The document discusses the phenomenon of "risky shift", where groups tend to make riskier decisions than individuals. It explains that risky shift occurs because influential group members can persuade others and individuals feel their personal risk is reduced by sharing it with the group. The document also discusses how risky shift relates to management, with managers sometimes distancing themselves from subordinates or micromanaging to reduce perceived personal risk. It concludes by noting risky shift can lead groups like juries to make riskier decisions than individuals, with potentially disastrous outcomes.

1. Directions for Chapter 10: Lesson 1 Project
Researching the Effect of Eyjafjallajökull
Volcano Eruption (Project Grade)
Conduct research on the Internet then create a visual timeline
(google slide or multimedia presentation) with visual
displays explaining the sequence of events that happened in
2010, use sequence signal words such as first, next,
last, and finally. Sequence the information visually. Identify
each step of the process, creating a slide show with captions and
labeling as needed. Also identify the economic status of the
airlines that were affected by the volcanic eruption and
subsequent ash cloud. Investigate how the airlines handled the
event from a public relations perspective as well as a logistical
one. You will present your findings to the class.
Risky shift, management and outsourcing
There is an interesting phenomenon that occurs in groups and
teams called 'risky shift'. What this means is that the group
collectively takes either higher- or lower-risk decisions than its
members would individually take. This is surprising as one
might reasonably expect some kind of average collective risk
being taken.
What appears to be happening here is that critical change is

2. occurring in the personal perception of the transfer of risk,
based on beliefs and concern for the group. Risk homeostasis
says that we each have a preferred level of risk and will hence
be relatively consistent in our risk-taking, yet what actually
happens is that we assess risk based on perception more than
reality, which means that the actual risk we may take on might
vary significantly.
If I care about others in the group and seek to sustain group
cohesion then I may feel responsible for the risk taken by other
group members. I thus might personally take on the risk of
others, increasingmy felt risk and leading me to seek lower-risk
decisions. If influential people or the majority of group
members feel this way then group decisions will be less risky.
On the other hand, if I feel that I am are sharing my personal
risk with others (and hence lessening my personal risk-taking)
then I will be more inclined to take gung-ho high-risk decisions.
Again, the extent to which this happens will depend on the
dynamic of influence within the group.
This principle may also explain a similar phenomenon that
occurs in hierarchical management situations. Managers are
responsible for a wider scope of activity than individuals, which
they share out with their subordinates. But what happens to the
perceived risk? For the manager to sustain their personal risk
limit they have to either let go of the perception, truly
transferring the risk to the subordinate, or otherwise act to
reduce the risk in some way. Both of these approaches can
become dysfunctional, resulting in what may be considered as
poor management.
If I 'let go', transferring risk to subordinates, I need to feel it is
their risk and not mine. To do this I must ensure I am relatively
blameless in the event of failure and so might distance myself
from them, providing them little support and preparing to

3. punish them if they fail. I might, for example, claim I am
'empowering' them or complain to my manager and others of the
incompetence of my staff. At worst I might give them work that
is doomed to failure and them sack them when the inevitable
happens.
On the other hand, managers might try to reduce risk by
managing their subordinates more closely, setting goals and
requiring regular reports. Sometimes called 'micro-
management', this also helps satisfy the need for a sense of
control.
Another, perhaps more canny method is to manage external
perceptions by projecting high levels of apparent risk upwards
and outwards whilst actually sustaining relatively lower risk
work, thus reducing personal risk of being judged as a failure
when risks do occur.
Games of shifting risk also extend to third-party arrangements,
for example in outsourcing and general use of suppliers. One of
the key reasons why companies ask others to do work is to shift
the associated risks of this activity.
Once this arrangement is made, the company, perceiving an
apparent reduction in risk, may 'up the ante', for example by
putting extra load on the supplier with demands for shorter
timescales, lower costs and changes in requirement. This may
significantly increase the risk of failure, but the company's
managers don't see it as their risk. Meanwhile, the game may
continue with the supplying company shifting the risk again,
perhaps to a sub-supplier or perhaps back up to the first
company through a pre-emptive get-out clause in the contract.
An alternative (and sometimes additional) scenario occurs when
the original company's managers realize that their customers
and senior managers will blame any failure on them. The

4. company's managers have relatively little understanding or
control over what happens at the supplier and thus perceive an
increase in risk. A typical response to this is to seek greater
control, with more reviews, meetings, metrics and general
attempts to gain more control over the supplier's operation,
much as the individual manager resorts to micro-management.
Again the supplier may well fight back against this intrusion
that might increase their costs and likelihood of failure.
So how can managers avoid these dilemmas? The first step is to
recognize when they are happening. Real and perceived risks
should be carefully differentiated. Understand also how
individuals and groups (including yourself) behave around risk,
with different responses outside preferred risk boundaries.
A critical additional activity is in developing and managing
real trust. A lot of problems arise from the dysfunction of blind
trust or paranoid distrust. Real trust comes from effective
relationships, transparent interactions and ongoing evidence of
trustworthiness. Any failure is dealt with by short-term
reparation and longer-term corrective action that prevents
recurrence.
Risky shift occurs when people change their decisions or
opinions to become more extreme and risky when acting as part
of a group, compared with acting individually; this is one form
of the phenomenon known as group polarization. The result is
that group decisions are bolder and more adventurous than those
made by individuals alone and even riskier than the average of
the individuals’ opinions and decisions before group discussion.
However, sometimes people in groups shift such that the group

5. decision is actually more conservative, which is known as
cautious (or conservative) shift. The group’s initial tendency
toward risk is important in predicting if risky shift will occur.
The direction of the shift (to be more risky or more
conservative) tends to be in line with the general direction of
group initial viewpoints.
The term risky shift was coined by James Stoner in 1961. To
examine group decision making, he asked participants to make
decisions about real-life scenarios that involved some amount of
risk. Participants first gave their own individual ratings. Then
they got together in groups and arrived at a decision together.
Following this, participants made their own individual ratings
again. Contrary to what was expected, he found that group
decisions were more risky.
In addition, the postdiscussion individual decisions also showed
a shift toward increased risk. Subsequent research has shown
that people in groups may make more risky decisions in a
variety of situations including, but not limited to, gambling and
consumer behavior, and people in groups can become more
prejudiced in their opinions of minorities or more liberal on
issues such as feminism.
This risky shift in group decision making may occur for a
variety of reasons. First, the individuals with more extreme
views may be more confident, committed, and persuasive,
compared with the more conservative members of the group. In
addition, as people present their arguments to the group
members, they may come to hold a stronger belief in their own
opinions and, in turn, be willing to make more extreme
decisions. These stronger opinions may carry more weight in
determining the final decision.
Another reason for the occurrence of risky shift is that the
group may fail to consider all available opinions and

6. possibilities. There may be biased filtering and communicating
of views, facts, and findings because of motivation by an
individual to promote his or her own opinion. This insufficient
exploration by the group of costs and benefits of each choice
may lead to assumptions in which negative outcomes are
overlooked.
Although the goal and desire of committee and group decision
making is ultimately to result in more educated, well-rounded,
and better decisions, risky shift may be a deterrent to this. In
groups such as juries or panels of judges, committees of
generals, or boards of directors, as a result of group discussion,
the group may choose a more risky option than a single juror or
judge, general, or CEO alone would. Unfortunately, in some
cases, this may result in poor, even disastrous, decisions and
outcomes.