Constraints – Negative forces of individuals differences and organizational structure

Decision making in practice is characterized by bounded rationality, common biases and errors and the use of intuition. In addition, there are individual differences that create deviation from the rational model.

Personality: There hasn’t been much research on personality and decision making. One possible reason is that most researchers who conduct decision making research are not trained to investigate personality. However, the studies that have been conducted suggest that personality does influence decision making. The research has considered conscientiousness as self esteem. Let’s us discuss each of these.

First some research has shown that specific facets of conscientiousness rather than the broad trait itself – face escalation of commitment. Interestingly one study revealed that the two facets of conscientiousness achievement striving and dutifulness actually had opposite effects on escalation of commitment. For example, achievement striving people were more likely to escalate their commitment, whereas dutiful people were less likely to escalate. Why might this be the case? Generally, achievement oriented people hate to fail, so they escalate their commitment hoping to forestall failure. Dutiful people however will be more inclined to do what they see as best for the organization. Second, achievement striving individuals appear to be more susceptible to the hindsight bias, perhaps because they have a greater need to justify the appropriateness of their actions. Unfortunately, we do not have evidence on whether dutiful people are immune to the hindsight bias.

Finally, people with high self esteem appear to be especially susceptible to the self serving bias. Because high self esteem people are strongly motivated to maintain their self esteem so they use the self serving bias to preserve it. That is they blame others for their failures while taking credit for their success.

Gender: Recent research on rumination offers insights into gender differences in decision making. Overall the evidence indicates that women analyze decisions more than men do.

Rumination refers to reflecting at length. In terms of decision making, it means over thinking about problems. And women, in general, are more likely than men to engage in rumination. Twenty years of study find that women spend much more time than men in analyzing the past, present and future. They are more likely to over analyze problems before making a decision and rehash the decision once it has been made. On the positive side, this is likely to lead to more careful consideration of problems and choices. However, it can make problems harder to solve, increase regret over past decisions, and increase depression. On this point women are nearly twice as likely as men to develop depression.

This rumination tendency appears to be moderated by age. Gender differences surface early. By age 11, for instance girls are ruminating more than boys. But this gender difference seems to lessen with age. Differences are largest during young adulthood and smallest after age 65, when both men and women ruminate the least.

Organizations can constrain decision makers, creating deviations from the rational model. Managers for instance, shape their decisions to reflect the organization’s performance evaluation and reward system, to comply with the organization’s formal regulations, and to meet organizationally imposed time constraints. Previous organizational decisions also act as procedures to constrain current decisions.

Formal regulations: All but the smallest of organizations create rules, policies, procedures and other formalized regulations in order to standardize the behavior of their members. By programming decisions, organizations are able to get individuals to achieve high levels of performance without paying or the years of experience that would be necessary in the absence of regulations. In so doing, they limit the decision maker’s choices.

System Imposed Time Constraints: Organizations impose deadlines on decisions. For instance, department budgets need to be completed by next Friday. Or the report on new product development has to be ready for the executive committee to review by the first of the month. A host of decisions must be made quickly in order to stay ahead of the competition and keep customers satisfied. And almost all important decisions come with explicit deadlines. These conditions create time pressures on decision makers and often make it difficult, if not impossible to gather all the information they might like to have before making a final choice.