The Role of Past Experiences in Decision Making
Each and every day, individuals are faced with situations in which they are required to make very informed choices and decisions. The final position arrived at by an individual or a group of individuals is usually a function of various factors which may both be intrinsic or environmental. Kleiman (2010) defines decision making as the processes in which an individual or a group deliberate on a number of concrete elements and options before using a careful procedure in coming with the most appropriate choice. Simon(1957) notes that the size of problems presented by the real world which require rational behavior and appropriate decision skills is quite large as compared to the capacity of the human mind to come up with concrete solutions to these problems. This therefore implies that the process of decision making may never be perfect irrespective of the fact that a choice has to be made at the end of the day. One choice may be agreeable in one situation yet in a different scenario, it gets perceived in a totally different manner. Different outcomes in relation to decision making processes can be attributed to a number of factors which include; differences in personality, cognitive biases, escalation of commitment, age and past experiences just to mention but few. The discussion in this paper highlights some of the concrete concepts which affect the process of decision making. In addition, the paper shall involve the use of real scenarios to demonstrate how each of the mentioned factors affected decision making in the given situations.
Past Experiences
One of the factors which tend to limit the human capacity to make precise choices is through the use of past experiences to make a decision on a current issue. It is a fact worth noting that the dynamic nature of the corporate world especially in the fraternity of business management involves aspects which keep changing as days go by. For instance, the emergence of technology has seen the incorporation of various technology aided processes within business organization which in turn has replaced the manual operations (Adam, 2013). The outcomes in these cases have changed significantly which therefore implies that the same parameters used to make decisions on the human resources fraternity in such an organization in the past, may not be applicable in the current operations. Individuals tend to use the outcomes of the past experiences especially in cases where they are faced with similar situations. If a given decision was given in the past and it led to positive outcomes, the process of decision making may end up settling on the same procedure used in the past with the main consideration that the same decision is likely to produce similar results (Andrews, 2009). On the other hand when a past decision for example, on a given organizational aspect backfired and brought about bad results, this channel is likely to be ignored however much it poses as the only appropriate option. This is because individuals tend to fear making similar mistakes. This perception in the process of decision making goes a long way in hindering the individuals from exploring g several options which could have been effective due to their preformed attitudes based on past results (Anita, 2010). Sensitive decisions for instance those involving financial investments ought not to be based on past outcomes but should be made based on a careful consideration of the present and fresh factors which are in tandem with the current flow of affairs both within the organization and its business environment.
The Impact of Cognitive Biases on Decision Making
Cognitive Biases
Cognitive biases can be described as the thinking patterns exhibited by individuals based on generalizations and observations (Bruce, 2008). One detrimental aspect about these sets of biases is the fact that they may lead to inaccurate judgments as a result of wrong memory of facts. There various types of cognitive biases which impact decision making in one way or the other. To begin with, there is belief bias in which individuals tend to over depend on the prior knowledge when it comes to making a decision. Having a prior knowledge about a situation may be a crucial consideration in itself; however, it shouldn’t be treated as the main point of focus when settling down on a choice (Bernhard, 2008). This is because there are various elements about a situation which change with time hence having a prior knowledge may only be a minute determinant when it comes to making sober decision. Secondly, there is the aspect of hindsight bias in which individuals treat an occurrence as inevitable especially if it has happened in the past. This conclusive perspective locks out the possibility of exploring other options which may improve the quality of the decision finally made. The third type of bias is omission bias in which people ignore or do away with facts which are considered risky in the process of decision making. The process of management may at times involve making considerably risky steps especially when the projected return on investment is huge. Most prosperous investors took risks and failed repeatedly but never gave up on trying again (Carliss, 2007). A decision made solely on the basis of safety for the business may not wholesomely cover some of the key organizational objectives especially in line with investment and business expansion. The last type of bias is referred to as confirmation bias. In this case, individual observe, in a situation, only what they expect. This is a rigid approach to viewing the various options that may be available in the process of decision making. In this case, individuals may approach a scenario with preformed opinions and hence make decisions that are largely tied on these preformed images and not necessarily out of the consideration of the worthy facts (Chalofsky, 2007). In a nut shell, the process of decision making may end up being flawed as a result of cognitive biases since they largely hinder flexibility which is a crucial attribute in efficient decision making. It is therefore recommended that makings choices on a particular situation should be approached with an open mind and a careful consideration of various factors without the interference of preformed thinking patterns and prior knowledge.
The Influence of Escalation of Commitment on Decision Making
Escalation of Commitment
Individuals also tend to make decisions basing their choices in various escalations of commitment. Some of these approaches result in wrong decisions as the process of decision making is always over flawed by personal stands on commitments and interests. In line with this concept, most individuals tend to make decisions that are largely inclined towards the aspects in life to which they are more committed (Christian and Slaughter, 2011). For instance, if the decision involves a project in which the individual or group has committed more of their time, effort as well as finances, the choices made are likely to be in support of the project or the main idea. On the other hand, an individual is less likely to show much effort in enhancing the actualization of the right choices especially in cases to which they are lowly committed. The interesting aspect with regard to this concept is the fact that an individual may choose to stick to a single line of thought irrespective of the risks involved with the hope of reversing the outcomes in the past cases (William, 2009). As mentioned by Simon in his quote, the human capacity to bring rational solutions to their problems is way smaller than the capacity of the problems themselves. It is however a fact worth noting that he magnitude of these problems are quite manageable depending on the approach given to situations in the process of decision making (Clemons, 2009). Aspects such as escalation of commitment affect the quality of judgments made by individuals on issues. As a result, individual behaviors which are likely to hinder the free flow of the process ought to be eliminated as much as possible and replaced by more rational approaches.
Personal Differences
In any organizational set up, one is likely to interact with individuals who are unique to each other on a number of aspects. For instance, there might arise individual differences based on age, socio economic class in addition to skills and experience just to mention but few. In line with the aspect of age, as one grows old, they tend to grow overconfident about certain decision. Such approaches may result in wrong judgments which in turn lead to poor quality decisions (Craig, 2009). At the same time, an individual’s cognitive abilities may diminish as they grow older, as a result, the decline in cognitive abilities may in turn hinder their capabilities to make rational choices and appropriate strategies when it comes to making decisions. Individual differences also occur in groups where individuals are different from one another as a result of socio economic status. Those in the lower scale socio economic levels have access to less education and hence the necessary exposure in terms of skills development and acquisition of cognitive abilities. Such people, due to their lack of experience and past decisions tend to make poor decisions. On the hand, there are the individuals who are higher up in terms of socio economic levels. These people have access to adequate education and exposure (Dey, 2001). Consequently, their development of skills and cognitive abilities is quite steady which enhances their effectiveness in the process of decision making. Additionally, personal relevance is another aspect of personal differences in which individuals make decisions on what they believe in as individuals and not necessary as a result of a collective group affair. In such cases, the smooth flow of the decision making process may be greatly hampered by such individualized perspectives.
Personal Differences and Decision Making
In a bid to globalize its operations, the Coca Cola Company established various campaigns and strategies each of which was aimed at exploring the foreign markets (Eric, 2005). The strategies involved carrying out feasibility visits to different parts of the world including countries in West, East and Southern Africa. Most of these strategies were effective since the company was able to gain as much information as possible about the foreign policies, customer preferences and the changing nature of the international markets (Gavett, 2014). In order to achieve the globalization objectives, the same committee which had been used in the prior projects was set to oversee the new idea. As deduced from the company’s annual report in 2000, the development committee had been successful in overseeing various projects including market entry into global areas such as Asia and parts of Europe. The good outcome from the prior tasks was the board’s main reason for picking the same team to oversee the feasibility study of Africa before launching into this market. The committee took up this task diligently and explored the international market and gave the reports to the company (Winterfield, 2006). With the prior belief in the team’s capabilities, the organization took up this report and immediately started working on ways of expanding its subsidiaries to most parts of Africa. Despite the fact that the projects worked in most parts of Africa, the multinational company has never been able to adequately venture into most parts of the global market. This could be attributed to lack of prior knowledge about the changing elements and aspects which could be associated within an international market. For instance, the report comprised the situations in the studied countries as at the given time, this has however changed with time hence the same strategies used in the past might not be applicable in the current world (Howard, 2007).. The company is however working on ways of recapturing the markets through more efficient strategies and a careful consideration of myriad factors without overdependence on one school of thought. Coca Cola however remains one of the most successful MNCs with a global turnover of about 20% recorded for the past 5 years (Johansson and Winograd, 2001).
Past Experience
From the above scenario, it is possible to deduce a number of areas in which the company’s management was required to make an informed choice. It is also clear that most of the choices made by individuals in the case study above were influenced by a number of factors which were both personal and corporate. To begin with, the criteria used by the company’s board to pick the committee which was meant to spearhead the feasibility study of Africa largely depended on the outcomes of the committee’s past assignments. Due to the fact that the team had successfully conducted a feasibility study of Asia and Europe, the management felt they would replicate the same results in the current task as well. In this case one can deduce the influence of past experiences on decision making (Jones and Tadajewski, 2016). The management’s past experience with the committee acted as the sole reason why they were assigned the same task. Past experiences affect the quality of decision making since it hinders the individual or the team from exploring other options which could be more effective. At the same time, the elements which surround a situation keep changing from time to time (Jones, 2010). For instance, the nature of policies, cultures and customer preferences in Asia and Europe may not be the same case in Africa. As such, the decision ought to have involved a careful consideration of various other factors in addition to the management’s concentration on the team’s past success. The effect of this concept can be derived from the outcome of the study since the global strategies backfired in some of the countries in which Coca Cola tried to venture.
Real-World Examples of Decision Making
Cognitive Biases
From the same scenario, it is possible to deduce the role that certain cognitive biases played in influencing the management’s final decision both on picking the team and implementing the feasibility strategy. One common type of cognitive bias is the belief bias in which individuals tend to over depend on prior knowledge about a situation when making decisions influencing similar cases (King, 2007). The decision made by the company’s management in this case could be attributed to the impact of belief bias. In the case study, it is evident that the management’s decision to remain with the same committee was entirely pegged on their prior knowledge of the team’s exploits. With such a rigid approach, it was not possible to explore other options for instance bringing in new members with fresh ideas into the committee. The result of the feasibility study weren’t satisfactory since without the right information about the foreign market, the company ended up facing a number of challenges in their bid to venture into the market (Kleiman, 2010). There is also the aspect of confirmation bias where preformed opinions affect an individual’s projection of a possible outcome. With their personal belief in the committee, the management rigidly clung on this strategy without exploiting other avenues due to the fact that their projection of the possible outcome of the team’s procedures was based on their prior assignments. This however did not work in the company’s favor since the report given was not as accurate as required leading to wrong conclusions about the foreign market.
Singapore Airlines being one of the leading companies in Singapore embraces high level procedures especially when it comes to marketing its brand. The company’s leading brand promoter is the Singapore Girl, who apart from working in the cabin crew also plays a crucial role in marketing the airline’s products and services (Legge, 2009). Due to the crucial place of marketing, the company’s marketing manager presents to the board new guidelines and policies every year. These policies include recruitment and training of the employees in order to revamp their skills. The marketing manager also provides more emphasis on the need to develop and promote the company’s image through the Singapore Girl through more recruitment and high class training. This idea was however met with a lot of resistance in 2010 being a time when the company was experiencing a slight drop in performance hence low financial levels. The other board members especially the accounting manager saw the objectives as expensive given the financial state of the company at that time. The marketing manager however insisted on the implementation of the policies which he considered would be of a greater good to the company in the long run. The board took a lot of time agreeing and disagreeing on a number of aspects before finally settling on a choice that would be comfortable both for the marketing and financial departments within the company
From the scenario above, there are two eminent factors which affect decision making which can be deduced from the case study. To begin with, there is the concept of escalation of commitment in which case individuals make decisions which tend to support ideas or situations to which they have invested more effort, finances or time. The marketing manager’s decision was majorly inclined towards developing the marketing department to which he probably has committed most of his time and efforts (Pankaj, 2011). His choices on the next cause of action to be taken by the organization, therefore, were fueled by his desire to the department grow irrespective of the impacts this may have on the organization as a whole. The same case is evident with the accounting manager whose decision especially with regard to the marketing manager’s proposal was largely influenced by his desire to ensure that the financial department of the organization remains in the right order.
Personal Differences
Secondly, the case above presents a situation in which individuals failed to reach a compromise as a result of personal differences. Personal differences may be in the form of age, class or the general manner in which individuals perceive problems (Schoenberg, 2008). The perception of the two managers was the highlight of personal differences which in one way or the other impacted the final decision made by the board. In addition, the meetings and discussions on the manager’s proposals would take longer than expected due to the fact that the members had varied opinions with regard to the matter under discussion. This therefore indicates that personal differences due to variations in cognitive abilities, individual preferences and forms of perception have a special way of influencing the process of decision making.
Conclusion
It is indeed true that the problems that people face on their day to day endeavors are relatively larger than the capacity of the human mind to obtain tacit solutions. The discussion revealed various factors which equally lower the human ability to make informed choices. These factors include; personal differences, cognitive biases, escalation of commitment and past experiences. However, it is possible to make the right decisions when the process involves a careful consideration of various factors without over dependence on one point of view.
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