7.4 Avoiding decision traps While it is not possible to change our human natures, it is possible to immunise ourselves to some extent against common decision traps. Useful strategies include: Get in the habit of reframing problems. For example, if you are considering strategies for avoiding a loss of €10,000 try asking yourself if you would feel differently if you consider them as strategies for making a gain of €10,000. Think about the information you have
7.1 Introduction We have taken a brief excursion through three different perspectives on decision making (the rational-economic, the psychological and the social) and we have considered how we think about risk from these different perspectives. How can you use these ideas to improve your own and others' decision making? The first way is to use them to develop greater insight into the pressures and influences that may be affecting how you process information, think, and decide. By becoming more aware of these
6.4 Prospect theory Kahneman and Tversky (1979) developed ‘prospect theory’ to describe this combination of risk and loss aversion. This suggests that whether an individual is risk seeking or risk averse will depend on where they are in relation to a personal reference point. The reference point divides the area where they feel as if they are in loss from the area where they feel they are in gain. This point is not usually zero, and will change over time. For example, a professional financial trader who is p
6.2 A rational-economic perspective on risk A rational-economic perspective generally represents risk as a combination of the expected magnitude of a gain or loss, combined with some probability distribution of anticipated outcomes. Economic ideas of risk behaviour are founded largely on expected utility theory. Expected utility theory predicts that investors will always be risk averse. The shape of the utility curve (utility plotted against increasing wealth) is such that utility increases with wealth, but at a declining rate. This is
5.6 A way of dealing with social pressures: decoupling Organisations often deal with these social pressures by decoupling responses to these different pressures. The need to appear legitimate in the eyes of important constituencies is met by actions and practices which have a purely ceremonial character: they are done for the sake of appearances and not with any real engagement. The example in Author(s):
5.5.2 Mimetic pressures
Mimetic pressures come from the pressure to imitate what others do. The world is complicated and finding the optimal solution often difficult. One way of dealing with this complexity is to copy others. For example, in my own consulting work I carried out an assignment for British Petroleum (BP). Subsequently, other (smaller) clients would often ask me ‘So how does BP do this?’, usually with little regard for the different circumstances they faced. It is this mimetic pressure that
5.5 Social pressures which affect our decision making Broadly, there are three kinds of social pressure which affect how we make decisions: coercive mimetic normative. We look at these in more detail below.
5.1 Introduction As we noted earlier, both the rational-economic and psychological perspectives on decision making tend to ignore the social context in which we live and work. We turn now to consider this social context.
3.1 Introduction Much of economics and finance theory rests on the notion of people as formally rational decision makers. First, people are understood to have ordered preferences. That is, if someone prefers A to B and prefers B to C then they should prefer A to C. Second, decision makers are assumed to engage in a formally rational decision-making process on the basis of those preferences.
1.2 Offshoring The premise is straightforward. Given modern telecommunications capability, it matters little where telephone support is based. India, with a large population of English-speaking graduates and low (by Western standards) wage rates is an obvious choice. The significant cost-savings look very attractive to many organisations. Introduction ‘Environment’ is one of the more popular words in the management lexicon, most generally understood to be referring to ‘something outside’. But common usage today often interprets the Environment (with or without the capital ‘E’) as referring to the planetary ecosystem. On that basis the Environment includes such things as global warming, the state of the ozone layer, deforestation and the means of energy generation. Organisations need to coexist with their environment, responding Acknowledgements Except for third party materials and otherwise stated (see terms and conditions), this content is made available under a Creative Commons Attribution-NonCommercial-ShareAlike 2.0 Licence Esthr: www.flickr.com/photos/edyson/274977240/ 4 Key points The important points this unit has covered include: Defining the entrepreneur in terms of economic function and role. Identifying the key characteristics of successful entrepreneurs and entrepreneurial firms. Considering the role of entrepreneurial motivation in decision making and business behaviour. Identifying leadership and management styles appropriate to an entrepreneurial firm 3 Entrepreneurial work style The need for supportive, open and communicative policies, structures and cultures in effective entrepreneurial firms as the optimal crucible for successful innovations comes through very strongly from studies of innovation and successful entrepreneurship. However, the strong internal locus of control of successful entrepreneurs suggests there may be a difficulty in accepting the influence of others, powerful or not. And, the strong need for autonomy does not suggest a personality open to shar 2 Entrepreneurial qualities It is now widely accepted that, apart from the start up phase, most small firms in Europe are more concerned about survival rather than growth and relatively few are especially entrepreneurial (Gray 1998). Consequently, a lot of research in this field has focused on finding the characteristics that set entrepreneurs and their firms apart from others. Elizabeth Chell (1985, 1999), a social psychologist, has examined numerous psychological trait-based approaches and concluded that, whilst psych 1 Economic function of the entrepreneur Broadly, entrepreneurs have two vital roles to play in the economy (1) to introduce new ideas and (2) to energise business processes. Strictly speaking, the term entrepreneur, which derives from the French words entre (between) and prendre (to take), referred to someone who acted as an intermediary in undertaking to do something. The term was originally used to describe the activities of what today we might call an impresario, a promoter or a deal maker. The entrep Learning outcomes After studying this unit you should: understand the nature of entrepreneurship; understand the function of the entrepreneur in the successful, commercial application of innovations; confirm your entrepreneurial business idea; identify personal attributes that enable best use of entrepreneurial opportunities; explore entrepreneurial leadership and management style; identify the requirements for building an 7.2.3 Sticking to one good argument While it may seem better to use as many arguments as possible to support a case you are trying to make, skilled negotiators tend to rely on fewer stronger arguments. This is because a weak argument does not add to a strong one, but has the opposite effect of diluting and weakening it. 1.1 A definition One definition is ‘A project is a one-off, non-repeated activity or set of tasks which achieves clearly stated objectives within a time limit.’ Most managers work on projects, often small or short-term projects, rather than large ones that take several years to complete. Size or length of time do not indicate that one project is more important than another – often small projects pave Introduction Many managers find that they are required to manage projects. In this unit we aim to help you to take an overview of the features of a project and the issues that arise in managing a project. Once you have identified a piece of work as a project, you are able to use a number of management approaches that have proven effective in managing projects. A project is a one-off, non-repeated activity or set of tasks that achieves clearly stated objectives within a time limit. Most projects are goal-o
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