BUMGT5980 Managerial Decision Making an Organisational Growth

Part 1

A rational organisation has a formal structure that characterise the behaviour of each working member. Every individual member has the clearly specified roles and responsibilities. Commitment of employee towards an organisation comes from the rationality and emotion (Pettigrew, 2014). Rationality of an employee is based on salary, compensation, growth opportunity in career. Organisation represents the relationship between the employer and employee. Rationality of the managerial level retains when biasness is absence in recruitment, compensation, benefits and career growth opportunity of employee (Munier, 2012). Rational decision-making depends on the availability of perfect information, cognitive ability of the leaders and mangers (Scott & Davis, 2015). The essay focuses on the capacity of human mind in decision-making and rational behaviour in the context of four concepts such as bias and heuristics, motivations and emotions, fairness and equity and escalating commitment.

As describes by Baron (2014), heuristics are mental states that guides decision-making. Heuristics are efficient rule that the decision maker uses at the time judgment in work place. Heuristics are of numerous types such as availability, representativeness, base rates. Heath et al. (2013) argued that theses heuristics may lead to the error in judgement. As stated by Hilbert (2012), many decisions are undertaken in urgency so that decision maker does not get enough time to make rational decision. It may happen that a company needs to take quick decision at the time of campus recruitment. Number of vacancy is limited in an organisation and hence, the company has to choose a few numbers of candidates for recruitment. In this scenario, the company does not get enough time to make extensive analysis regarding recruitment. Therefore, biasness is seen often during his type of recruitment when the candidate with greater efficiency may be excluded (Chandra, Srivastava & Theng, 2012). Moreover, biasness comes when decision makers have to select any one among equally qualified candidates.

Availability heuristics are applicable when decision makers choose decision regarding good or bad consequences regarding similar incidences. On the other hand, representative heuristics is a mental short cut, which helps the decision makers based on comparison of the information available from experiences. This type of heuristics takes lesser time in decision-making as the cause and consequences are already known from the experiences. Base rate heuristics take help probability in making decision. In the view of Simon (1957), there is limitation in the human behaviour in knowledge, skill and foresight that influences decision-making. During heuristics evaluations, the decision makers can make quick decision and can obtain early feedback. Mata (2012) argued that application of heuristics requires knowledge and experience otherwise chances of biasness and error increases in the decision-making. Base rate heuristics requires trained experts in decision-making. Example of availability heuristics is proximity of worker. An example of representativeness heuristic is the similarity and start ups to the past venture.

Reeve (2014) cited that emotions are managed through self-awareness, self-control, awareness of others and inspiring others. Positive emotions are more likely to influence heuristics. Negatives emotions make the decision making process weaker. In real life, specific emotions control the decision-making and cognitive skill of the person. It can be stated as an example that fears makes a person risk averse. A person wants to insured himself because of fear of loss of money, life or wealth. Sadness or failure motivates people to change. There are two main approaches of the moral rules and decision making such as utilitarianism and deontological (Glendon, Clarke & McKenna, 2016).  In case of a utilitarian approach, rightness or wrongness of a rule is exclusively a subject of the overall knowledge, satisfaction and individual desire. According to Levine, Thompson & Messick (2013), morality is a matter of intangible goods produced and is instrumental in nature rather than intrinsic.

Moral philosophers and theologians have found utilitarianism is defective as in many instances, this approach justified moral to the immoral activities. In the view of Harré, Clarke & De Carlo (2015), deontological ethics are better than utilitarianism. Deontological ethic follows natural moral law and common sense. Important feature of this philosophy is intrinsic morality. Acts those are intrinsically wrong, are not tries to do. It has been observed that fairness is workplace is biased by self interest of individual. Self-serving bias is appropriate for personal career development. When participants decide between two facts that are probabilistically rewarded, they make biased choices that favour smiling relative to angry faces. Heerdink et al. (2013) explained that as processing in the human brain increases, likely to decide emotionally increases. As business environment becomes complex with increase in dynamism, importance of emotions in decision making is increasing. Connelly, Gaddis & Helton-Fauth (2013) stated that emotional decision making is fast compared to rational decision making, and may require to consider final selection that starts with logical sense. One positive side of the emotions decision making is that it helps to drive us when decision making conflicts with self interest. Reeve (2014) argued that emotional decision making is a complex business situation such as business expansion or partnership may give poor due to having biasness.

Fairness and equity considers in the decision making when  allocation of resource and opportunity is considered. Fairness matters in both workplace and family life. Human mind considers social status and cost benefits before allocation of any resource. Fairness and equity in workplace is judged based on pay, benefits, growth opportunity, bonus or other incentives. Workplace fairness can be evaluated in terms of distributive justice, procedural justice, and interactional justice. As described by Sabharwal (2014), distributive justice is experienced from the fairness of the outcome for a given level of input. On the other hand procedural justice in workplace deals with the distribution of the outcome of final decision. The third one is interactional justice that focuses on the procedure how people are treated in the organisation.

This fairness and equity affects individual behaviour in the workplace. In a diversified workplace, where people work from different culture, regions and nations, the thought of discrimination comes automatically. One can think of the fairness in this place in terms of benefits available to all employees irrespective of class, gender or nationality. As mentioned by Banks, Patel & Moola (2012), rational decision making regarding fairness and equity depends on present and pre-existing factors. A person from one culture or one point of view may see unfairness when another person sees fairness. Differences in needs, beliefs, preferences, resources, efforts and rights determine the equality concept. As discussed by Prilleltensky (2012), pay system, managerial favouritism and equal recognition is the common challenge for leadership in an organisation. Managers and leaders often face fairness issues in the organisation with the expansion of business. Preference for workplace depends on the equal opportunity to be recognised in the workplace.

In the era of globalisation, fairness is important for employee retention. Any biasness discourages employee to stay with the organisation and they search for alternative options. In order to remove this type of discrimination, management can take frequent feedback from the employees and may provide personal support to employees feeling deprived (Elwér et al. 2013). Management and organisation leaders need to take initiative so that employees can experience the fairness and equity in the workplace. Moreover, female workers also required to receive equal opportunity as like the male counterpart (Cojuharenco & Patient, 2013). Therefore, fairness and equity at every tier of employment structure is crucial for decision-making and the development of the organisation. For an example, Human resource department of Johnson & Johnson started a total compensation document named ‘Investment Statement’ to bring parity in the employee compensation method (Erb, 2017).

Escalation of commitment is another decision-making problem faced by human being. Escalation of commitment occurs when the decision makers invest adequate resources into a course of action that is deteriorating. Organisational resources are time, effort and money (Sleesman et al., 2012). Escalation of commitment is associated with the organisation commitment model, which has three components such as investment, job satisfaction and quality of alternatives. It may happen for an employee or an investor that even if there is no job satisfaction, people are unwilling to leave the organisation as there is already lot of investment. Another example of escalation of commitment can be observed if any person is unwilling to change the organisation just because non-availability of superior opportunity in other organisations (Hamza & Jarboui, 2012). Therefore, escalation of commitment plays an important role in how people view the quality of available alternatives. As described by Bae (2012), people tend to escalate commitment for three reasons such as perceptual biases, judgemental biases and impression management. Impression management is the process of making decision. As highlighted by Guay et al. (2016), self-justification, conflicts between group and individual influences escalations. As suggested by Horn (2012), decision makers of an organisation needs to pay attention to the employee values and align that with value of organisation in order to prevent escalation of commitment from occurring kinds of situation discussed above.  

It can be concluded that decision-making is a choice of set of alternatives. Biasness can arise in decision-making based on available information, resources and emotions of decision makers. Choice is made based on judgement. There is difference in the decision-making process and way of thinking due to which individual decision differs from each other. Four areas in decision-making have been discussed in the here such as heuristics, motivations and emotions, fairness and equity and escalating commitment in the context of workplace. Human being makes any decision either based on emotions or based on rationality. Biasness arises from the irrational behaviour. Sometimes, biasness may be seen, when people have to take urgent decision. Experience, knowledge, or emotions may be used that time for judgement.

Part 2

This part analyses the real life biasness in the workplace that are experienced by both employee and managers. Sometimes the biases are conscious and sometimes those are unconscious. Coca Cola Company of Australia has been taken as case study. The company is a multinational organisation and has to manage diversifies workforce. Therefore, biasness may be observed both intentionally or unintentionally. The case study is of expansion of business in different regions of Australia through merger and acquisition. The complexity in this kind of decision-making and possible solutions is discussed in this part.

Recognition of bias

As Coca Cola is a global company, this company wants to expand its market value through acquiring a small organisation in Australia. Merger and acquisition is an important decision for the company in the real life competitive world. This decision is crucial for a company as this merger or acquisition may be successful or may fail. The success of the merger depends on the cultural aspect of the transition and the management of the workforce. Several conflicts may arise at the time of merger. Bias and conflicts may arise consciously or unconsciously at the time of human resource management during structural change of the organisation. It may happen that at the time of restructure of the organisation, management favourable employees get opportunity to recruit in the higher position. Several issues can rise such as cross-cultural challenge, loss of key people, inner versus loser, right or wrong judgement. The analysis of mergers and acquisitions during the decision-making process focuses profoundly on financial information. A lot of money is spent on accountants and lawyers even though it is now better understood that the cultures would make or break the deal.

If the decision makers of Coca Cola use heuristic method in decision making about the acquisition, managers may use the experiences regarding the success or failure of the business deal. However, this decision may be biased if taken very quickly before considering risks. It may happen that the highest member may take final decision of an urgent basis without consulting with other member of boards. Emotional and motivational bias may seen if the sole purpose of the business deal is profit maximisation. Employee welfare is an important goal of the organisation. If the employees do not find self interest in this business deal, they may resist to the change. It may happen that management give important role in this project to the favourable employees and other employees are convinced to consider this decision of the company for their future benefits. This kind of bias is inevitable during business expansion.

Fairness and equity is paid attention in the Coca Cola Company. During the expansion, company may need to recruit more employees. However, employees may feel biased if they think that new employees are getting better opportunity compared to existing ones. Existing employees require getting better opportunity in the workplace compared to new ones due to differences in experiences. It may also happen that the company gives first priority to the male employees while taking decision for promotion. Although there are no differences between skilled female and skilled male employees in terms of intelligence, company has biasness towards male employee to provide career growth opportunity. In this case, the female employees feel deprived in the workplace and that may affect their performance. Cultural bias may arise if the some of the existing employees of Coca Cola cannot be accustomed with the new employees. As stated by Prilleltensky (2012), people in each company look at the same event, same decision and same situations but with different view due to cultural differences and experiences. These differences in decision-making are important reasons to influence success or failure of the acquisition. A new employee with different nationality or cultural background may think that company gives priority to the native people. This kind of thought questions the fairness and equity in the work place and for cultural biasness.  

Escalating commitment may also arise if some employees cannot accept the decision of acquisition. Problem of acceptance may arise due to the fear of losing their positing and career. They make think of leaving the organisation may shift to another organisation because of not finding quality of alternatives Coca Cola is an international organisation and hence, career growth opportunity is greater in this company. Better alternatives in the same industry are difficult to find. Hence, some employees unwillingly stay with the business even if they lose job satisfaction and feel less valuable in the organisation.

Methods of recognising the bias

Bias can be recognised through the outcome of the event and attitude of the decision makers and analysers. Behaviour of the employees changes if they feel deprived due to biasness. During the first phase of decision making regarding acquisition, the unwilling stakeholders try to resist the decision implementation (Banks, Patel & Moola, 2012). Therefore, a pessimism feeling appears in their behaviour and attitudes. Numerous issues, rumours and disruption may arise within the workplace. The pessimism attitude may be long lusting reality and may negatively influence other members. People feel biasness, when they observe how others are treated after the organisational change, and how they are compensated and whether people are paid what they deserve. Unconscious bias may be observed through the performance of the employees.  

Methods of overcoming the bias

As opined by Chandra, Srivastava & Theng (2012), the first thing that the management does to eliminate biasness from workplace is to acknowledge that biasness may exist. The questions of differences in pay structure, differences in performance evaluation, promotion opportunity and position need to be addressed at first (Levine, Thompson & Messick, 2013). The effective method of overcoming the bias is the proper communication with the employees after taking the decision. The benefits of the acquisition need to be communicated with the existing employees. Division of responsibilities after the organisational and structural change needs to be as per efficiency, experience, and that required to be communicated with all employees before implementing the decision (Sabharwal, 2014). Project benefits should be communicated at the company as well as individual level so that people can connect their future goal with the new project and can refocus their energy towards forward direction.

The primary thinking of the employees is that acquisition take place for business reasons. Differences in the culture between acquired and acquirer company and hence, the leaders of the acquired company are accessible to all employees. Employees need support from the both the company at this stage (Glendon, Clarke & McKenna, 2016). An integration plan can be created to present future activities clearly. Bias needs to be eliminated at the time of recruitment. An interviewer in the panel may have a preference or biasness for any candidate, who is familiar to the interviewer. Biasness can be removed by building a diversified team where members from cross culture and incorporating both male and female members. In a cross-cultural team, employees get the opportunity to know different types of culture, their positive contribution in the society. The management may create such environment where employees can feel themselves valuable. There needs to be parity in the compensation, reward and payment method for all employees at the same level.

Conclusion

This part of the paper focuses on the biasness that may be observed due to the acquisition decision of the company. Some decision in an organisation needs to be taken immediately and some decision are taken during a longer period of time. Acquisition is an important decision takes needs enough time as this decision can brings significant structural change in the organisation. During merger and acquisition, biasness may arise consciously or unconsciously. Four kinds of biasness have been described in this part along with possible solutions.

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