becomes associated with a meaningful stimulus and acquires the
capacity to elicit a similar response.
n Basic principle a type of conditioning in which an individual
responds to some stimulus that would not ordinarily produce such a
response.
S
R
q

Classical Conditioning Theory Ivan Pavlov

Classical Conditioning Theory Ivan Pavlov

Unconditioned
Stimulus(US) e.g.(Bell)

Unconditioned

response

(UR)

e.g.

(No

saliva)
Unconditioned

Unconditioned

Stimulus(US) e.g.(meat)

response (UR) e.g. (saliva)

Conditioned

Conditioned

Stimulus (CS) e.g.(bell)

response (CR) e.g.(saliva)

Classical Conditioning Theory Implication

Condition Response (CR) was learned because of repeated
reinforcement which in this case following the Condition
Stimulus (CS) (Bell) by the Unconditioned Stimulus (US)
(food) and Unconditioned Response (UR) saliva) at
appropriate time intervals.
If the food (US) was not re-supplied from time-to-time, the
response would begin to disappear or extinguish.
Organisational Implication
- Certain stimulus enforces employees to respond in a
particular manner.
- Repeated occurances of this stimulus help them
to make a habit of that particular response.
- It can stimulate desired employee behaviour.

Operant Conditioning Theory B.F. Skinner

n

Also known as Instrumental Learning Theory /

Reinforcement Theory

qPioneer Psychologist- e.g. Thorndike & Skinner believed that

the majority of human behaviours are not random responses to
stimuli which are purposive
qBehaviour is a function of its consequences, i.e., consequences
of behaviour produce changes in the probability that behaviour
will occur
n A type of learning whereby a voluntary response is strengthened
when it is reinforced
n People actively and voluntarily operate on their environment
to produce different kinds of consequences

Operant Conditioning Theory B.F. Skinner

Behavior changes according to its immediate
consequences (immediacy of consequences is key)
n Skinner Box Experiment
n Reinforcers consequences that are likely to increase the
frequency of the behavior, i.e., strengthen the behavior
n Positive reinforcement are usually things given to
students that they value, e.g., praise.
n Negative reinforcement escape from an unpleasant or a
way of preventing unpleasant behavior from occurring.
n

n Punishment consequences that weaken behavior; punishment

like reinforcement is in the eye of the receiver and the impact on
behavior.

Operant Conditioning Theory Schedule of Reinforcement

1. Intermittent or Partial reinforcement Reinforcing responses only some of
the time can be categorized as ,
n Fixed ratio It could be the reinforcement after a fixed no. of behaviours
or accomplishments. For example, every quarter there will be performance
evaluation & reinforcement. The fixed ratio schedule keeps the response
fairly low after the moment of reinforcement.
n Variable ratio Employee behaviour is reinforced after a variable no. of
times. For example, Salespeople experience this when they can make a
successful deal after making some unsuccessful calls.
n Fixed interval Here employees receive their reinforcement after a fixed
period of time. For example, pay-check.
n Variable interval Employees are reinforced after a variable amount of
time. For example, merit-basis promotion.
2. Continuous reinforcement Reinforcing every occurrence of the desired
behaviour.

Operant Conditioning Theory Reinforcement

Positive reinforcement
BEHAVIOUR
Student asks
good question

CONSEQUENCE
Teacher praises
student

FUTURE BEHAVIOUR
Student asks more
good questions

(Add or obtain positive stimulus)

Negative reinforcement
BEHAVIOUR
Student turns
homework in
on time

CONSEQUENCE
Teacher stops
criticising
student

FUTURE BEHAVIOUR
Student increasingly
turns homework in
on time

(Subtracted or removed negative stimulus)

Operant Conditioning Theory Reinforcement

Punishment
BEHAVIOUR
Student interrupts
teacher

CONSEQUENCE
Teacher verbally
reprimands
student

FUTURE BEHAVIOUR
Student stops
interrupting
teacher

Operant Conditioning Theory Thorndike

CONSEQUENCE
Behavior

CONSEQUENCE
Behavior

Law of Effect (Thorndike)

Reinforcer

EFFECT
Strengthened or
repeated behavior

Punisher

EFFECT
Weakened or
decreased behavior

Implication of Operant Conditioning Theory Shaping

Behaviour
A technique to control & change behaviour by reinforcing
in a systematic way those actions that are considered
important or desirable
A-B-C Model of Behaviour Modification --n

Antecedents
(what happens
before
behaviour)

Behaviour
(what person
acts)

Consequences
(what happens
after
behaviour)

Strengths & Limitations of Behavioural Learning

Theory
How to modify behaviour?
n Shaping With shaping, an appropriate reinforcer is
selected to suit the occasion, & all positive
reinforcements are contingent on the organism moving
closer to adopting the desired behaviour.
n Modeling An applied learning procedure associated
with shaping is modeling. The desired behaviour is firmly
kept in mind before selecting the appropriate model
capable of exemplifying the way to proceed.

Strengths & Limitations of Behavioural Learning

Theory
Difference between Classical & operant
Conditioning Theories:
Classical Conditioning
A reactive process
Stimulus to response
Responses are fixed to
stimulus; no choice

Operant Conditioning
A proactive process
Response to stimulus
Responses
are
choices are there.

variable;

Strengths & Limitations of Behavioural Learning

Theory
n

The basic principles are as firmly established as

any in psychology and have been demonstrated
under many different conditions

However, the theories only deal with observable

behavior

In some ways in complements cognitive theories

of learning

Cognitive Learning Theory

Cognitive learning theories stress the importance of
internal mental processes.
n Understanding and thinking
n Problem solving approach to learning
n Knowledge is stored cognitively as symbols
n Learning is the process of connecting symbols in a
meaningful & memorable way
n Studies focused on the mental processes that facilitate
symbol connection
n Edward Tolman the experiment
n Learning the association between cognitive cues &
expectancy
n

Social Learning Theory

n

n
n

Bandura and observational learning he noted that Skinnerian

emphasis of the consequences of behavior largely ignored the
phenomena of modeling the imitation of others.
Observational learning involves four phases:
Attention
Retention
Reproduction
Motivation
Vicarious Learning - People learn in this process learn by seeing
other people rewarded or punished.
Self-regulation people can observe their own behavior, judge it
against their own standards, and reinforce or punish themselves.

Social Learning Theory

Features:
n
Behavioural modeling People learn by observing behaviours of a
role model on the critical task, remembering the important elements of
the observed behaviours, & then practicing those behaviours.
Behaviour modeling increases self-efficacy because people gain more
self-confidence after seeing someone else to do it.
n
Learning behaviour consequences We learn consequences of
behaviour in ways other than through direct experiences. In particular,
we learn by logically thinking through the consequences of our actions
& by observing the consequences that other people experience
following their behaviour.
n
Self-reinforcement It occurs whenever an employee has control over
a reinforcer but doesnt take the reinforcer until completing a self-set
goal.
n
Self-efficacy Bandura has defined self-efficacy as the selfperceptions of how well a person can cope with situations as they
arise.