Carter Racing

1
Carter Racing

• In the next 20 minutes
• Read the case carefully and make a race/not race
  decision
• Use any extra time to develop the logic of your
  decision
• No talking please

2
Carter Racing(2)

• As a group, agree on your roles
• i.e., 1 Pat Carter, 2 Paul Edwards, 2 Tom Burns
• Take 25 minutes to reach a group consensus about
  racing or not racing
• You will have 60 seconds to justify your decision
  to the class

3
Decision Choices

• Race
• Top Five 50
• Out of Money 12
• Blow Engine 29
• Not Finish 8
• Dont Race 100

4
Expected Value of Racing(Ignoring All
Temperature)
5
Temp. Data Races With Blown Gaskets
Ambient Temperature for Races with Blown
Gaskets
4
3
Number of Races
2
1
0
50
55
60
65
70
75
80
85
90
Ambient Air Temperature
6
Temp. Data Without Blown Gaskets
Ambient Temperature for Races without Blown
Gaskets
4
3
Number of Races
2
1
0
50
55
60
65
70
75
80
85
90
Ambient Air Temperature
7
Temp. Data With Without Blown Gaskets(Data
from the Challenger Space Shuttle)
Ambient Temperature for Races without Blown
Gaskets
4
3
Number of Races
2
1
0
50
55
60
65
70
75
80
85
90
Ambient Air Temperature
8
Conditional ProbabilitiesUsing All Temperature
Data
9
What does the case demonstrate?

• Managers face problems when making decisions
  under uncertainty
• Decisions that occur in a behavioural context are
  often ambiguous critical pieces of information
  are either unavailable or are suppressed
• Whos opinion should you believe?
• Importance of gathering all relevant data
• Perceptions bias the use of information
• Quantitative calculations are only as solid as
  the data that are used in making them GIGO

10
Decision Biases

• Overconfidence - High Efficacy
• affects risk perceptions
• Minimize the importance of evidence that is
  counter to our perspective
• Majority of Ind. Racers almost always Race
• Escalation of commitment

11
What are Framing Effects?

• Framing refers to the manner in which objectively
  equivalent alternatives are presented
• You have blown engines in 7 of 24 races this
  season, a rate of 29. If you blow an engine in
  this race you lose all your support for next
  year, including the 500,000 oil and 300,000
  tire sponsorship
• You have finished in the top 5 and won prize
  money in 12 of 15 races you finished this season,
  a rate of 80. If you finish in the money in
  this race you will secure both the 500,000 oil
  and 300,000 tire sponsorships.

12
Space Shuttle Challenger

• NASA operating under severe budget pressures
• Launch was a media event to attract attention
• 24 previous successes
• Shuttle had been reclassified from
  developmental to operational (i.e., safe)
• Groupthink at NASA - is Morton-Thiokol with or
  against us?
• Morton-Thiokol concerned about future booster
  contracts
• concern gave NASA what they wanted

13
Group-level Effects

• Risk Taking
• groups tend to make more extreme decisions that
  individuals (called group polarization)
• Information Pooling
• groups tend to focus on information shared by all
  members and ignore information held by a few.

14
Vigilant Decision-making(a model for making
crucial decisions)

• 1) Identify a wide range of objectives to be
  achieved by the decision
• 2) Generate a comprehensive list of alternative
  courses of action
• 3) Search for new information relevant to
  evaluate the alternatives
• 4) Process all information in ways that minimize
  biases
• 5) Reconsider pros cons of rejected
  alternatives
• 6) Carefully examine the costs, benefits, and
  risks that flow from the preferred alternative
• 7) Develop implementation plan, with special
  attention given to contingency plans

15
Groupthink
1) Illusion of invulnerability
2) Construct rationalizations
3) Morality of position is unquestioned
4) Stereotypes--distort image of other parties
5) Pressure applied to those who express doubts
about the groups position
6) Self-censorship--deviations from consensus are
avoided
7) Illusion of unanimity
8) Mindguards--leaders and fellow members
protected from adverse information
16
Groupthink
17
Warning Signs of Groupthink

• Teams isolating themselves from external sources
  of information through mindguards
• Feeling under pressure
• Exhibiting defensiveness - e.g., stereotyping
  others
• Feeling they are doing what is moral or right
• Minimizing the public expression of doubt
• Having strong leaders that intentionally or
  unintentionally discourage input and real debate
• Creating the illusion of unanimity by
  self-censorship
• Creating the illusion of invulnerability

18
The Groupthink Process

• Characteristics of Groupthink
• Illusion of invulnerability
• Collective rationalization
• Belief in the inherent morality of the team
• Stereotypes of other groups
• Self-censorship
• Illusion of unanimity
• Self-appointed mind guards

• Groupthink Leads to Defective Decision Making in
  Terms of
• Incomplete survey of alternatives
• Incomplete survey of goals
• Failure to examine risks of preferred choice
• Selective bias in processing information at hand
• Failure to reappraise alternatives
• Failure to work out contingency plans

• Initial Conditions
• High Cohesiveness
• Insulation of team from outsiders
• Lack of methodical procedures for search
  appraisal
• Directive leadership
• High stress with low hope for finding a better
  solution than one favoured by the leader or other
  influential person
• Complex/changing environment

Conformity- Seeking Tendency of Group
19
Remedies to Groupthink

• Assign encourage the role of critical evaluator
  in each group member
• Leaders should avoid stating preferences adopt
  an impartial stance
• Use multiple groups to work on the same questions
• Protect security, but seek outside counsel
  insight
• Invite outside experts have experts challenge
  the views of core members

20
Conformity
21
Remedies to Groupthink (cont.)

• When discussing alternatives, at least 1 person
  should be assigned the devils advocate role,
  to fully evaluate options
• Take time to address how enemies may respond -
  develop scenarios
• When evaluating policy alternatives, break up
  into small groups then reform to sort through
  differences
• After reaching a preliminary consensus, group
  should hold a second-guess meeting
• 10 The behaviour of the leader is key