Overlapping Aspects of Decisions

Overlapping Aspects of Decisions

In this week’s Discussion, you will explore what happens after decisions are made, communicated, and executed. If it were not for the execution step, decision making would be an academic exercise that would have virtually no impact on the real world. Through the execution step, the benefit of decision making can be used to actually improve people’s lives, organizations, and ultimately, the world.

Have you ever made a decision that led to unintended or unexpected consequences? Personal decisions often lead to more than one consequence, no matter how hard one tries to anticipate and plan for any possible occurrence. Consider the stakes when an organizational decision involving many stakeholders is implemented. In this situation, the number of effects a decision may have can multiply exponentially.

Based on your personal experience, focus on organizational overlap in new decisions—how one decision can affect other decisions, such as existing policy, and so on.

For this discussion

Propose a set of circumstances in an organization with which you are familiar, in which an overlapping structure, overlapping set of responsibilities, or shared/overlapping governance would create a series of decisions that affect other decisions. Explain the measures you would need to take as a manager or stakeholder to ensure that overlaps are identified, removed, mitigated, or addressed. Explain whether these overlaps provide a positive checks-and-balances system or if they would prove to be an impediment.

Required

Hastie, R., & Dawes, R. M. (2010). Rational choice in an uncertain world (2nd ed.). Thousand Oaks, CA: Sage. Chapter 14, “In Praise of Uncertainty” (pp. 319–335)

How Executives Can Make Bad Decisions SUMMER 2009 VOL. 50 NO. 4 REPRINT NUMBER 50402 Intelligence A brief synopsis of Who’s with Me? False Consensus, Advice Networks, and Ethical Decision Making in Organizations, (working paper, under resubmission), by Francis J. Flynn and Scott S. Wiltermuth, Ph.D. Please note that gray areas reflect artwork that has been intentionally removed. The substantive content of the article appears as originally published. 14 MIT SLOAN MANAGEMENT REVIEW SUMMER 2009 SLOANREVIEW.MIT.EDU The conventional wisdom is that social networks are good for decision making because they help people to acquire knowledge that then enables them to make better choices. In other words, the more extensive and active your social networks, the better decisions you’ll presumably make. But could social networks actually impair your judgment and decision making? Consider a recent study conducted by Francis J. Flynn, an associate professor of organizational behavior at the Graduate School of Business at Stanford University, and Scott S. Wiltermuth, a Ph.D. student in organizational behavior there. (Their paper, “Who’s with Me? False Consensus, Advice Networks, and Ethical Decision Making in Organizations,” is under invited resubmission at the Academy of Management Journal.) In their research, Flynn and Wiltermuth asked participants for their opinions on different ethical dilemmas. For example, in one of the hypothetical scenarios, an employee is caught pilfering pens, paper and other small office supplies. Corporate policy requires that the person be fired on the spot, but she is one of the best workers at the company and is also a long-time employee. So her manager decides to give her a second chance. Was that ethical? The study participants were also asked to estimate how their colleagues might view those same dilemmas. Lastly, they were asked for information that helped determine their position in a social network of their peers. Whom, for instance, did they turn to when they needed advice? Flynn and Wiltermuth conducted the experiment with three groups: graduate business students, executive education students and employees in the marketing department of a large manufacturing company. For all three samples, the results were the same: The more that people were centrally connected to their peers, the more they tended to overestimate the degree to which their judgments were in agreement with the views of others (a phenomenon called “the false consensus effect”). This was true even when the study participants held a minority opinion on an issue — but mistakenly believed they were in the majority. Simply put, social ties tended to exacerbate — and not mitigate — the false consensus effect. In essence, social ties strengthened the illusion of consensus even when none existed. That result might seem counterintuitive, but it has a straightforward, plausible explanation. Past studies have shown that when people interact, they tend to affirm the things they have in common. Two colleagues who are fans of a particular sports team, for example, will frequently talk about the team in their workplace conversations. This could then lead the two colleagues to the mistaken belief that they have more in common than they actually do. That misperception might be especially true with respect to their ethical and moral attitudes, because coworkers tend not to discuss such issues. Instead, they are more likely to talk about their families, current events and other “safe” topics. Flynn and Wiltermuth have shown that this ethical “blind spot” can be particularly dangerous for people who are the centers of social networks, because such individuals are likely to perceive themselves as being more in touch with the opinions of others than they really are. “If members of organizations erroneously assume that their ethical INTELLIGENCE [DECISION MAKING] How Executives Can Make Bad Decisions Social networks provide greater access to information, which improves people’s judgment and decision making, right? Not always, according to some recent research. judgments are in line with the prevailing view,” state Flynn and Wiltermuth, “they may feel emboldened to act and only learn of their misjudgment when it is too late to avert the consequences.” CEOs and other high-level executives are particularly vulnerable to such erroneous assumptions, because past research has also shown that people in positions of power are more likely than others to search for evidence that confirms their beliefs — instead of trying to explore any contradictory information. Moreover, ethical dilemmas are inherently tricky because many moral standards aren’t necessarily cast in black and white. Rather, they may be etched in gray, according to the principles and values that are socially agreed upon at a given time. So if people don’t have a firm grasp of what is “socially agreed upon” (that is, if they don’t know the majority view), then how can they be sure that they’re acting ethically? Flynn and Wiltermuth’s study provides a new lens through which to view the recent financial crisis — in particular, the subprime mortgage meltdown. Some people signed up for mortgages that they would later have a hard time paying, and mortgage companies approved the applications. Wall Street packaged those questionable loans into collateralized debt obligations, which were then approved by the ratings agencies and sold. At every step in that sequence, the false consensus effect could have played a role, making people feel more comfortable in what they were doing — even when those actions involved questionable business practices — because of the misperception that “everyone” was doing it. And, Flynn and Wiltermuth’s research suggests, that might have been particularly true for well-connected individuals — such as Wall St. executives. — Alden M. Hayashi Reprint 50402. Copyright © Massachusetts Institute of Technology, 2009. All rights reserved. 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Managers, auditors, and accountants can be observed operating in overlapping roles. Also, company auditors and state auditors can function in overlapping ways within casinos, in Nevada, because they are frequently viewed as operating against, rather than in support of, operations within the organization (Ravas, 2011). Auditors working for the company and for the state share the task of improving operations, providing thorough methods of data storage/security, aligning organizational practice with legal guidelines, and otherwise prescribing methods for operation that achieve the mutual goals of owners and state regulators.

One specific redundancy that I witnessed, which was also a costly overlap, was the record of transactions for slot machine records. In the early years of casino operation, technology was not the primary method of securing this information; it was kept on ledgers and payout forms, with careful records maintained for every machine. This information is now kept electronically, but it is also frequently printed out. Additionally, the electronic copies are backed-up on external hard drives by some casinos. These records are kept at several locations: on site, in the accounting department, in the auditing department, and usually by a slot manager. It may be observed, in some casinos, that there are paper printouts at all of these separate locations, in addition to the electronic backups, which are available through company networks and servers. One specific occurrence of this, which I was exposed to, revealed that there were five printed copies of all slot data history, for a ten year history, housed in the same storage room; they were each labeled differently for each department that printed and accessed the files, but were exact duplicates.

Any changes made to slot machines resulted in a cascading effect. The slot manager, who generally initiated the change, would update on site files and the slot files located in his files. Then, the company auditors would update their files and inform the company accounting department of any pending changes. The accounting department would compare the auditing records with the slot managers records, with the goal of ensuring expenses matched, and update their own records. Finally, state auditors could access any of those files to ensure accuracy of procedure, which usually resulted in another printout or copy.

A simple solution to most of these reprints and backups was a change in information flow. The file, created by the slot manager, could be passed on to the company auditor. This file was then passed on to the accounting department. Signatures amassed and the files generally became more complete. Finally, a single copy was placed at each mandated location; usually two or three different sites, but sometimes only one (sometimes the state requires a printout be located offsite). Similarly, centrally located storage of files benefits the collective stakeholders. State auditors are generally impressed by the uniform data and filing. Also, changes that occur can be updated in a consistent manner because they are processed through each department consecutively (rather than disjointedly).

 

References

Ravas, B. (2011). The role of the internal audit in the tourism unit’s risk management process.

Annals of the University of Petrosani Economics, 11(1), 215-222. Retrieved from http://www.upet.ro/annals/economics/pdf/2011/Ravas%20B%201.pdf

 

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