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LEARNING AND DECISION MAKING Dynamics of Organizational Behavior Virginia Tech MBA Program Andrew Watson Agenda • Learning and Creativity: Ch. 5 • Including Learning Organization • Decision Making: Handout • Break • Decision Making: Ch. 15 • Looking ahead Learning • Defined as: • relatively permanent change in knowledge or behavior • that results from practice or experience • Are universities good places to learn? • Based on above (textbook) definition • Perhaps we should get more specific: • Undergrad vs. grad? • Virginia Tech? • This program? • This course? Learning Through Consequences • Encourage behaviors using reinforcement • Positive • Negative • Not to be confused with punishment • Schedule: continuous or partial? • Often depends on organizational reality, rather than on learning theory • Discourage behaviors using • Extinction • Punishment Debate About Using Consequences • It sounds like what Taylor called “Scientific Management” • Isn’t that demeaning to workers? • Not if it helps them perform better and earn more • Isn’t this what B.F. Skinner did with rats? • In a way, yes: it is a sort of operant conditioning • But let’s call it OB MOD • which has improved performance in many organizational settings • It sounds rather controlling… Learning… • From others • Social learning theory (Bandura), aka social cognitive theory • Cognitive processes process information from the social environment • Vicarious learning: watching another person • On your own • Self-control, self-reinforcers, self-efficacy • By doing • Experiential learning • Simulations Creativity • Generation of useful and novel ideas (text definition) • Call it Invention, and it’ll be the first of three “I” words • Others are Innovation and Imitation • The Person/Employee • Openness to experience • The Situation/Workplace • Autonomy • Feedback, encouragement, reward… The Learning Organization • Members of a learning organization: • Have the knowledge necessary to do their jobs • Are motivated to add to this knowledge, i.e. to learn • Know how to learn • Peter Senge identified five “disciplines” of such orgs • Personal mastery • Complex mental models, or schemas • Team learning • Shared vision • Systems thinking Tacit Knowledge • Two kinds of knowledge • Explicit: can be documented • Tacit: harder to capture • Tacit knowledge presents a learning challenge • G&J discuss tacit knowledge in Ch. 10 (Groups and Teams) • Learn by working with others who already possess valuable tacit knowledge Decision Making • Exercises in Decision Making • Do exercises from this first section of handout • Go on to next section if you have time • Thinking Fast and Slow (Kahneman, 2011) • Source of exercises • And of the rest of the handout • Also a source for the next slide Expected Utility Theory • Still “the most important theory in the social sciences” • Decide based on answers to questions • What options to I have? • For each option, what outcomes are possible? • For each outcome: • What’s the utility to me? • What’s the probability? • Similar to expectancy theory of motivation • “Economists adopted expected utility theory in a dual role: • as a logic that prescribes how decisions should be made, • and as a description of how Econs make choices.” • Kahneman rejects the theory as a description of how Humans make choices Decision Making: Ch. 15 • GJ definition: process by which members or an organization choose a course of action to respond to: • Opportunities: choice likely to result in gain • Problems/threats: choice may not result in gain, since goal attainment is threatened • Ethical decisions: GJ again (p. 440): • “promote well-being and do not cause harm” • “sometimes it is difficult to determine the boundary between ethical and unethical decisions in an organization” Programmed vs. Nonprogrammed • Some organizational issues are routine or recurring • e.g., stock running low, need to hire new engineer • Can develop a performance program (or standard operating procedure) for such issues • And execute it when the issue arises • Hence: programmed decisions • Other issues are new or novel • e.g., opportunity to expand into new market • Involve search for new information • No existing program to execute • Hence: nonprogrammed decisions More on Decision Programs • If similar nonprogrammed decisions are made in similar ways, programs may emerge • True in organizations, and groups, and individuals? • If so, it sounds like a fractal • a shape that, when you look at a small part of it, has a similar… appearance to the full shape • Quote from fractalus.com/info/layman • Which includes an example Classical Model of Decision Making • Prescriptive: how people should make decisions • Assumes that Decision makers: • Have access to all relevant information • Make optimal decision • In OB today, this model is a “straw man” • i.e. built to be demolished • In reality, decision makers often not know: • All relevant information • And getting new information often has a cost • All possible alternatives • Let alone the outcome of each alternative • Own preferences Administrative Model • Descriptive: how people actually make decisions? • Due to Herbert Simon and colleagues • Bounded rationality • Limited ability to process information • Even if all relevant information available • Satisficing • Choose acceptable, rather than optimal, decision • May actually be optimal when considering costs of searching for and processing information Heuristics: Sources of Error and Speed • Heuristic: “rule of thumb” used in decision making • Faster to use heuristics than to process all information • Experts often use heuristics • But a real expert uses the right heuristics • Consider some heuristics, and errors associated with them • Availability • Representativeness: ignoring base rate • Anchoring and adjustment Escalation of Commitment • A prior decision is consuming resources without producing hoped-for outcomes • Current decision: expend more resources in support of the original decision? • May well get escalation of commitment • Current decision: Yes • Why? • Don’t want to admit mistake (if it really was a mistake) • Want to win back the losses • Effect of negative frame • Description of how many decisions are made • Prescription: ignore sunk costs Group Decision Making • Advantages • Diverse skills and knowledge • Error detection • Decision acceptance • Disadvantages • Time • Potential for groupthink • Other consequences • Diffusion of responsibility • Polarization: groups tend to make more extreme decisions than individuals • Availability of techniques such as brainstorming Looking Ahead • Feedback • On Paper 1 tomorrow • On Exam 1 by 8am on Sunday • … • Next week • Exam 2 • Bring laptop