Question 1: Which biases in decision making can be identified in the performances of both Pieterson and Gack? How can the identified biases be overcome? In general, the decision making style for manager approach decision making is toward rational and intuitive thinking. In rational thinking a person consider the problem in a rational, step-by-step and analytical way. Rational thinking person will resolve a complex and complicated problem into smaller part and then resolve them in a rational, logical and integrated method. Another way of decision making style which is intuitive thinking is more flexible, spontaneous and creative.
Intuitive thinking person will respond to a problem quickly and gone through evaluation and come out with several possible alternative solution. Intuitive thinking person is expected to deal with many problems at once, review quickly from one to another and respond based on experience of his own and spontaneous ideas. In this case, John Pieterson behaves anchoring and adjustment heuristic and rational in his decision making for the Steel Incorporated branch in the Netherlands while Jack Gack is an intuitive thinking manager and he has the escalating commitment.
Both managers have their own way in handle their problem and making decision for their problem but they having biases in their making decision. John Pieterson has the biases “anchoring and adjustment heuristic” because he making decision based on adjustments to a previously starting point or existing value. In this case study, the evidence that John Pieterson has the biases anchoring and adjustment heuristic is John is a rational person in prepare a proposal or bid for customer’s order. After a few years success in the Steel Inc, John decision making is affected by it.
He starting to consider less information and takes competitor prices as a starting point by simply adapts a little amount from that. Therefore, John needs a lot of information and details about the competitors, suppliers and customers. If John lack of any detail information, he can hardly make a decision for the proposal or the bid for his customers. Thus, information and information systems are useful for John to overcome his bias in decision making. Information systems which have essential characteristics to support John’s works are timeliness and completeness.
This both characteristic of information systems make sure the information that John needed is available when he need and meets deadlines for decision making. Furthermore, completeness in information is complete and sufficient for the task at hand and up to date as possible. Jack Gack has the biases escalating commitment because he is intuitively continue a course of action that is not working. According to this heuristic, people will unable to decide to quit and let the momentum of situation overwhelm them.
The evidence here is Jack Gack performs the same duties as John Pieterson but Jack is not very success in Steel Inc branch at Finland. Jack did make rational decision but he also includes a share of intuition in his decision making. Jack is not willing to go of his intuition although he is often criticized and he believes that external factors had affected his bad performance. From the point of view from Jack, he believes his unsuccessful is because of the external factors and he does not want to let go of his intuition during the decision making.
He is fall into escalating commitment which is the continuation of an action even though it is not working. Therefore, Jack should not limit himself to just one way. Jack should set advance limits on his involvement and commitment to a particular action stuck with these limits, make his own decisions and do not follow the action of others since they are also liable to escalation, carefully determine the reason of continuing an action, remind himself of the cost and watch for escalation tendencies.
Furthermore, Jack should had more discussion with his employee or co-worker before making any decision because team decisions make greater amount of information, knowledge and expertise available to solve problem. Team decisions also expand the number of alternatives that are examined, help to avoid tunnel vision and consideration of limited options. Therefore, team decision will help Jack be more rational and avoid escalation on his decision making. Beside that, Jack should refer to the past references to help his decision making on the problem more frequently to avoid his bias.
In conclusion, rational thinking is important in decision making but intuitive thinking is more flexible and creative. Both of the decision making style having their advantages and disadvantages. Biases behaved by both managers which are “anchoring and adjustment heuristic” and “escalating commitment” are imperfect and they are influences of cognitive limitations, risk and uncertainly but their potential biases can improve our decision making capabilities when we faced with this complex environments, limited information and cognitive limitations situation.