In This Module, You Will Extend What You Have Learned Thus F

In this module, you will extend what you have learned thus far into the realm of group decision making and analyze the role it plays in organizations

In this module, you will extend what you have learned thus far into the realm of group decision making and analyze the role it plays in organizations. In addition to group decision making, you will also explore the concept of mental accounting and consumer choices. As discussed previously, people do not always act perfectly rational. In part, this is because they aggregate gains and losses differently. Moreover, research indicates that most people tend to be adverse to risk.

In fact, they are not always well adjusted in terms of their ability to estimate risk. As with other decision-making processes, there are pitfalls in group decision making. However, the use of groups increases the ability to diminish bias and increase objectivity when making choices. You will develop an understanding of how and why groups fail at times. Crowds generally outperform individuals in terms of utility and the reduction of bias when making decisions so long as those crowds are appropriately structured and facilitated.

However, crowd-sourced solutions have significant limitations, including considerations of deep complexity, decisions dependent on expertise, choices under duress, and choices dependent on speed. You will examine these limitations in order to better understand, as decision-makers as well as managers, how to optimize your teams and your organization in order to perform with greater precision and objectivity. In addition to these limitations, groups are also prone to social influences. These group social influences represent both negative and positive contributions and in some cases the net result is unclear, such as in “social facilitation.”

Social facilitation refers to the tendency of some group members' performances to improve as others decline. More specifically, the performance of “above average players” tends to improve with the presence of onlookers while the performance of “below average players” tends to degrade with the presence of onlookers. In other words, those who know how to perform a given task do so with greater efficacy while they are under the glare of an audience while those who are unfamiliar with the task will unduly struggle. This clearly has ramifications on how groups assemble and how group decision making is facilitated.

Roughly two-thirds of the US economy is attributed to consumer spending or roughly 10 trillion dollars in 2010 (US Department of Commerce: Bureau of Economic Analysis, 2011). This enormous amount of capital itself as well as how it is utilized is of constant interest to marketers, economists, and political leaders.

Beyond the influences of social heuristics, how do your own internal metrics and accounting principles influence your decisions and how can those practices create opportunities? In other words, what is your mental accounting? In 1980, Richard Thaler coined the term mental accounting in an attempt to describe how people categorize and quantify economic outcomes (Thaler, 1980). Eight years later, Shefrin and Thaler proposed that mental accounting is divided into discrete repositories; these “buckets” are current income, current wealth, or future income. Moreover, these accounts have interesting qualities from a cognitive and accounting perspective (Shefrin & Thaler, 1988).

These accounts are largely non-fungible and the marginal propensity to consume from each account is different. The implications for this are profound; how utility is evaluated varies based on the mental account used. Likewise, perception of value changes at different points in time; people are prey to subjective frames. Adding complexity to this mix, mental accounting applies two values to any transaction—acquisition value and transaction value. The acquisition value is the money you will trade to physically acquire a good or service while the transaction value is the price you place on getting a good deal.

Finally, the value placed on gains and losses differs between individual mental accounts. Similar to prospect theory, people have a tendency to skew utility in order to minimize losses and maximize gains. Mental accounting of consumer-oriented decisions, coupled with the complexity of consumer choice (imagine all the different options and financing plans on the car purchase), and the departures taken from perfect rationality all influence consumer behavior. They determine when an individual chooses to act or postpone a purchase, how he or she perceives gains and losses, and how timing bears on the individual’s choices. Marketers especially want to leverage these predilections to frame one’s perceptions and choices in nonrational ways.

However, one’s personal balance between self-control and buyer’s remorse is at stake. Shefrin, H. H., & Thaler, R. H. (1988). The behavioral life-cycle hypothesis. Economic Inquiry, 26, 609–643. Thaler, R. H. (1980). Towards a positive theory of consumer choice. Journal of Economic Behavior and Organization, 1, 39–60. US Department of Commerce: Bureau of Economic Analysis. (2011). National economic accounts: National GDP. Retrieved from.

Speed and Strategic Choice: How Managers Accelerate Decision Making Eisenhardt, Kathleen M California Management Review; Spring 1990; 32, 3; ProQuest Central pg. 39 This course opened with the argument that as managers in an organization your most vital skills are analysis and decision making. Perhaps knowing what you now know, you can add to these vital skills the ability to recognize and repair the pitfalls, biases, and individual shortcomings that plague organizations and groups.

The role of the modern, and appropriately risk-adjusted, manager is to fully reflect on the motivations and incentives that delay and undermine sound decision making and effective, objective management. Beyond this, you must understand how to deploy the tools you have learned to accurately assess risk/reward scenarios and to frame decisions in ways that quickly create sound and actionable alternatives. Lastly, and most importantly, you must revisit how your own toolkits have been augmented and how some of your most important choices may be evaluated differently. In order to achieve these goals you need to increase your knowledge a step further. Consider that in addition to all you have learned, speed, strategy, and a number of other factors play critical roles in your decision-making repertoire.

Being a great decision maker must include the ability to make choices quickly, efficiently, and strategically. If not, you may run the risk of losing your competitive advantage. In this module, you will learn that maintaining your competitive advantage requires not only precision but also speed. Choosing quickly demands that you keep a vigil over real-time operating information and rely on quick, comparative analysis to accelerate your decision making. Great managers and decision makers resolve conflicts quickly and constructively.

They rely on trusted, reliable counselors, not sycophants. Great, fast decision makers also use multiple alternatives and have backup plans—multiple options (frames) improve precision and offer a fallback position if the need arises. Finally, great decision makers incorporate the decision at hand with broader strategic considerations. Ultimately, there is still one more role for the rational manager in organizations. That is, great decision makers facilitate great decision making. As this course draws to an end, you will investigate ways in which you can bring structure and precision into your organization, striving towards your successes breeding success in others.

Paper For Above instruction

In organizational settings, decision-making is a critical process that influences the efficiency, adaptability, and overall success of the organization. Traditional views emphasized rational, individual decision-making; however, contemporary research demonstrates that group decision-making, mental accounting, and behavioral biases significantly impact outcomes. This paper explores the role of group decision-making, the phenomenon of social influences such as social facilitation, the concept of mental accounting, and strategies for enhancing decision-making speed and quality within organizations.

Group Decision-Making and Its Organizational Role

Group decision-making has long been regarded as a means to enhance objectivity and reduce individual biases. When structured effectively, groups can outperform individuals by pooling diverse perspectives and expertise (Kerr & Tindale, 2004). However, group dynamics are complex; phenomena such as groupthink, conformity, and social influence can sometimes hinder objective judgment (Janis, 1982). For example, social facilitation impacts how group members perform tasks based on their relative abilities and the presence of an audience. Above-average performers tend to excel under scrutiny, whereas below-average performers may deteriorate—a dynamic that influences overall group performance and decision quality (Zajonc, 1965). Therefore, managers must design group processes carefully—by structuring roles, encouraging open communication, and fostering an environment receptive to dissent—to harness the benefits and mitigate the pitfalls of group decision-making (Nemeth & Chiles, 1988).

Limitations of Crowd-Sourced Decisions

Despite their advantages, crowd-sourced decision approaches face limitations. Complex problems often require expert judgment, and hurried decisions under duress or high-pressure scenarios can lead to errors (Eisenhardt, 1990). Speed and the need for rapid responses are crucial in dynamic markets; however, excessive reliance on crowdsourcing may overlook nuanced issues or lead to oversimplified solutions. Additionally, crowd decisions may be biased by dominant voices or social influences, which can distort collective judgment. Recognizing these limitations emphasizes the importance of combining crowd input with expert analysis and structured decision frameworks to improve outcomes (Surowiecki, 2004).

The Impact of Social Influences in Group Decision-Making

Social influences extend beyond social facilitation, affecting conformity, polarization, and peer pressure. While social facilitation can boost certain individuals’ performance, social pressure can also lead to conformity, suppressing dissenting opinions (Asch, 1951). These effects may cause groups to adopt suboptimal or risky decisions if social dynamics are not managed properly. Conversely, constructive social influence—such as encouraging diverse opinions—can lead to better decisions. Managers must cultivate an environment where social influences are harnessed positively, promoting critical thinking and reducing conformity pressures through techniques like devil’s advocacy and anonymity (Nemeth & Chiles, 1988).

Understanding and Applying Mental Accounting

Developed by Richard Thaler (1980), mental accounting explains how individuals categorize financial outcomes into mental “buckets,” such as current income, savings, or future income, affecting their decision-making processes. These mental compartments influence perceptions of value and risk, often leading to biases like the disposition effect, where investors sell winners prematurely and hold losers longer (Shefrin & Thaler, 1988). In consumer behavior, mental accounting impacts purchasing decisions, timing, and savings strategies. Recognizing these biases allows managers and marketers to design interventions and framing strategies that influence consumer choices more effectively. For instance, framing discounts as savings from a “mental account” can motivate purchase behaviors (Thaler, 1980; Shefrin & Thaler, 1988).

Enhancing Decision-Making Speed and Strategic Precision

Speed is vital in organizational decision-making, especially in competitive environments. Eisenhardt (1990) emphasizes the importance of rapid, strategic responses, supported by reliable information and multiple alternative options. Effective managers utilize delegation, real-time data, and decision frameworks to accelerate decision cycles without sacrificing quality. Additionally, having contingency plans and backup options enhances organizational resilience. Combining speed with strategic foresight enables organizations to maintain competitive advantage and adapt swiftly to environmental changes (Eisenhardt, 1990). This dual focus on rapid yet precise decision-making is increasingly critical given the fast-paced nature of modern markets.

Conclusion

Effective organizational decision-making integrates understanding of group dynamics, behavioral biases, mental accounting, and strategic agility. Managers must recognize the benefits of diverse, well-structured groups, while also guarding against social influences and biases that impair judgment. Incorporating rapid decision-making processes, with backups and strategic foresight, enables organizations to operate efficiently in complex, dynamic environments. Cultivating skills in these areas ensures that managers can foster decision frameworks that promote accuracy, speed, and strategic alignment—thereby securing competitive advantage and organizational success.

References

• Asch, S. E. (1951). Effects of group pressure upon the modification and distortion of judgments. In H. Guetzkow (Ed.), Groups, leadership, and men (pp. 177-190). Carnegie Press.
• Eisenhardt, K. M. (1990). Speed and strategic choice: How managers accelerate decision making. California Management Review, 32(3), 39-54.
• Janis, I. L. (1982). Groupthink: Psychological studies of policy decisions and fiascoes. Houghton Mifflin.
• Kerr, N. L., & Tindale, R. S. (2004). Group performance and decision making. Annual Review of Psychology, 55, 623-655.
• Nemeth, C., & Chiles, C. (1988). Promoting solutions through dissent. Journal of Applied Psychology, 73(2), 486-493.
• Shefrin, H., & Thaler, R. (1988). The behavioral life-cycle hypothesis. Economic Inquiry, 26(2), 609-643.
• Surowiecki, J. (2004). The wisdom of crowds. Anchor.
• Thaler, R. H. (1980). Towards a positive theory of consumer choice. Journal of Economic Behavior & Organization, 3(1), 39-60.
• US Department of Commerce: Bureau of Economic Analysis. (2011). National economic accounts: National GDP. Retrieved from https://www.bea.gov/national
• Zajonc, R. B. (1965). Social facilitation. Science, 149(3681), 269-274.