Class 6 - Decision-Making and Emotions Posting Flashcards
Improving Reward Effectiveness
- Link reward to performance
- Ensure rewards are relevant and valued
- Team rewards for interdependent jobs
- Beware of unintended consequences
- Make things fair (org justice and the components)
Habit and Identity
identity based: easier to keep, harder to break, habits become identity based through time through repetition
Decision making
The process of developing a commitment to some course of action/choice
Choice
Process
Commitment
The process of problem solving
Problem = gap between a current state and desired state
Rational Decision Making
How decisions “Should” be made
Consistent, value-maximizing choices
Problems with the 6-step Rational Thinking Method
- Lack of problem clarity
- Known options
- Clear preferences
- Constant preferences: problematic as they tend to change over time
- No time or cost constraints
- Max payoff
Actual Decision Making
Bounded rationality
Satisficing
Intuition
Judgement shortcuts
Bounded rationality
limitation on person’s ability to interpet, process and act on info
That could include: political, resource, satisficing, intuition, cognitive biases, emotions
Satisficing
identifying a solution isn’t good enough
first acceptable one NOT the optimal one
Intuition
Not rational but often not wrong
Quick decisions, distilled from experience
NOT guessing
Judgement Shortcuts
cognitive biases
dunning-kruger effect
sunk cost
prospect theory
framing
Cognitive Biases
perception vs reality
Dunning-Kruger Effect
low ability individuals think they are better than they are
need a certain level of expertise to then know how truly bad you are at something (at a level where you recognize you’re bad)
Sunk Costs
Pattern of behavior, continue to rationalize into an existing cost that gives out increasingly negative outcomes
Prospect Theory
Positive outcome: prefer a sure thing over a risk
Negative outcome: take a chance to prevent negative outcome
Framing
- about something is communicated in terms of gains earned (positive framing) or loss inferred (negative framing)
- informs how comfortable risk seeking/avoiding we are, whether we are willing to take a chance
Positive framing
Negative framing