Intuition In Organizational Decision Making


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The purpose of this slide is to share my knowledge about intuition for decision making. Intuition can make you a much more effective as decision maker. Especially when you deal with non-standard situations or in expedient decision making. Yet, before you put more weight on intuitive choices, there are a few important points you need to keep in mind. Your experience, strategy and feelings.

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Intuition In Organizational Decision Making

  1. 1. Intuition in Organisational Decision Making Presented By : Eka Yuliana :: Magister Science Management :: School of Businesss Management :: Bandung Institute of Technology 2008 Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology 3/28/2009
  2. 2. What is Intuition? Sixth Sense ? Instinct and Insight ? It is not a conscious process. Nor is it a step- by-step procedure that can be justified Strategy using logic. Or it is said to be the opposite of Experience analytical and rational thought. Feelings It's a process of being open to information, or a way to process lot of information very quickly. Or it's a feeling that things are right, or a finely tuned psychic ability. Or it's Decision Making the ability to make decisions so that your life works out well. Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  3. 3. intuition represents a particular ‘way of knowing’ which is reflective of a particular epistemological stance (for example, intuition as „authoritative knowledge‟) DESCRIPTION PERSPECTIVE Intuition-as-ability Willingness to make decisions when all the facts were not currently Perspective available, and the ability to have such decisions validated with probability higher than chance (Simon, 1947) Ability to appraise a situation holistically and pull patterns together (Showers and Charkin, 1981) A questioning outlook on certain types of data and situation; the ability to judge when normative analyses break down (Blattberg and Hoch, 1990) Innate problem solving ability; visualizing the causes of a situation (Swink, 1995) Ability to recognize pattern and interpret cues (Klein, 2003) Ability to judge stimulus properties on the basis of information that is activated in memory but not consciously retrieved (Bolte and Goschke, 2005) Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  4. 4. Unconscious process. Preliminary perception of coherence (pattern, meaning, structure) guiding thought and inquiry toward a hunch of hypothesis ( a novel recombination of knowledge and information precipitated out of memory) about the nature of that coherence (Bowers Information 1990) Processing Synthesizing unconnected memory fragments into a new information Perspective structure (Mintzberg 1998) A means of complex data processing (Payne 1993) Immediate judgement based on feeling and the adoption of a global perspective ( Allinson and Hayes, 1996) Using quot;softquot;, personal information and quot;gut-feelquot; (Molloy and Schwenk, 1995) Awarness of thoughts, feelings, or bodily sense connected to a deeper perception, understanding, and way of making sense of the worl (i.e a system Cognitive-affective of processing that is synthetic and integrative). (Sadler-Smith and Shefy, 2004) Perspective Non sequential, holistic and comprises both cognitive and affective elements, and results in direct knowing without any use of formal reasoning (Sinclair and Ashkanasy, 2005) Affectively-charged judgments that arise through rapid, non-conscious, and holistic associations (Dane and Pratt, Forthcoming) Knowledge derived from inward illumination-a beam of light cast upon a chaotic confusion (Amabile, 1983) Alternative Epistemology Perspective An alternative, competing, and inductive way of knowing (Davis-Floyd and Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology Arvidson, 1997)
  5. 5. Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  6. 6. Disentangling Rationality and Intuition Barnard argued in the Appendix to The functions of the executive : 1. logical processes (conscious and expressible in words), 2. non-logical processes (known through judgment, decision and action) and consisting of „good sense‟ intuition, inspiration or even „genius‟. Conversely, if decision makers cannot agree on goals, cause- and-effect, or are not fully cognizant of constraints, they may not be able to rely exclusively upon rational methods because consensus is lacking and the environment is uncertain (Dean and Sharfman, 1993: p.592). Hence, the limits of rationality may be apparent in uncertain environments where it is difficult to identify, measure and predict key variables and their inter-relationships (Priem, Rasheed and Kotulic, 1995). Both analysis and intuition are considered to involve search processes and lead to the recognition of underlying patterns. In this model intuition simply describes a more sophisticated way of reasoning and making decisions which becomes possible where, after years of experience and mastery of a task, managers can chunk together information, thereby honing in of Technology Eka Yuliana :: Magister Science Management :: Bandung Institute their
  7. 7. Adaptive Decision Making Informal data sources (opinion, stories, illustrations, analogies and metaphors) than on facts and formal data, and on tacit, experience-based information over formal data sources at a ratio can involved the decision making. Intuition and analysis are not opposites in that most decisions have elements that require both types of thinking, but each operates with different levels of cognitive and conscious control and speed of information processing. Judgment is also associated with motivation behavior. Millar and Tesser (1992) differentiate between cognitive and affective decision making motivations, arguing that affect drives decision making where the motivation is consummators (done for the decision makers‟ own purpose) and cognition drives decision making done for instrumental motivations (to aid goal attainment). Intuition was found to be adaptive (i.e., how individuals decide how to decide is reflects considerations of cognitive effort as well as the accuracy of different information processing strategies) when: 1. information presented to the manager required a reliance on perceptual processes to interpret it (i.e. the information was carried in media that require the manager to sense it by relying unduly on vision, hearing etc) 2. when cues were multiple and appeared in parallel rather than a simple, linear sequence 3. when Yuliana ::of the cues were redundant orInstitute of Technology Eka many Magister Science Management :: Bandung irrelevant.
  8. 8. Fast and Frugal Heuristics Fast and frugal heuristics are designed to solve certain classes of problems; they are not therefore generically effective or ineffective but rather they are ecologically rational contingent upon their match with the demands of the task and environment. Given that fast and frugal heuristics are developed on an experiential basis, the initial understanding of which information to generalize (and therefore enable a robust heuristic to be devised) and the conscious choice of knowing which heuristic to use is likely to be guided by unconscious, experience-based intuition. Dual Processing Perspectives Dual processing theories in cognition stem from two sources: 1. Dual processing theory emergent from literature on sense making and „practical intelligence‟, and models of parallel systems of perception and 2. Information processing in personality and individual difference psychology. The senses and acts as a gateway to both the decision-making environment and the rest of the mind and a preconscious which stores knowledge that is accessible through processes such as intuition, incubation, and introspection, use of metaphor or mental imagery. After initial capture, data is stored either as tacit knowledge (which can be back-translated into the consciousness) or in the subconscious (stores of knowledge of which we are not aware). Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  9. 9. System 1 System 2 • The properties of • Thinking has the automaticity and properties of anlytic heuristic processing intelligence. and is associated with • Controllable, interactional conscious, intelligence constrained by working memory, rule based, serial. Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  10. 10. Cognition and Affect Intuitions may be seen as automatic, involuntary responses to particular configurations of environmental cues. Considerable efforts have been exerted in trying to understand the subtle ways in which cognitions and emotions interact, and how this relates to intuition. There is a divergence in view between those who see intuition as primarily experience-based, where emotions are detrimental to the process and intuition is based on „frozen‟ expertise and habit, and those who see intuition as being linked to emotions and capable of going beyond existing tacit knowledge. 1. attentional resources: emotions divert scarce attentional mechanisms to important pieces of information in an environment, thereby enabling the deployment of resources for learning. 2. memory processes: emotions activate and regulate many of the activities involved in the encoding, storing and retrieval of information about important events and so have an effect upon the way that people reconstruct previously experienced situations. The cognitive and neural mechanisms underpinning intuition and the related process of insight have been explored by researchers examining the non-conscious nature of problem solving. to achieving insightful solutions. The mode of representation and encoding of information (for example as images) may also be an important contributory factor to these mechanisms. The positive and negative feelings associated with images are retrievable more quickly, they require less effortful processing and may serve to over-ride or guide rational decision processes. The anticipatory emotions generated by the intuitive system may influence and compete with cognitive appraisals from the rational system in uncertain situations (Loewenstein, Weber, Hsee and Welch (2001). Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  11. 11. Contingent Factors in Intuitive Decision Making Whether a manager will use rationality or intuition is likely to depend on a number of individual and organizational variables including thinking styles, mood states and organizational culture and norms, domain specificity and problem structure (Dane and Pratt, forthcoming; Sinclair and Ashkanasy, 2005). Thinking styles The complexity of mental representations of strategic issues and the way that individuals use such cognitive structures has a bearing on the role of intuition in decision making, as does the manner in which information is gathered and assimilated (Hodgkinson and Sparrow, 2002). Whilst managers might well have dominant or preferred cognitive styles, their actual decision-making style may be influenced also by the demands of the situation and/or the task at hand. Louis and Sutton (1991) argued that a key capability for managers is to be able to ‘switch cognitive gears’ between analytic and intuitive processing, with managerial effectiveness being a function of an individual’s capacity to sense when such a switch is required, knowing when to process information in one mode or another, iterate back and forth from ‘habits of mind to active thinking, as appropriate to each particular situation (see: Hodgkinson and Sadler-Smith, 2003). Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  12. 12. Mood States Positive mood may influence the use of intuitive judgments by increasing an individual‟s openness to information and their propensity to integrate cognitive material (Isen, 2000). Negative mood may predispose individuals to rely upon more structured decision protocols (Elsbach and Barr, 1999). Decision makers use heuristic processing when in positive mood whilst negative mood initiates more careful analysis. The effect of emotions is related to motivational strategy. Strong desires to find a solution may be triggered by high- intensity emotions, with emotion used as a conduit to reach the desired outcome. During an actual intuitive process some people use emotions as their preferred mode of reception, and for these people emotions become a component of the intuitive construct itself. In the final evaluation the genuine (or otherwise) nature of an intuition may be affirmed through feelings of certitude i.e. emotions become a symptom of the intuitive process. Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  13. 13. Domain Specificity and Problem Conceptual Structure Rules Problem system There is an assumption that there is “good” intuitive decision making (portrayed as intelligent processing of complex data) and “bad” intuitive decision making (portrayed as unvigilant, biased or lazy processing Intelective Operation Judgmental of information). Task „intellective‟ tasks (characterized by objective criteria for success within the definitions, rules, operations, and relationships of a particular conceptual system) and the latter to Laughlin‟s „judgmental‟ tasks Decisio (political, ethical, Definition Relationship of Probelm n aesthetic, or behavioral judgments for which there is no objective criterion or demonstrable solution – and to which we might add moral judgments). Intuition may be neither necessary nor effective in tightly Eka Yuliana :: Magister Science Management :: Bandung Institute ofstructured situations (such as those Technology
  14. 14. Conclusions and Future Research In reviewing work that has analyzed the mechanisms by which intuitive judgments are arrived at it is clear that there have been at least four competing perspectives taken by researchers which we have : 1. intuition-as-ability; 2. Information processing perspective; 3. cognitive-affective perspective; 4. alternative epistemology perspective. Each perspective has tended to reveal important mechanisms related to intuition – if not also serving to produce competing conceptualizations of the phenomenon. Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  15. 15. Across these conceptualizations it should be concluded that: intuition should not be seen as a substitute for rational analysis and that intuition and rationality should not be treated as mutually exclusive opposites. Rather, intuition and analysis should be understood as separate facets of human information processing that may operate in parallel and interact contingent upon the demands of the task and its environment. The relationship between the domain within which decision are made and the decision maker’s expertise is critical. Domain has been seen as an important factor in relation to research on creativity and decision. However, this form of knowing can be based on a number of mechanisms, each of which now needs to be better incorporated into our theories of intuition, including we believe: the access mechanisms associated with the separate processes of incubation, insight and intuition; the representation of intuitive and pre-inventive expertise in schemata; attentional mechanisms; meta-cognitive monitoring techniques that enable rapid perceptual framing; and responses to emotional memory. Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  16. 16. Future development of the field requires a synthesis of work on such creative perceptual processes and the link between these and cognitive structures. We need now to synthesize work on rapid perceptual framing, implicit learning, and mastery of complex performance tasks into our models of intuition. There also needs to be a clear understanding of the link between cognitions and emotions and feelings. As we have seen, such understandings are beginning to be developed. Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  17. 17. Intuition in Organisation Decision Making : The Intuiotion is the strategic of management process can be described as an objective and also subjective, logical, systematic approach for making major decisions in an organization. Intuition is essential to making good strategic decisions. Intuition is particularly useful in making decision in situations of great uncertainty or little precedent. Some managers and owner of business profess to have extraordinary abilities for using intuition alone in devising brilliant strategies. Although some organization may survive and prosper because they have intuitive geniuses managing them, most are not so fortunate. Most organization can benefit from strategic management, which is based upon integrating intuition and analysis in decision making. Analytical thinking and intuitive thinking complement each other. Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology
  18. 18. Thank You Eka Yuliana :: Magister Science Management :: Bandung Institute of Technology