Prospect and Attribution Theories in Decision Making

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Table of Contents

Introduction
Case study analysis
Critical discussion
Recommendations
References

Introduction

Managers often face tough situations that require them to make decisions under uncertainty. Examples of factors that determine the effectiveness of decisions in such situations include personality, values, psychology, and sociological influences. Personality refers to a person’s dynamic psychological dispositions that determine how they relate and adjust to their environment as well as to the people around them. It is determined by heredity, environment, and aging. On the other hand, values refer to ideals that people use to decide whether behaviours or actions are right or wrong. They are divided into two groups namely cultural and personal values. Values determine people’s behaviours and their reactions to different circumstances.

They also play a key role in influencing decisions. Psychology affects decision making in three main ways namely perception, attribution, and framing. Higashi is the director of the JET program and Kelly’s supervisor as well as the other ALTs. He has made several decisions that are highly flawed and that provide lessons on how managers manage during moments of uncertainty. These decisions will be analysed from two main perspectives namely personality and value based as well as psychological. The decisions that will be analysed include denying Kelly sick leave, concluding that foreigners feign sickness in order to increase their weekend days, giving erroneous information to Kelly and her colleagues, and pushing Kelly to participate in activities that are considered feminist in Japan.

Case study analysis

Prospect theory is a behavioural model that people use to make decisions that involves prioritising the value of loses and gains over the final outcome of the decision made (Vis, 2011). This theory can be used to analyse Mr. Higashi’s decision to deny Kelly and the other ALTs sick leave and instead replace it with paid leave. He is not interested in the final outcome of the decision but the losses and gains involved. Higashi is less willing to embrace the gains that will come from giving Kelly and the ALTs sick leave. Instead, he considers the losses that the program will suffer if he gives Kelly sick leave. Therefore, he replaces sick leave with paid leave. The decision is made after an evaluation that is set by social comparison. One of the three principles of prospect theory is loss aversion (Vis, 2011). In this case, the losses loomed larger than gains because in Japan, workers are highly committed to their jobs, work on Saturdays, and utilize their leave well.

Higashi is worried that Kelly’s work ethic is not fit for the program because native employees work even on Saturdays. The ALTs lack of commitment was unacceptable to Higashi. In order to mitigate the losses, he replaced sick leave with paid leave. He is not convinced that Kelly and her colleagues could all be sick and absent from work simultaneously. In addition, replacing sick leave with paid leave was standard procedure in Japan because it was a sign of loyalty and commitment. Kelly was expected to follow suit and sign the papers. The loss aversion principle influences decision making significantly.

Preferences depend on how the individual frames the problem. The problem can be framed to present the outcome as gain in which case the individual will be risk averse or as loss in which the individual will seek risk (Tom, Fox, Trepel, & Poldrack, 2005). Higashi frames the problem as a potential gain for the JET program because Kelly and the ALTs will be working instead of being on holiday. The program would make gains by having Kelly and the either ALTs work more and take less days for holiday. The potential gains motivated Higashi to be risk averse and as a result contravene the terms and conditions of the contract that offered the ALTs sick leave provided they presented evidence of their illness.

Attribution theory refers to a method that people use to account for the reasons why people behave in certain ways. It basically explores how individuals use information to explain the occurrence of certain outcomes (Akpoyomare, 2012). An important aspect of this theory is the use consistency as a source of information in decision making. Mr. Higashi has dealt with many foreigners in the program and has learnt to evaluate their actions based on how he perceives them. The theory has several frameworks that help to explain why people make certain decisions that could be questionable.

The fundamental attribution error is an attribution bias that refers to people’s tendency to conclude that people are fully responsible for their behaviour and not the result of the situation they experience (Akpoyomare, 2012). For instance, Higashi misinterprets Kelly’s absence from work by assuming that she is absent because she is a foreigner and foreigners always pretend to be sick so that they can have more days for weekend. Framing effect is an approach used in attribution theory that refers to a cognitive bias in which an individual’s reaction is determined by the mode of a situation’s representation (Gurevich, Kliger, & Weiner, 2011). Risky choice framing is a tendency by individuals to make a choice based on whether the outcome will be positive or negative.

According to bounded rationality theory, the process of decision making is limited by three main factors that include information available, cognitive limitations, and time available (Grune-Yanoff, 2007). In many cases, decision makers lack sufficient resources to make effective decisions. Higashi denied Kelly and the other ALTs sick leave due to lack of enough information and cognitive limitations during the decision making process. Higashi ignored useful information that could have helped him to make a good decision. He ignored the doctor’s note that could have provided proof that Kelly was actually sick. His limited capacity to evaluate and process information compelled him to apply stereotyping and framing as alternatives to the tedious act of finding and evaluating information. Higashi did not examine all the possible alternatives to the problem. For instance, the contents of the work contracts could have been useful in helping Higashi realize that denying Kelly and the other ALTs sick leave was a bad decision. Limited information affects the quality of decisions (Grune-Yanoff, 2007)

Critical discussion

Stereotyping refers to the act of judging an individual based one’s perception of the group to which they belong (Bodenhausen, 2005). Mr. Higashi uses stereotyping to make the decision of denying Kelly sick leave and instead replacing it with paid leave. His experience of working with foreigners in the JET program has led him to conclude that foreigners always feign sickness in order to extend their weekends. This is a destructive stereotype that affects the supervisor’s decision making. Such stereotyping is detrimental to effective decision making because it ignores or overlooks the positive attributes of employees and instead focuses on biased generalizations (Bodenhausen, 2005). This stereotyping overshadowed Higashi’s rationality and led to a hasty decision that had severe implications. It contravened the terms of the work contract and affected the trust the ALTs had on their supervisor.

The halo effect refers to the tendency to use a single characteristic to create an impression of someone (Fitzgerald, 2013). The prevailing characteristic used by Higashi to understand Kelly and the other ALTs is the tendency by foreigners to feign sickness. He concludes that since Kelly is a foreigner, he pretended to be sick in order to get extend her weekend. This is the reason why he does not bother to look at the note that Kelly brought from the doctor. On the other hand, he pushes Kelly to take part in activities considered feminine in Japan. He assumes that since Kelly is female, then she should enjoy the activities. Higashi uses a single characteristic to evaluate Kelly and her interests. The supervisor’s behaviour is evidence of the negative effect of contrast effect on decision making. Contrast effect refers to the tendency to judge a person’s character by comparing them to other people one has interacted with (Fitzgerald, 2013). Higashi has worked with several foreigners on the JET program and has developed a stereotype that obscures his judgement when making decisions.

Machiavellianism is a personality trait that is characterised by manipulation and exploitation of other people as well as severe disregard for ethics (Fitzgerald, 2013). Higashi shows signs of Machiavellianism in two main ways. First, he tries to manipulate Kelly and his colleagues by pushing them to attend and participate in activities that immerse them into the Japanese culture. He takes advantage of his position as the supervisor in charge of the program to get them to do what he wants. Second, he replaces their sick leave with pad leave, which is exploitative. The decisions affect team harmony because the ALTs feel violated and disrespected by their supervisor. In addition, it creates tension and makes them lose the respect they had for Higashi because he is an unethical supervisor who contravenes the teams of their contracts in order to have things go his way. Kelly’s contract offers sick leave and exempts her from work on weekends. The ALTs are allowed to adopt their American way of working. However, the supervisor is not okay with that because he thinks they are lazy and not fully committed to their jobs.

Recommendations

Higashi denies Kelly sick leave because according to him, replacing sick leave with paid leave is standard procedure in Japan and a sign of loyalty. However, he fails to consider the fact that the ALTs are working under special contracts that incorporate their American way of working. As a good manager, Higashi needs to avoid letting biases and personality weaknesses influence his decisions. In periods of uncertainty, it is important to take into consideration one’s personality in order to ensure that a rational decision is made. It is important for Higashi to understand that people possess different values and personalities that determine how they act and behave. The behaviours of the ALTs are not determined by the fact that they are foreigners. Their individual personalities and value systems are responsible for their actions.

Higashi needs to understand people so that he can determine the motives of their actions based on their values and personalities. Stereotyping is one of the factors that highly influenced the decision to deny Kelly and the other ALTs sick leave. Stereotypes are generally erroneous generalizations that lead to irrational and unfair decisions (Bodenhausen, 2005). Higashi should have refrained from generalizing the behaviours and actions of the ALTs based on his past experiences with foreigners in the program. He should have treated each case of absence individually and collected enough information to determine whether they were legitimate. For instance, Kelly brought a doctor’s note as proof that she was sick hence her absence. However, Higashi did not bother to look at the note after receiving it from Kelly because he had already made a decision that was based on stereotyping.

An important factor that affects the quality of decisions is an individual’s personality. Mr. Higashi should have done some research into his personality in order to understand how it affects his decision making. There are 3 main personality frameworks namely Myers-Briggs Type Indicator, the Big Five model, and other personality traits framework (Fitzgerald, 2013). Higashi should use one of the above frameworks to learn about his personality in order to be able to make more effective decisions. For instance, his tendency to exploit and manipulate people comes from his personality trait of Machiavellianism. On the other hand he is unreliable because he gives incorrect information that the ALTs later find out to be incorrect. A deep understanding of his personality is important for Higashi in order to avoid allowing his weaknesses to interfere in his decision making.

Finally, Higashi needs to understand how to effectively use information to make rational and ethical decisions. One of the sources of weaknesses in his decision making was ineffective framing. He considered the situation and made a decision based on whether the outcome would be a gain or a loss for the program. Many biases that originate from framing and attribution affect the quality of decisions. It is necessary for Higashi to consider situations objectively through thorough evaluation of facts and available information (Grune-Yanoff, 2007). This could involve avoiding incorporating stereotypes, biases, and personality weaknesses into the decision-making process.

References

Akpoyomare, B. E. (2012). Attribution Theory and Strategic Decisions on Organizational Success Factors. Journal of Management and Strategy 3(1), 32-39.

Bodenhausen, G. V. (2005). The Role of Stereotypes in Decision-Making Processes. Medical Decision Making 25(1), 112-118.

Fitzgerald, M. (2013). Managing Under Uncertainty: A Qualitative Approach to Decision Making (2nd Ed.). New York: Pearson.

Gurevich, G., Kliger, D., & Weiner, B. (2011). The Role of Attribution in Economic Decision Making. The Journal of Socio-Economics 41(4), 439-444.

Ipurie, T. D. (2004). The Cumulative Prospect Theory and Managerial Decision Making. Lagreb International Review of Economics and Business7 (1), 61-80.

Grune-Yanoff, T. (2007). Bounded Rationality. Philosophy Compass 2(3), 534-563.

Tom, S. M., Fox, C. R., Trepel, C., & Poldrack, R. A. (2005). The Neural Basis of Loss Aversion in Decision-Making under Risk. Science 315(5811), 515-518.

Vis, B. (2011). Prospect Theory and Political decision Making. Political Studies Review 9(3), 334-343.

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