MGMT 3130 Judgment and Decision

Making in Organizations

UNIT 1.4
COLLECTING MORE INFORMATION
TO AID DECISION-MAKING

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 Where are we now?

Decision Heuristics Choice and Applications

Analysis and Biases Preference
Two systems of
Problem thinking Performance
Prospect theory
definition appraisal
Availability
heuristic
Decisions Motivating
Escalation of
involving multiple Representativeness employees by
commitment
objectives heuristic money? Or…?

Anchoring and Why people

Decision-making adjustment Time and
become bad
under uncertainty preferences
apples?
Embodied
cognition
Collecting more Is more choice
Bounded Going green
information always better?
awareness
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 UNIT 1.4
COLLECTING MORE INFORMATION TO AID DECISION MAKING

Group decision making

• Potential benefits of group decision making
• Why do groups go astray? How can we improve
group decision making?
Conducting experiments
• Fundamental concepts in experimentation
• Internal validity & experimental design

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 GROUP DECISION MAKING

Group decision making has the potential to result in more careful

problem definition, more comprehensive objective list, generation of
better alternatives, more accurate assessment of alternative, etc., and
thus wiser decisions.

“When there are many who contribute to the process of deliberation,

each can bring his share of goodness and moral prudence… some
appreciate one part, some another, and all together appreciate all.”
--- Aristotle

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 POTENTIAL BENEFITS OF GROUP DECISION MAKING

In 1906, Francis Galton Analysis of patent data from

observed that… the U.S. Patent and Trademark
Office (USPTO) showed that …
West of England Fat Stock
and Poultry Exhibition
(1) Being a lone inventor decreases
the probability of having high-
impact inventions while
increasing the probability of
particularly poor outcomes.
Weight of the ox (2) The effect of team collaboration
= 1198 pounds (vs. being a lone inventor) is
Average estimate mediated by the technical
of 774 participants diversity of inventor(s).
= 1197 pounds
Surowiecki, J. (2004). Wisdom of The Crowds. Singh, J., & Fleming, L. (2010). Lone inventors as sources of
Doubleday: New York. breakthroughs: Myth or reality? Management Science,
56(1), 41-56. 5
SPECIAL ACTIVITY:
CANDIES-IN-THE-JAR

What’s the correct answer?

Part 1
What’s the average estimate
among all classmates? Have we
achieved the “wisdom of crowds”?

Part 2
How about our small-group
estimates? Are the group
estimates better than that of the
best-performing group
members?
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 WHY DO GROUPS GO ASTRAY?

The KEY to successful group decision-making is:

Elaboration (exchange and integration) of diverse task-relevant
information.

However, elaboration of diverse information does not always occur

• Social loafing
• Common knowledge effect
• Pressure of conformity

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 Social Loafing

Social loafing: When working as a team, due to a feeling of reduced

accountability, people input less effort compared to working
individually.
• Ringelmann’s rope-pulling study:
Participants were asked to pull on a rope. As group size increased,
group performance was increasingly lower than would be expected
from the simple addition of individual performance.
Why?

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How to reduce social loafing?
• Inspire a shared vision: Members need to feel that the
organizational/team goals matter to them personally.
• Establish an appropriate system that recognize individual’s
contribution.

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 Common Knowledge Effect

Let say, you bring together a group of 4

managers to form a team.
Manager A
Manager B
What can we say about the information
available to the group before a meeting?
• Some information is unique to one individual
• Some information is common to all members Manager C Manager D

Common knowledge effect: Groups tend to discuss information that was

available to all group members before the discussion, and ignore the
‘unique information.’ As a result, group judgments are determined
predominately by the common knowledge.

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In a study, participants were asked to choose among three candidates (A, B,
and C) running for student council president.
— In one condition, each participant was given all available information
(which collectively favors Candidate A).
Member 1 Individual decision before group
Member 2 discussion: 67% chose A
Member 3
Group decision after discussion:
Information: Pro-A Pro-B Pro-C 83% chose A
Under condition 2, Pro-A has less common knowledge comparing to Pro-B and Pro-C

— In another condition, the same information was given to the group but
the Pro-A information was divided up. What does this mean?
Member 1 Individual decision before group
Member 2 discussion: 23% chose A
Member 3
Group decision after discussion:
Information: Pro-A Pro-B Pro-C 18% chose A

Stasser, G., & Titus, W. (1985). Pooling of unshared information in group decision making: Biased information
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sampling during discussion. Journal of Personality and Social Psychology, 48, 1467–1478.
Why does common knowledge effect occur?
Statistically, common information (vs. unique information) is more
likely to be mentioned during group discussion, as more group
members are holding that piece of information.
And, social validation of information takes place:
• When common information is expressed during group discussion,
there tends to be affirmation by group members (e.g. a subtle
nod of head, “yes, I agree”). Common information is thus
perceived as more trustworthy.
• When unique information is expressed, the lack of affirmative
responses from group members raises doubts about the validity
of information, especially when the information holder is of lower
status.

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How to reduce common knowledge effect?
Be aware of the existence of unique information
• E.g. Forewarning the existence of unique
information
Lawyer Marketing
• E.g. Assign each group member a specific manager
role that is known and appreciated by all
members (Every member would know that
each of the others has some credible Manufacturing Medical
doctor
information pertaining to his/her own manager
expertise to contribute)

Set norms for information sharing

• Encourage the group to actively search out and consider unique
information that they don’t already know, before anyone votes or
indicates a preference.
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 Pressure of Conformity

Asch’s conformity experiment:

Confederates who gave wrong answers
in 12 critical trials (out of 18 trials)

1 2 3 4 6

Target lie Comparable lies

Participant
Results:
Participants gave incorrect answers in the direction of the majority (i.e.
conformed) on 32% of critical trials.
Three out of four participants conformed at least once.

Asch, S.E. (1951). Effects of group pressure upon the modification and distortion of judgment. In H. Guetzkow
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(Ed.), Group, Leadership and Men. Pittsburgh, PA: Carnegie Press.
 In Asch’s conformity experiment, individuals go along with the majority
to avoid conflict and social disapproval.
In a meta-analysis of studies using Asch’s line judgment task,
researchers found the following: Same university or department

• Conformity increases when the majority is made up of ingroup

members rather than outgroup members.
Emphasize on interpersonal relationships rather than competition
• Conformity level is higher for female than male.
• Conformity level is higher in collectivist countries than in individualist
countries. E.g. China and Japan

Besides conformity pressure from majority, in

organizational context, individuals also
conform to high-power individuals who can
administrate substantial punishments.

Bond, R., & Smith, P. B. (1996). Culture and conformity: A meta-analysis of studies using Asch's (1952b, 1956) line
judgment task. Psychological Bulletin, 119, 111-137. 15
How to reduce conformity pressure?
• Members should indicate a willingness to hear disagreement,
emphasizing the value of task conflict.

Alfred P. Sloan, the former chairman of General Motors, once said at an

executive meeting: "Gentlemen, I take it we are all in complete
agreement on the decision here.” All the committee members nodded.
“I propose we postpone further discussion until our next meeting to give
ourselves time to develop disagreement and perhaps gain some
understanding of what the decision is all about."

• Leaders (given their high status) should refuse to take a firm position at
the outset and in that way make space for more information to emerge.
• Appoint devil’s advocate: Assign some members a role to generate
counterarguments to the group’s dominant position.

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 MOVIE TIME: TWELVE ANGRY MEN (1957)

Background: The story begins in a New York City courthouse, where a 18-
year-old boy is on trial for killing his stepfather. Final closing arguments are
presented, and the 12 juries were instructed to decide whether the boy is
guilty of murder.

“Evidence” presented in the court:

Old man heard the boy yelled

Knife used to kill the Woman across the street saw
“I am going to kill you” and
stepfather was very unique. the boy killing his stepfather.
saw the boy running away.
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Scene 1: 10.25 - 12.00
• The juries had a preliminary vote
before discussion. And the
preliminary vote was public (by
raising hands). What are the
potential drawbacks?
• Did every member has a clear
preference at the time of voting?

Scene 2: 15.13 - 18.50

• After the preliminary vote, juries were asked to take turns and convince
the solo dissenter.
• Some juries had no supporting arguments, they’ve simply followed the
majority in the preliminary vote.
• Most of the juries recited information that supports the preliminary vote
result. They also seemed to disregard information that would disconfirm
their beliefs.
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 Scene 3: 25.45 - 29.08
• Henry Fonda (the dissenter) kept generating
counterarguments to the group’s dominant position.
• The juries believed that: The man was killed by a very
unusual knife, the boy had a similar knife, thus the boy
was the killer. Henry pointed out that the knife is not
that unusual.

Scene 4: 1.12.27 - 1.15.06

• Members start to provide unique information.
• A downward stab wound found on the body. Two juries found out that it
is unlikely that a shorter person would stab downward into a taller person
with a switch-knife.
Ending: All 12 juries were convinced that the boy was not guilty.

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 CONDUCTING EXPERIMENTS

Organizations have used

experiments to learn about a
variety of business questions
such as:
• What types of promotions are
most effective?
• How sales staff should be
compensated?
• Which training method is more
effective?
We are going to learn about
designing experiments that
Anderson, E. T. & Simester, D. (2011). A step-by-step guide to smart produce meaningful results.
business experiments. Harvard Business Review, March, 98-105.

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 Think about it
A young researcher attempted to find out if using a smaller container could
cause higher sales of ice-cream…

Day 1 Day 2
Sales: 4000 cups Sales: 5000 cups

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PRS
What conclusion can you draw from this experiment?
1. The smaller container caused the increase in sales.
2. I cannot conclude anything definite.
Too many unknown variables e.g. temperature and weekend

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 KEY ELEMENTS IN EXPERIMENTATION

Manipulation of independent variable(s) Size of container

Measurement of dependent variable(s) Sales of ice cream
Controlling for all other influencing variables Temperature
• Holding a controllable variable constant across the comparison groups.
• Random assignment of test units to the comparison groups, in hope
that uncontrollable variables will average out across the groups.

Pedhazur, E. J. & Schmelkin, L. P. (1991). Measurement, Design, and Analysis: An Integrated Approach.
Lawrence Erlbaum Associates. Chapter 10, pp. 212-223. 23
An illustration

Average rating = ??

How good is the cookie?

(1 = very bad, 100 = very good)

Average rating = ??

IV: Number of chocolate chips

DV: Consumer evaluations on cookies
We hold constant the size of cookies because customers prefer larger cookies.
By random assignment of participants, we try to ensure the age, gender,
eating habits, etc. of participants are, on average, the same across the
comparison groups. 24
 INTERNAL VALIDITY & EXPERIMENTAL DESIGN
Internal validity:
• The extent to which the manipulation of independent variables
actually caused the observed effects on dependent variables.
• In other words, we ask “Is the conclusion draw from an experiment
believable?”
If a study has a high degree of internal validity, then we have strong
evidence of causality.
If a study has low internal validity, then we have little or no evidence
of causality.
Eliminate threats to internal validity

We now turn to a description of some major threats to internal

validity. The presence of these threats implies that the observed
change in DV is NOT caused by the IV.

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 Consider a “one-group pretest-posttest” experimental design:
Training X
Math Test Math Test
C B-

Can we conclude that Training X improves Math ability?

Threats to internal validity

§ History – Specific events that are external to the experiment took
place between pretest and posttest (e.g. trainees attended Training Y).
§ Maturation – Changes in test units that occurs with the passage of
time (e.g. trainees grow older, become wiser).
§ Testing – Pretest may affect people’s performance on posttest, due to
practice, and sensitization of research purpose.
E.g. If they are doing the same test, they would perform better due to reengagement
§ Regression to mean – Respondents with extreme pretest scores are
selected into the experimental group, their scores move closer to the
average score in the posttest.
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An illustration of regression to the mean
• Exam score = knowledge + random luck
• Students with the highest scores on the first exam probably had BOTH
knowledge AND random luck.
• Students with the lowest scores on the first exam probably had NEITHER
knowledge NOR random luck.
• Random luck is, by definition, random. Just because you got lucky (unlucky)
on 1st exam doesn’t mean you will still be lucky (unlucky) on 2nd exam.
• The highest scoring students in 1st exam are likely to perform worse on
the 2nd exam even when their true abilities remain the same.
• The lowest scoring students from 1st exam are likely to perform better
on 2nd exam even when their true abilities remain the same.
• Regression to the mean: An extreme value of a random variable is likely to
be followed by a value closer to the mean.

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 Consider an experimental design with comparison groups:
Training X
Math Test
Group 1
B+

Group 2 Math Test

B
Can we conclude that Training X improves Math ability?

Threats to internal validity

§ Selection bias – Initial difference across the comparison groups.

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Experimental designs with higher internal validity

Consider an experimental design with random assignment, comparison groups,

and pretest-posttest:
Training X
Math Test Math Test
Group 1 Score 1 Score 3
Participants
are randomly
assigned to 2 Math Test Math Test
groups Group 2 Score 2 Score 4

Effect of IV = (Score 3 – Score 1) – (Score 4 – Score 2)

Randomization ensures equivalence between comparison groups

before IV manipulation, eliminates selection bias.
Threats of history, maturation, testing, regression to the mean are
isolated, because what affects “Score 4 vs. Score 2” should also affect
“Score 3 vs. Score 1”.
Oftentimes researchers omit the pretest when participants are
randomly assigned to experimental conditions. Why? 29
Redundancy of resources as their results will be randomized anyways
Time for REFLECTION

What idea/concept in this class do you find most useful in future

decision making? How are you going to apply it?

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 INTENDED LEARNING OUTCOMES FOR UNIT 1.4

By now, you should be able to:

• Identify the obstacles of effective group decision making,
and offer suggestions for improvement.
• Evaluate various types of experimental design in relation to
internal validity.

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