Learning and decision making Dynamics of Organizational Behavior Virginia Tech MBA Program Andrew Watson

Agenda Learning and Creativity: Ch. 5 Decision Making: Handout Break Including Learning Organization Decision Making: Handout Break Decision Making: Ch. 15 Looking ahead

Learning Defined as: Are universities good places to learn? 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 On your own By doing 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 Disadvantages Other consequences 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 Next week On Paper 1 tomorrow On Exam 1 by 8am on Sunday … Next week Exam 2 Bring laptop