2014/S1
1. Describe 3 common decision-making errors and biases that managers make
When managers make decisions, they not only use their own particular style, but may also use
‘rules of thumb’ or heuristics to simplify their decision making. Rules of thumb can be useful
because they help make sense of complex, uncertain and ambiguous information. However,
they may lead to errors and biases in processing and evaluating information..
When decision makers tend to think they know more than they do or hold unrealistically
positive views of themselves and their performance, they’re exhibiting the overconfidence bias.
The immediate gratification bias describes decision makers who tend to want immediate
rewards and to avoid immediate costs. For these individuals, decision choices that provide
quick pay-offs are more appealing than those in the future. The anchoring effect describes
when decision makers fixate on initial information as a starting point and then, once set, fail to
adequately adjust for subsequent information. When decision makers selectively organise and
interpret events based on their biased perceptions, they’re using the selective perception bias.
Decision makers who exhibit the confirmation bias tend to accept at face value information that
confirms their preconceived views and are critical and sceptical of information that challenges
these views. The framing bias is when decision makers draw attention to specific aspects of a
situation while at the same time downplaying or omitting other aspects. The availability bias is
when decision makers tend to remember events that are the most recent and vivid in their
memory, distorting their ability to recall events in an objective manner. Managers exhibiting
the representation bias assess the likelihood of an event based on how closely it resembles
other events or sets of events, seeing identical situations where they don’t exist. The
randomness bias describes when decision makers try to create meaning out of random events.
They do this because most decision makers have difficulty dealing with chance, even though
random events happen to everyone and there’s nothing that can be done to predict them. The
sunk costs error is when decision makers forget that current choices can’t correct the past.
Instead of ignoring sunk costs, they can’t forget them. Decision makers who are quick to take
credit for their successes and to blame failure on outside factors are exhibiting the self-serving
bias. Finally, the hindsight bias is the tendency for decision makers to falsely believe that they
would have accurately predicted the outcome of an event once that outcome is actually
known.
Managers can avoid the negative effects of these decision errors and biases by being aware of
them and then not using them! Beyond that, managers also should pay attention to ‘how’ they
make decisions and try to identify the heuristics they typically use and critically evaluate how
appropriate those are. Finally, managers might want to ask those around them to help identify
weaknesses in their decision-making style and try to improve on them.
2. The most appropriate organizational structure depends on 5 contingency variables. The
organisation’s strategy, size, culture, technology and degree of environment uncertainty.
Describe the way 3 variables affect structure
What contingency variables affect structural choice?
Top managers typically put a great deal of thought into designing appropriate structure
because the most appropriate structure to use depends on five contingency variables: the
organisation’s strategy, size, culture, technology and degree of environmental uncertainty.
How does strategy affect structure?
Alfred Chandler’s early studies of several large US companies demonstrated that strategies
determine structure because changes in corporate strategy lead to changes in an organisation’s structure that support the new strategy.
Since then, research has shown that certain structural designs work best with different
organisational strategies. For instance, the flexibility and free-flowing information of the
organic structure works well when an organisation is pursuing meaningful and unique
innovations. The mechanistic organisation with its efficiency, stability and tight controls works
best for companies wanting to tightly control costs.
How does size affect structure?
There’s considerable evidence that an organisation’s size affects its structure. Large
organisations—defined by the Australian Bureau of Statistics as having more than 200
employees—tend to have more specialisation, departmentalisation, centralisation, and rules
and regulations than do small organisations. However, once an organisation grows past a
certain size, size has less influence on structure. Once there are about 2000 employees, it’s
already fairly mechanistic. Adding another 500 employees won’t impact the structure much. On
the other hand, adding 500 employees to an organisation that has only 50 employees is likely
to make it more mechanistic.
How does culture influence structure?
An organisation’s culture may have an effect on its structure, depending on how strong, or
weak, the culture is. In organisations with a strong culture, the culture can substitute for the
rules and regulations that formally guide employees. In essence, strong cultures can create
predictability, orderliness and consistency without the need for written documentation.
Therefore, the stronger an organisation’s culture, the less managers need to be concerned with
developing formal rules and regulations. Instead, those guides will be internalised in
employees when they accept the organisation’s culture. If, on the other hand, an organisation’s culture is weak—if no dominant shared values are present—its effect on structure is less
clear.
How does technology affect structure?
Every organisation uses some form of technology to convert its inputs into outputs. For
instance, workers at Whirlpool’s Brazilian facility build microwave ovens and air condi- tioners
on a standardised assembly line. The technology that an organisation uses determines the
appropriateness of its organisational structure. The initial research on technology’s effect on
structure can be traced to Joan Woodward. For more information on her ground- breaking
work, see the ‘From the past to the present’ box.
How does the environment affect structure?
Mechanistic organisations are most effective in stable environments. Organic organisations are
best matched with dynamic and uncertain environments.
The evidence on the environment–structure relationship helps explain why so many managers
have restructured their organisations to be lean, fast and flexible. Global competition,
accelerated product innovation by all competitors, knowledge management and increased
demands from customers for higher quality and faster deliveries are examples of dynamic
environmental forces. Mechanistic organisations tend to be ill-equipped to respond to rapid
environmental change. As a result, some managers are redesigning their organisations in order
to make them more organic.
3. To increase the probability of selecting the right person for the job, selection procedures
should be both reliable and valid. Outline what is meant by reliability and validity using two
selection devices as examples.
4. How are opportunities, constraints and demands related to stress? Provide example of each
Chapter 7
5. Outline 3 team processes that are related to team effectiveness
Five team process variables have been shown to be related to team effectiveness. These
comprise a common purpose, specific team goals, team efficacy, managed conflict and
minimal social loafing.
An effective team has a common plan and purpose. This common purpose provides direction,
momentum and commitment for team members.Members of successful teams put a lot of time
and effort into discussing, shaping and agreeing on a purpose that belongs to them both
individually and as a team.
Teams also need specific goals. Such goals facilitate clear communication and help teams
maintain their focus on getting results.
Team efficacy describes when teams believe in themselves and believe they can succeed.
Effective teams have confidence in themselves and in their members.
Effective teams need some conflict. Conflict on a team isn’t necessarily bad and can actually
improve team effectiveness. But it has to be the right kind of conflict. Relationship conflict—
that based on interpersonal incompatibilities, tension and autonomy towards others—is almost
always dysfunctional. However, task conflict— that based on disagreements about task
content—can be beneficial because it may stimulate discussion, promote critical assessment of
problems and options, and lead to better team decisions.
Effective teams have a common plan or purpose, believe in themselves and make members
individually and jointly accountable for the team’s approach. Crews of firefighters, like those
pictured above, collaborate to extinguish fires and deal with emergency incidents. The team
leader determines the specific goals at the scene of a particular fire (e.g. contain or extinguish
the fire, deal with chemical hazards, rescue civilians) and allocates tasks and duties to crew
members. As they execute their duties, crew members maintain constant communication about
conditions, hazards and accomplishments. Good communication, along with extensive training,
regular drills and strong group cohesion heighten team efficacy and trust between members.
Finally, effective teams work to minimise the tendency for social loafing, which we discussed
earlier in this chapter. Successful teams make members individually and jointly accountable for
the team’s purpose, goals and approach.
6. David McClelland and associates proposed the three-needs theory, which says there are
three acquired (not innate) needs that are major motives in work. Outline these 3 needs
David McClelland also considered personal needs that motivate behaviour. He and his
associates proposed the three-needs theory, which says there are three acquired (not innate)
needs that are major motives in work.These three needs are the need for achievement
(nAch), which is the drive to succeed and excel in relation to a set of standards; the need for
power (nPow), which is the need to make others behave in a way that they would not have
behaved otherwise; and the need for affiliation (nAff), which is the desire for friendly and
close interpersonal relationships. Of these three needs, the need for achievement has been
researched the most.
People with a high need for achievement are striving for personal achievement rather than for
the trappings and rewards of success. They have a desire to do something better or more
efficiently than it’s been done before. They prefer jobs that offer personal responsibility for
finding solutions to problems, in which they can receive rapid and unambiguous feedback on
their performance in order to tell whether they’re improving, and in which they can set
moderately challenging goals. High achievers avoid what they perceive to be very easy or very
difficult tasks. Also, a high need to achieve doesn’t necessarily lead to being a good manager,
especially in large organisations. That’s because high achievers focus on their own
accomplishments while good managers emphasise helping others
accomplish their goals. McClelland showed that employees can be trained to stimulate their
achievement need by being in situations where they have personal responsibility, feedback
and moderate risks.
The other two needs in this theory haven’t been researched as extensively as the need for
achievement. However, we do know that the best managers tend to be high in the need for
power and low in the need for affiliation.
7. When group conflict levels are too high, managers can select from five conflict
management options: avoidance, accommodation, forcing, compromise and collaboration.
Outline 3 of these options and the circumstances under which they should be used
8. You are a university administrator responsible for developing controls to minimizes student
cheating on assignments and exams. Provide an example of (1) feedforward control (2)
concurrent control (3) feedback in order to address such behavior.
Management can implement controls before an activity commences, while the activity is going
on or after the activity has been completed. The first type is called feedforward control, the
second is concurrent control and the last is feedback control (see Figure 13.4).
（1）The most desirable type of control—feedforward control—prevents problems since it
takes place before the actual activity. One example of feedforward control is the checking of
meat, fish, fruit and vegetable deliveries to a restaurant before the chef accepts the goods.
These checks are designed to detect any blemishes or food that isn’t fresh that will
compromise the quality of the food served to customers.
The key to feedforward control is taking managerial action before a problem occurs. That way,
problems can be prevented rather than having to correct them after any damage— poor
quality products, lost customers, lost revenue and so on—has already been done. However,
these controls require timely and accurate information that isn’t always easy to get and
managers can only use feedforward controls for problems that can be anticipated. Thus,
managers frequently end up using the other two types of control.
（2）Concurrent control, as its name implies, takes place while a work activity is in progress.
For instance, the director of business product management at Google and his team keep a
watchful eye on one of Google’s most profitable businesses—online ads. They watch ‘the
number of searches and clicks, the rate at which users click on ads, the revenue this
generates—everything is tracked hour by hour, compared with the data from a week earlier
and charted’. If they see something that’s not working particularly well, they fine-tune it.
Technical equipment (such as computers and computer- ised machine controls) can be
designed to include concurrent controls. For example, you’ve probably experienced this with
word-processing software that alerts you to a misspelled word or incorrect grammatical usage.
The best-known form of concurrent control, however, is direct supervision. All managers can
benefit from using concurrent control because they can correct problems before they become
too costly. MBWA, which we described earlier in this chapter, is a great way for managers to
do this.
（3）The most popular type of control relies on feedback. In feedback control, the control
takes place after the activity has been done. Feedback control has two advantages. First,
feedback gives managers meaningful information on how effective their planning efforts were.
Feedback that shows little variance between standard and actual performance indicates that
the planning was generally on target. If the deviation is significant, a manager can use that
information to formulate new plans. Second, feedback can enhance motivation. People want to
know how well they’re doing, and feedback provides that information (see the ‘Developing
your performance feedback skill’ box.). But the major problem with this type of control is that
the problems have already occurred by the time a manager has the information.