Category Archives: Knowlege

Cultural Literacy: Things you should know when working with Vietnamese

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This blog post is inspired from the book “Kiss, Bow, or Shake Hands”, one of the bestselling guides to do business in different countries. It is used as the textbook in the “Negotiation” course of my MBA program. However, I realize that the book has focused mainly on doing business and failed to give enough accurate, useful and updated information for foreigners in order to work effectively with Vietnamese. As a result, the purpose of this post is to help people from other cultures to:

  • Know how Vietnamese employees think, work and behave.
  • Know how to communicate effectively with Vietnamese employees.
  • Know how to establish a good relationship with Vietnamese employees.
  • Avoid potential misunderstandings and inappropriate behaviors.

Originally, this is written to give my co-workers in Australia and Philippine with basic cultural literacy about Vietnam in a working environment. And since we are working in the software industry, the cultural literacy also focuses a little bit on that industry. This will be useful for those who will work as expats in Vietnam or for foreign companies that are going to open their business in Vietnam, especially in the IT industry.

So here are the things you should know when working with Vietnamese:

Religion
Confucianism (which is a philosophy more than a religion) has had a great effect on Vietnamese thought and tradition. Buddhism and Christianity are the two most popular religions in Vietnam. However, the majority of the population do not follow any religion, they just worship their ancestors.

Workship ancestors

Worship ancestors

Working
  • Vietnamese employees are quite punctual, especially in business meetings. However, a tolerance of about 5 minutes late is also normally acceptable in Vietnamese working culture.
  • Vietnamese employees usually take meetings at work seriously and look very tense (not relaxed) in the meetings.
  • Gender discrimination is usually not popular in the workplace. However, it is a fact that there are far fewer female workers than male workers in the software industry and this has nothing to do with gender discrimination.
  • Compared to Western culture, Vietnamese have a much higher level of tolerance of sexual harassment. This means a lot of behaviors that are considered as sexual harassment in Western cultures may not be seen as such in Vietnam. Generally speaking, it is quite common for Vietnamese to think that sexual harassment needs to involve physical contact. An induction or orientation may need to be conducted to align the understanding of Vietnamese employees in this topic.
  • Vietnamese employees usually need to build personal trust with others outside of the office in order to increase their teamwork and collaboration. This is the reason why companies in Vietnam usually have a budget for team members having dinner or drinking every few months or sponsor some sport activities for team members to play together. In business, a contract is more likely to be signed by inviting the business partner to dinner, drinking and other entertainment activities.
Drinking after working hours

Drinking after working hours

  • Influenced by the hierarchical structure in Confucianism, it is quite common that most Vietnamese employees think that they have the obligation to respect people who have a higher position or are older than them.
  • Vietnamese people are usually hospitable. It is quite common that as a guest, you will be treated to lunch or dinner by a Vietnamese host. However, Vietnamese people also expect the same in return when they are the guests.
Communication
  • Good topics for conversation are sports, travel, food, music, movies and weather. Soccer is the most popular sport in Vietnam and Vietnamese people call it “football”. Avoid political topics, especially Vietnamese politics.
  • A smile does not always mean “happy”. A smile can also mean:
    • “Hi”
    • I’m trying to look friendly
    • I’m feeling embarrassed
    • I’m sorry that I did something wrong
  • Handshake: Not all Vietnamese employees know how to shake hands properly because they may not have been taught that. Therefore, a loose handshake doesn’t mean that the person is  not confident or impolite, it may simply mean that he/she does not know how to shake hands properly. Females (especially foreigners) usually need to initialize a handshake with Vietnamese males. Males usually have a looser and quicker handshake with females than with other males.
  • Vietnamese developers usually don’t have good socializing skills.
  • Vietnamese names are written in this order: surname followed by middle name and then given name. People are called by their given name, even with the prefix Mr. or Ms. Common surnames in Vietnam are:
    • Nguyen: 40% of the Vietnamese population (FYI, Nguyen is also the 13th most popular surname in Australia and growing fast, especially in Sydney and Melbourne)
    • Tran: 10% of the Vietnamese population
    • Le: 10% of the Vietnamese population
  • Sometimes, Vietnamese can start their answer with “Yes” or “OK” but they may not actually mean yes or ok. It just means that they understand what you say or what you ask. The actual answer is after the “Yes” or “OK”. For example: – “What do you think about solution A?” – “Yes. I think that solution A is good but solution B is actually better.”
  • English speakers should avoid tag question because the answer from a Vietnamese can be confusing due to the different language structure. For example: – “Solution A isn’t good enough, is it?” – “Yes”. The answer “Yes” here means “I agree with you that solution A isn’t good enough”.
    We should ask this question instead: “Do you agree that solution A isn’t good enough?”
  • If a group of Vietnamese is silent after being asked for their opinion about something, it can be interpreted in two ways:
    • The group agrees (or at least has no objection) to what is proposed. This is the more likely case.
    • The group is surprised or shocked by what is proposed. This is a less likely case.
Entertainment
The following entertainment activities are quite common in Vietnam and as a guest, you can be invited to them:
  • Eating out and drinking
  • Karaoke
  • Bowling
  • Hanging out at a coffee shop
  • Hanging out at bar and pub
  • Massage (Even though it is illegal in Vietnam, some massage services also include sexual services, so it is better to check with the host when you are invited to a massage).
Karaoke in Vietnam

Karaoke in Vietnam

Dressing
Generally speaking, Vietnamese people dress more casually than Western people. This may be because of the hot weather in Vietnam, especially in the South.
  • Suit and tie are not very common. People only wear a suit and tie in very important business meetings (such as when signing a contract). The following picture shows what can be considered as “formal dress” for a common Vietnamese employee:
Formal dress at workplace in Vietnam

Formal dress at workplace in Vietnam

  • This is considered formal enough for job interview or wedding party. Usually at a wedding party, only the groom wears a suit and tie.
  • Dressing in the North is usually more formal than in the South, mainly because of the difference in culture and climate. Suit and tie are more popular in the North of Vietnam.
  • Developers usually dress more casually. Most of the developers in Ho Chi Minh City wear jeans and T-shirts in the office. Sandals and flip-flops are also acceptable. Some companies even accept wearing shorts in the office. The following picture shows typical dress in a software company in Ho Chi Minh City:
Dressing in IT company

Dressing in IT company

Annual leave and public holidays
  • According Vietnamese labor laws, employees must have at least 12 days of annual leave. Some companies can have up to 20 days of annual leave per year for the employees.
  • Vietnamese employees usually don’t save all of their annual leave for a long vacation. Instead, they usually take several short vacations during the year.
  • Vietnam has 10 days of public holiday and Tet (or Lunar New Year) is the biggest public holiday (like Christmas in Western culture). Even though the Tet official holiday is only 5 days, people usually take some extra days off using their annual leave during this time.
Tet, the biggest public holiday in Vietnam

Tet, the biggest public holiday in Vietnam

The six leadership styles

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Different people have different personalities, skills and strengths and so do leaders. As a result, different leaders may have different styles of leadership, each coming from different components of the leader’s emotional intelligence. The purpose of this post is to give a brief introduction to each leadership style, its impact to the organization and when the style works best.

According to Goleman (2000), there are six leadership styles:

Six leadership styles

  • Coercive: A coercive leader demands immediate compliance from his followers. A phrase that can summarize this style is: “Do what I tell you”. This style should only be used (with extreme caution) in a few situations such as crisis, turnaround or dealing with problem employees. Other than that, this style should be avoided due to the fact that it may demotivate as well as reduce the morale and feelings of the followers. In general, the  Coercive style is the least effective in most situations and it has negative impacts to the organization.
  • Authoritative: An authoritative leader mobilizes people toward a vision. If this style can be summarized in one phrase, it will be “Come with me”. This style works well in almost any situation but it is particularly effective when changes require a new vision or when a clear direction is needed. However, this approach may fail when a leader is working with a team of experts who are more experienced than he is; they may see the leader as arrogant or out-of-touch. Generally speaking, the Authoritative style is the most effective one and it has positive impacts to the organization.
  • Affiliative: An affiliative leader creates harmony and builds emotional bonds. “People come first” is the slogan of this leadership style. The affiliative style should be used when leaders try to build team harmony, increase morale, improve communication, or repair broken trust. However, this style should not be used alone since it may allow poor performance to go uncorrected as well as affiliative leaders rarely provide directions to their followers. In general, the Affiliative style has positive impacts to the organization.
  • Democratic: A democratic leader forces consensus through participation. Their most popular question is “What do you think?”. The democratic style works best when a leader is himself uncertain about the best direction to take and needs ideas and guidance from able employees. And even if a leader has a strong vision, this style works well to generate fresh ideas for executing that vision. However, the disadvantages of this style can be endless meetings where ideas are mulled over, consensus remains elusive, and the only visible result is scheduling more meetings. As a result, the Democratic leadership style is not as good as other styles even though it also has positive impacts on the organization.
  • Pacesetting: A pacesetting leader sets high standards for performance. We usually hear he says “Do as I do, now”. This style works well when all employees are self-motivated, highly competent, and need little direction or coordination. However, employees may feel overwhelmed by the pacesetting leader’s demands for excellence, and their morale may drop. Similar to the Affiliative style, the Pacesetting style should not be used alone and in general, it has negative impacts to the organization.
  • Coaching: A coaching leader develops people for the future and he usually encourage his followers by saying “Try this”. This style works well in many situation but it is most effective when people on the receiving ends are “up for it”. In other words, the coaching style works best with employees who would like to improve their performance and want to be coached. On the contrary, the style may not work when employees are resistant to learning or when the leader lacks the expertise to help the employee. Generally speaking, the Coaching style has positive impacts to the organization.

Goleman’s research also shows that leaders with the best results do not rely on only one leadership style; they may use different style on different situations or combine them together. The more styles a leader exhibits, the better. Leaders who have mastered four or more, especially the Authoritative, Democratic, Affiliative, and Coaching styles, have the very best climate and business performance. And the most effective leaders switch flexibly among the six leadership styles as needed.

Reference:
Goleman, D., 2000. Leadership that gets results. Harvard Business Review, March-April 2006, pp.78-90.

Understanding leadership

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1. Introduction
Leadership can be defined as the act of influencing others to work toward a common goal. Leadership is different from management: management is about coping with complexity whereas leadership is about coping with change. Another big difference is that management requires formal power and authority to exercise where as leadership does not.

Similarly, a leader may or may not have any formal authority and this is one of the differences between a leader and a manager. It is very important to note that leaders do not rely on the use of force to influence people. Instead, people willingly adopt the leader’s goal as their own goal. In other words, the influence comes from leadership always have voluntary response. If a person is relying on force and punishment, the person is a dictator, not a leader.

Leadership

2. Leadership in organizations
In organizations, leadership is more than the personal characteristics: it includes setting a strategy, developing influential relationships with followers, designing organizations as well as managing change within the organization and with followers to achieve desired outcomes. Here are what leaders usually do in organizations:
  • Leaders relentlessly upgrade their team, using every encounter as an opportunity to evaluate, coach, and build self-confidence.
  • Leaders make sure people not only see the vision, they live and breath it.
  • Leaders get into everyone’s skin, exuding positive energy and optimism.
  • Leaders establish trust with candor, transparency, and credit.
  • Leaders have the courage to make unpopular decisions and gut calls.
  • Leaders probe and push with a curiosity that borders on skepticism, making sure their questions are answered with action.
  • Leaders inspire risk taking and learning by setting the example.
  • Leaders celebrate.
Generally speaking, leaders in organizations have three main roles:
  • Path finding: Having a compelling vision and mission that ties the value system and vision to the needs of customers and stakeholders through a strategic plan.
  • Aligning: Having the structure, systems, and processes contribute to achieving the mission and vision.
  • Empowering: Allowing people to bring their talent, ingenuity, intelligence, creativity and energy to the cause.
3. Six keys to effective leadership
According to Giuliani (2003), the six keys to effective leadership are:
  • You must know what you believe
  • You must be an optimist
  • You must have courage
  • You must practice relentless preparation
  • You must understand the value of other people
  • You must communicate effectively
4. Quotes on leadership
  • “Leadership is influence.” – John C. Maxwell
  • “Leadership is the capacity to translate vision into reality.” – Warren Bennis
  • “Leadership is the art of accomplishing more than the science of management says is possible.” – Colin Powell
  • “If a leader will take care of the people – provide support, motivation, discipline, and communication – the people will take care of the mission.” – Robert D. Gaylor
  • “As we look ahead into the next century, leaders will be those who empower others.” –  Bill Gates
  • “Leadership is solving problems. The day soldiers stop bringing you their problems is the day you have stopped leading them. They have either lost confidence that you can help or concluded you do not care. Either case is a failure of leadership.” – Colin Powell

Leadership

References:
Bauer, T. and Erdogan, B., 2009. Organizational Behavior. 1st ed. Flat World Knowledge, Inc.
Bess, D., 2012. Leadership, BUS 626 Organizational Behavior. University of Hawaii at Manoa, unpublished.
Forbes, 2012. 100 Best Quotes on Leadership, [online] Available at:<http://www.forbes.com/sites/kevinkruse/2012/10/16/quotes-on-leadership/> [Accessed 5 January 2013].

Empowerment in organizations

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1. Introduction
In organizations, empowerment means granting employees the autonomy to assume a more active and responsible role. This is accomplished by strengthening their sense of effectiveness as well as by sharing power, information and the responsibility to manage their own work as much as possible. In terms of organizational culture, empowerment is related to the Individual Autonomy dimension.

2. The pros and cons of empowerment
But why should we empower our employees? Here are some benefits that empowerment may bring to organizations:
  • Improves communication and decision making
  • Improves morale, motivation and commitment
  • Creates “ownership” of the job
  • Increases job satisfaction
  • Increases risk-taking and innovation
  • Improves relationships with customers and suppliers
  • Reduces layers of management
On the other hand, empowerment may also have some negative effects:
  • Not everyone wants to be empowered
  • We can not just empower staff and assume that they will assume the empowerment
  • Empowerment may not be appropriate for some organizations
  • Empowerment actually requires more management effort
  • Empowerment  means changes and constant changes may keep things unsettled
  • There is a risk that empowerment efforts may fail

3. Barriers to empowerment
Here are some barriers that may prevent empowerment to be implemented:

From the aspect of organization:
  • Lack of trust between manager and staff
  • No clear definition and policy about accountability
  • Empowered staff do not receive enough training to be able to handle the empowerment
  • No differentiation between staff
  • Lack of communication
  • Unclear vision
From the aspect of manager:
  • Unwillingness to give up control
  • Reluctance to change management style
  • Fear of losing position
  • Cling to old accountability
From the aspect of staff:
  • Do not want to be accountable
  • Do not realize their values and potentials
  • Fear of losing position due to new accountability
  • Lack of training

4. Implementing empowerment
By understanding possible barriers to empowerment, here are how empowerment can be implemented in organizations:

At company level:
  • Develop a clear mission and communicate it clearly to all employees
  • Build trust within the organization at all levels
  • Build an organizational culture that encourage innovation and risk taking
  • Provide adequate training so that staff can handle the empowerment
  • Replace hierarchical structure with self-managed teams
  • Set clear boundaries for authority and accountability
At team level:
  • Get staff to involve in selecting their work assignments and the methods for accomplishing tasks
  • Create and environment of cooperation, information sharing, discussion, and shared ownership of goals
  • Encourage staff to take initiative, make decision, and use their knowledge
  • When problems arise, find out what staff think and let them help design the solutions
  • Stay out of the way, give staff the freedom to put their ideas and solutions into practice
  • Maintain high morale and confidence by recognizing successes and encouraging high performance

Empowerment

5. Empowerment in startup
In my opinion, empowerment should be compulsory in startup company and become part of its organizational culture for the following reasons:
  • In terms of organizational culture, startup company should have high level of Individual Autonomy dimension and this can only be achieved via empowerment.
  • Employees in startup company are usually the “A players” and they are likely  to have the ability to handle empowerment.
  • Startup company is there to grow fast and so are its employees. Empowerment will prepare and help them to grow.
  • For startup software company, such Agile methodologies as Scrum or Extreme Programming requires self-managed teams and this can only be achieved via the implementation of empowerment.

Reference:
Bess, D., 2012. Power, BUS 626 Organizational Behavior. University of Hawaii at Manoa, unpublished.

Common influence tactics

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The definition of power, which is “the ability to influence the behavior of others”, shows a strong relationship between power and influence, all together with leadership. According to Hughes, Ginnett and Curphy (2011), understanding about leadership can not be achieved without understanding the concepts of power, influence and influence tactics. Followed up on the six sources of power, this post will list some common influence tactics that can be used to achieve power.

According to Bauer and Erdogan (2009), there are nine commonly used influence tactics:
  • Rational persuasion includes using facts, data, and logical arguments to try to convince others that your point of view is the best alternative. This is the most commonly applied influence tactic.
  • Inspirational appeals focus on values, emotions, and beliefs to gain support for a request or course of action. Such sayings like ““Ask not what your country can do for you, ask what you can do for your country” (John  Kennedy) or “Stay hungry, stay foolish” (Steve Jobs) are good examples of this tactic. Inspirational appeals are effective when they are authentic, personal, big-thinking, and enthusiastic.
  • Consultation refers to the influence agent’s asking others for help in directly influencing another person or group. Consultation is most effective in organizations and cultures that value democratic decision making.
  • Ingratiation refers to different ways of making others feel good about themselves. Ingratiation is effective when it is honest, infrequent, and well intended.
  • Personal appeal refers to helping another person because you like them and they asked for your help. Personal appeals are most effective with people who know and like you.
  • Exchange refers to give-and-take in which someone does something for you, and you do something for them in return.
  • Coalition tactics refer to a group of individuals working together toward a common goal to influence others. Unions are common examples of coalitions within organizations.
  • Pressure refers to pushing someone to do what you want or else something undesirable will occur. This often includes threats and frequent interactions until the target agrees.  Pressure tactics are most effective when used in a crisis situation.
  • Legitimating tactics occur when the appeal is based on legitimate or position power. This tactic relies upon compliance with rules, laws, and regulations. It is not intended to motivate people but to align them behind a direction.
There are three possible outcomes from influence attempts:
  • Resistance: occurs when the influence target does not wish to comply with the request and either passively or actively repels the influence attempt.
  • Compliance: occurs when the target does not necessarily want to obey, but they do.
  • Commitment: occurs when the target not only agrees to the request but also actively supports it as well.

The following table shows the usage frequency and outcomes of each influence tactic:

nine_common_influence_tactics

References:
Bauer, T. and Erdogan, B., 2009. Organizational Behavior. 1st ed. Flat World Knowledge, Inc.
Hughes, R., Ginnett, R. and Curphy, G., 2011. Leadership: Enhancing the Lessons of Experience. 7th ed. McGraw-Hill.

Six sources of power

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By definition, power is the ability to influence the behavior of others to get what you want. According to Bauer and Erdogan (2009), there are six sources of power:

Six sources of power

  • Legitimate power is power that comes from one’s organizational role or position. For example, a manager can assign tasks to his subordinates, a policeman can arrest a citizen, and a teacher assigns grades to his students. Others comply with the requests these individuals make because they accept the legitimacy of the position, whether they like or agree with the request or not.
  • Reward power is the ability to grant a reward, such as an increase in pay, a perk, or an attractive job assignment. Reward power tends to accompany legitimate power and is highest when the reward is scarce. Anyone can have reward power in the form of public praise or giving someone something in exchange for their compliance.
  • Coercive power is the ability to take something away or punish someone for noncompliance. Coercive power often works through fear, and it forces people to do something that ordinarily they would not choose to do. The most extreme example of coercion is government dictators who threaten physical harm for noncompliance.
  • Expert power comes from knowledge and skills. Technology companies are often characterized by expert, rather than legitimate power.
  • Information power comes from the ability to access to specific information. For example, knowing price information gives a person information power during negotiations. In organizations, a person’s social network can either isolate them from information power or serve to create it.
  • Referent power comes from the personal characteristics of the person such as the degree to which we like, respect, and want to be like them. Referent power is often called charisma—the ability to attract others, win their admiration, and hold them spellbound.

Legitimate, Reward, Coercive and Information power can be categorized as “organizational bases of power”, which are derived from organizational position and organizational policies. On the other hand, Expert and Reference power are “personal bases of power”, which are derived from personal characteristics.

Reference:
Bauer, T. and Erdogan, B., 2009. Organizational Behavior. 1st ed. Flat World Knowledge, Inc.

Common traps in decision making

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In the previous post, we have discussed about different types of decisions as well as different decision making models. However, no matter which model is used, there are some common traps that we can fall in while making decisions. The purpose of this post is to introduce those traps and suggest how to avoid them.

Decision making traps

According to Hammond, Keeney and Raiffa (2006), there are six psychological traps that are particularly likely to undermine decisions:

1. The anchoring trap
The anchoring trap refers to the tendency for us to rely too heavily on the first information we receives. It is very common that initial impressions, estimates, or data can anchor our subsequent thoughts and judgments.

For example: When we are asked these two questions in sequence: “Is the population of Turkey greater than 35 million?” and “What is your best estimate of Turkey’s population?”, it is very likely that the number 35 million in the first question will influence your answer for the second question. To be more precise, your answer for the second question will be likely around 35 million, even though this number may not be in the reasonably accurate range.

Here are several ways to avoid or minimize the impact of the anchoring trap:
  • Always view a problem from different perspectives.
  • Think about the problem on your own before consulting others.
  • Be open-minded.
  • Be careful to avoid anchoring your advisers and consultants.
  • Be particularly wary of anchors in negotiations.

2. The status-quo trap
By nature, people resist to changes and therefore, decision makers usually have a strong bias toward alternatives that prolong the status quo.

For example: When people inherits shares of stock that they would never have bought themselves, most of them don’t sell the shares and put the money into a different investment. Even though selling those shares is a straightforward and inexpensive alternative, people usually find the status quo comfortable and they avoid taking action that would upset it.

Here are several ways to avoid the status quo trap:
  • Always remind yourself of your objectives and examine how they would be served by the status quo.
  • Never think of the status quo as your only alternative.
  • Ask yourself whether you would choose the status-quo alternative if, in fact, it weren’t the status quo.
  • Avoid exaggerating the effort or cost involved in switching from the status quo.
  • Remember that the desirability of the status quo will change over time.
  • If you have several alternatives that are superior to the status quo, don’t default to the status quo just because you are having a hard time picking the best alternative.

3. The sunk-cost trap
The sun-cost trap refers to the tendency that we are likely to make choice in a way that justifies past choices, even when the past choices no longer seem valid. This happens because we are unwilling, consciously or not, to admit to our past mistakes.

For example: We may have refused to sell a stock at a loss, forgoing other, more attractive investments. Or we may have poured enormous effort into improving the performance of an employee whom we knew we shouldn’t have hired in the first place.

Here are several ways to avoid the sunk-cost trap:
  • Seek out and listen carefully to the views of people who were uninvolved with the earlier decisions and who are hence unlikely to be committed to them.
  • Examine why admitting to an earlier mistake distresses you.
  • Don’t cultivate a failure-fearing culture that leads employees to continue their mistakes.

4. The confirming-evidence trap
The confirming-evidence trap refers to the bias that leads us to seek out information that supports our existing instinct or point of view while avoiding information that contradicts it. The confirming-evidence bias not only affects where we go to collect evidence but also how we interpret the evidence we do receive, leading us to give too much weight to supporting information and too little to conflicting information.

For example: An CEO of a company may have a concern that US dollar may appreciate against other currencies. Before making the decision to adjust the company’s plan to adapt to that assumption, he calls up an acquaintance, CEO of another similar company to check her reasoning. She presents a strong case that other currencies are about to weaken significantly against the dollar. If the CEO makes his decision right after being confirmed, he may fall into the confirming-evidence trap.

Here are several ways to avoid the confirming-evidence trap:
  • Avoid the tendency to accept confirming evidence without question.
  • Get someone you respect to play devil’s advocate, to argue against the decision you’re contemplating.
  • Ask yourself if you are really gathering information to help you make a smart choice or you are just looking for evidence confirming what you would like to do?
  • Do not ask leading questions that invite confirming evidence when seeking advice from others.

5. The framing trap
The framing trap refers to the tendency of decision makers to be influenced by the way that a situation or problem is presented.

For example: When making a purchase, customers tend to prefer a statement such as “90% fat free” as apposed to “10% fat” even though those two options are actually the same.

Here are several ways to avoid the framing trap:
  • Always try to reframe the problem in various ways and look for distortions caused by the frames.
  • Try posing problems in a neutral, redundant way that combines gains and losses or embraces different reference points.
  • When others recommend decisions, examine the way they framed the problem and challenge them with different frames.
6. The estimating and forecasting traps
This type of traps can be split into three:
  • The overconfidence trap refers to the tendency that individuals overestimate their ability to predict future events.
  • The prudence trap takes the form of overcautiousness, or prudence: When faced with high-stakes decisions, we tend to adjust our estimates or forecasts “just to be on the safe side”.
  • The recallability trap refers to the tendency that we can be overly influenced by dramatic events in the past, those that leave a strong impression on our memory.

Example for the overconfidence trap: 82% of the drivers surveyed feel they are in the top 30% of safe drivers and 86% of students at the Harvard Business School say they are better looking than their peers.
Example for the prudence trap: Engineers design weapons to operate under the worst possible combination of circumstances, even though the likeliness of those circumstances is actually very rare.
Example for the recallability trap: People usually exaggerate the probability of rare but catastrophic occurrences such as plane crashes because they get disproportionate attention in the media.

Here are several ways to avoid the estimating and forecasting traps:
  • To reduce the effects of overconfidence in making estimates, always start by considering the extremes, the low and high ends of the possible range of values.
  • To avoid the prudence trap, always state your estimates honestly and explain to anyone who will be using them that they have not been adjusted.
  • To minimize the distortion caused by variations in recallability, examine all your assumptions to ensure they’re not unduly influenced by your memory.

Reference:
Hammond J. S., Keeney R. L. and Raiffa H., 2006. The Hidden Traps In Decision Making. Harvard Business Review, January 2006, pp.118-126.

Understanding decision making

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1. Introduction
Decision making is a mental process of making choice among alternative courses of action, which may also include inaction. In organizations, decision making is a very popular activity that can happen at all levels. The purpose of this post is to provide some basic understandings about decision making as as different types of decisions and the four decision-making models. More practical discussion about decision making will be provided in later posts.

Decision making

2. Types of decisions
In general, decisions can be categorized into two types:
  • Programmed decisions: This type of decisions is straightforward and occurs frequently enough that we develop an automated response to them. Example of this type is the decisions of what to wear, what to eat, and which route to take when we travel between our home and the office.
  • Non-programmed decisions: This type of decisions is unique and important that requires  conscious thinking, information gathering, and careful consideration of alternatives. Decision of which job offer to take or which business model to follow is a good example of this type.
In organizations, decisions can be classified into three categories based on the level at which they occur:
  • Strategic decisions: are made by top management team and set the course of an organization.
  • Tactical decisions: are made by managers and are about how things will get done.
  • Operational decisions: are made each day by employees to make the organization run.

More details about the three categories of decisions can be found in the following table:

Three types of decisions in organization

3. Decision-making models
According to Bauer and Erdogan (2009), there are four models of decision-making:

Rational decision-making model:
This model describes a series of steps that decision makers should consider if their goal is to maximize the quality of their outcomes:

8_steps_in_rational_decision_making_model

The disadvantage of this model is that it involves a number of unrealistic assumptions. It assumes that people know all the available choices, that they have no perceptual biases, and that they want to make optimal decisions. Research shows that this model does not represent how decisions are frequently made within organizations.

Bounded rationality model:
According to this model, individuals knowingly limit their options to a manageable set and accept the first alternative that meets their minimum criteria without conducting an exhaustive search for alternatives. This model helps us to make “good enough” decisions.

Intuitive decision-making model:
This model refers to arriving at decisions without conscious reasoning. This model is usually used under challenging circumstances such as time pressures, constraints, a great deal of uncertainty or changing conditions. In this model, only one choice is considered at a time and if it does not meet the criteria then it is discarded and a new choice is tested until a workable one is found.

Creative decision-making model:
This model refers to the generation of new, imaginative ideas and it has five steps:

5_steps_in_creative_decision_making

  • Problem recognition: The need for problem solving becomes apparent.
  • Immersion: Consciously thinks about the problem and gathers information.
  • Incubation: Sets the problem aside and does not think about it for a while. At this time, the brain is actually working on the problem unconsciously.
  • Illumination: The insight moment when the solution to the problem becomes apparent, sometimes when it is least expected.
  • Verification & application: Verifies the feasibility of the solution and implements the decision

The following table suggests which decision-making model to use in a particular situation:

Decision making models

Reference:
Bauer, T. and Erdogan, B., 2009. Organizational Behavior. 1st ed. Flat World Knowledge, Inc.

Tips for negotiating a higher salary

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Every employee wants a higher salary, either when he is offered a new job or when he has been working for a company for a certain duration. But should we negotiate for a higher salary? The answer is Yes for both cases:
  • 58% of hiring managers say they leave some negotiating room when extending initial job offers.
  • Many hiring managers agree to a candidate’s request for a higher salary.
  • People who routinely negotiate salary increases will earn over $1 million more by retirement than people who accept an initial offer every time without asking for more.
  • The fact that an employee is doing a good job does not mean he will automatically get a raise because his boss may believe the employee is satisfied with what he is getting.

Salary negotiation

So, research supports the idea that you should negotiate for a higher salary if you think that you deserve it, either with the new job or the existing one. Here are the tips suggested by Bauer and Erdogan (2009) that you can use when negotiating salary:
  • Overcome your fear: Don’t be afraid of angering the boss if you think you deserve a higher salary. The boss may not know your contribution or he believe you are satisfied with your current salary.
  • Get the facts: Do some background research before the negotiation. Check within your company or the market to see if your expected salary is appropriate or not.

Salary negotiation

  • Build your case: Make a list of your contributions to the company and be sure to focus on the contributions that your boss values most. If another company has shown interest in you, mention that as a fact but do not use this as a threat unless you are prepared to take the other offer.
  • Know what you want: Set your expected salary based on your research and figure out:
    • What will happen if you can not get the expected salary? Will you quit or take offer from the other company?
    • What are the alternatives (such as higher title, more vacation, training …) that you can accept besides salary raise?

Salary negotiation

  • Begin assertively: Start the negotiation with your boss friendly with the list of your contributions to the company.
  • Don’t make the first offer: Instead, let’s your boss name the figure first. If your boss offer a range then ask for the high end. In case you are insisted to provide the figure, ask for the most that you can reasonably expect to get. This will leave some room for negotiation.
  • Listen more than talk: The more you listen, the better the boss will feel about you. People tend to like and trust people who listen to them.

Salary negotiation

  • Look for the future: If you can’t get a raise now, get your boss to agree to one in a few months if you meet agreed-upon objectives.

Reference:
Bauer, T. and Erdogan, B., 2009. Organizational Behavior. 1st ed. Flat World Knowledge, Inc.

Negotiation

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1. Introduction
Negotiation is a process in which two or more parties work toward an agreement. Negotiation can occur everywhere: in business, in organizations, between nations as well as in personal situations such as marriage, divorce, shopping and everyday life. In addition, negotiation is also a common way to deal with conflict. The purpose of this post is to provide some basic knowledge about negotiation such as:
  • The five phases of negotiation
  • The two approach for negotiation
  • Some common mistakes in negotiation
  • Third-party negotiation techniques

Negotiation

2. The five phases of negotiation
A typical negotiation process usually includes five phases:

Five phases of negotiation

  • Investigation: In this phase, information related to the negotiation process should be gathered. Here are a few questions that the parties can ask themselves in this investigation phase: What are my goals? What do I want to achieve? What would I concede? What would I absolutely not concede? What is the other party likely to want? Which aspects could be changed and which could not?
  • Determine BATNA: BATNA is an acronym for the “Best Alternative To a Negotiated Agreement”. In this phase, we need to know what our alternatives are. It should be noted that the party with the best BATNA has the best negotiating position, so the more possible  alternatives we can explore, the better it is. Here are some good practices when determining your BATNA:
    • Brainstorm a list of alternatives
    • Identify the most beneficial alternative to be kept in reserve as a fall-back
    • Keep revising the BATNA since they may evolve over time
    • Don’t reveal the BATNA to the other party
  • Presentation: In this phase, the parties assemble the information they have gathered in a way that supports their position.
  • Bargaining: In this phase, each party discusses their goals and seeks to get an agreement. A natural part of this process is making concessions, which means giving up one thing to get something else in return.
  • Closure: In this phase, either the parties have come to an agreement on the terms, or one party has decided that the final offer is unacceptable walked away from the negotiation. This phase is also a chance to learn why a deal can not be reached in case the negotiation fails.
3. Negotiation strategies
There are two approaches when negotiating:
  • Distributive approach: In this approach, negotiators see the situation as a pie that they have to divide between them. Each party tries to get more of the pie and “win”. This is also called the “win-lose” approach.
  • Integrative approach: In this approach, both parties look for ways to expand the pie, so that each party gets more. This is also called a “win–win” approach. This approach require cooperation, listening and trust between the parties.

Negotiation

4. Common mistakes in negotiation
According to Bauer and Erdogan (2009), there are five common mistakes in negotiation:
  • Accepting the first offer: Some people are taught to feel that negotiation is a conflict situation, and these individuals may tend to avoid negotiations to avoid conflict. However, research shows that those who accept the first offer without negotiating usually receive less than those who are willing to negotiate. Research also reveals that more women usually make this mistake than men.
  • Letting your ego get in the way: If we are thinking only about our own needs, it is very likely that the deal can not be made. People usually don’t accept a deal that doesn’t offer any benefit to them so it is very important to help the other party to meet their own goals while achieving ours.
  • Having unrealistic expectations: Setting reasonable goals that address each party’s concerns will decrease the tension in negotiation and will improve the chances of reaching an agreement.
  • Getting overly emotional: Research shows that those who express anger negotiate worse deals than those who do not. However, research also shows that those with more power may be more effective when displaying anger.
  • Letting past negative outcomes affect the present ones: Research shows that negotiators who had previously experienced ineffective negotiations were more likely to have failed negotiations in the future. In other words, there is actually a tendency to let the past repeat itself and being aware of this tendency allows us to overcome it.
5. Third-party negotiations
Sometimes, it is more effective to have a specially trained, neutral third party involved in the negotiation process, especially for challenging problems. There are several approach for third-party negotiations:
  • Mediation: In mediation, an outside third party (the mediator) enters the situation with the goal of assisting the parties in reaching an agreement. The mediator can work with both parties to facilitate, suggest, and recommend but does not represent either side. The mediator’s role is to help the parties share feelings, air and verify facts, exchange perceptions, and work toward agreements. This approach should be used when:
    • The parties are unable to find a solution themselves.
    • Personal differences are standing in the way of a successful solution.
    • The parties have stopped talking with one another.
    • Obtaining a quick resolution is important.
  • Arbitration: In arbitration, the parties submit the dispute to the third-party arbitrator. It is the arbitrator who makes the final decision.
  • Mediation – Arbitration: This approach starts with mediation and then followed by arbitration. At the beginning, the third party will play the role as the mediator to facilitate the negotiation process. After that, the final decision will be made by the arbitrator.
  • Arbitration – Mediation: In this approach, both parties formally make their cases before the arbitrator. The arbitrator then makes a decision and places it in a sealed envelope. Following this, the two parties work through mediation. If they are unable to reach an agreement on their own, the arbitration decisions will be applied.

References:
Bauer, T. and Erdogan, B., 2009. Organizational Behavior. 1st ed. Flat World Knowledge, Inc.