Model Answers_IDM Mid-term Exam_2015!12!29

Indian Institute of Management Calcutta Executive Post Graduate Program in Management

Term 5, 2015-16

Executive Post Graduate Program in Management Term 5, 2015-16

IIMC PGPEX, IDM Mid-term Exam – 29 Dec 2015 1

29 December 2015 Roll # (No name please)

Course: Intuitive Decision Making Mid-term Examination

Maximum marks: 40. All questions carry equal marks. Time: 1 hr. 30 mins.

Instructions 1. Read each question and think about it carefully before you figure out your approach to the

answer. Write your answer below each question in the space provided and indicate the word count below.

2. Your answers are expected to demonstrate that you have understood the concepts, theories, models et cetera taught in this course and can apply the relevant ones correctly. Explain yourself with the use of appropriate concepts that are part of the syllabus of this course. Use of concepts that are outside this course, even if appropriate, shall not merit marks.

3. Write your answer briefly but lucidly. Remember, your instructor is not clairvoyant. He can understand only what you write, not what you mean. Quality and clarity of explanation will be important factors in assessment.

4. This examination is open book, open notes, open laptops and open Internet. Collusion, communication, signalling – explicit or tacit – may lead to disqualification from the examination.

5. Write your roll # in the top right hand corner of each sheet. Do not write your name. It will avert any bias – positive or negative – on the part of your instructor. If you write your name, please be prepared to lose 1 mark.

6. This question paper is being e-mailed to you. Open and save it as a MS Word document (NO OTHER FORMAT) with the file name <your complete roll #_IIMC PGPEX IDM Mid-term Exam_2015-12-29>. Write IDM Mid-term Exam in Subject line of e-mail and send your answer paper as attachment to [email protected]. The time stamp on your email will be treated as proof of timely submission.


Term 5, 2015-16



Q1. Many commercial and almost all government organisations practise annual performance appraisal. How can average performers get better than average performance ratings? Can you highlight one or two strategies employees can adopt to game the system (manipulate it to one’s advantage)? (In 150 words.)

Answer:

We recall recent events readily compared to those in the distant past. This encourages us give greater weightage to recent events that we recall easily. It is called Recency bias and it is fuelled by Availability heuristic. Knowing this natural predisposition, an employee can work more diligently in the last two quarters before performance appraisal is due, and take it relatively easy in quarters 1 and 2. His supervisor is likely to consider his performance more favourably in this situation, and the employee is likely to gain a good performance rating.

Another method can be to leverage the supervisor’s Affect heuristic. By behaving agreeably, and pleasantly as much as possible in the last 1-2 quarters, the employee may be able to create a favourable impression of a co-operative and enthusiastic person.

Affect heuristic allows us to recall pleasant episodes readily and give greater weightage to them. An employee who has displayed a pleasant and enthusiastic disposition is likely to be credited with better performance that would be due on rational and rigorous evaluation.

It is reasonable to assume that he would not have made gross errors of judgement and that his performance would have given the supervisor no cause for regret.

Observations:

1. Attempting to leverage Anchoring by highlighting good work done, especially in recent past, may cause the boss to adjust his assessment using favourable information.

2. Halo effect is also admissible. In this approach a person good behaviour or excellent performance in one field may create a halo and a favourable rub-off on other accomplishments even of they are not so great. To do this the employee may make a deliberate and concerted effort to create a positive impression in one or two specific areas that tends to show him/her as more intelligent, accomplished, or capable.

Marking protocol:

Availability bias based answers: 7

Affect based answers: 7

Anchoring: 7

Any two together: 10


Term 5, 2015-16



Q2. It is well known that large and complex software implementation projects are often delayed even though their timelines are diligently estimated to last several months, sometimes a couple of years. One of the reasons is clients ask for changes midway. Assuming they don’t and projects are run more or less according to agreed plans, do you think the majority would be completed on schedule? Why? Why not? Explain using an appropriate concept in the IDM syllabus. (In 150 words.)

Answer: The reason for delays in execution of large and complex projects is planning fallacy. It arises from a combination of base rate neglect and over optimism. Both of these tendencies focus one’s attention on the current project and the future. It also leads to systematic neglect of what has happened in the past, for example, how long similar projects took and what caused delays. Over optimism acting simultaneously leads to discounting the effect of obstacles and uncertainties and allotting greater weightage to reasons for the project going smoothly. These biases undermine accurate and realistic assessment of how projects will be executed and the time they will take. Planning fallacy occurs because optimistic plans are often fallacious in judgement. Observations: Planning fallacy occurs as a result of optimism bias. Some academics have suggested it may be the result of self-serving or impression management bias. It occurs when people make estimates of time, cost and risks for their projects. It doesn’t seem to occur when estimating these factors for other people’s projects. Anchoring heuristic does not appear to influence planning fallacy. Marking protocol: Planning fallacy: 8 Optimism bias without mention of planning fallacy: 8 Planning fallacy coupled with over optimism, self-serving, or impression management bias: 10 For mention of other biases such as anchoring, etc.: 3 marks Explaining appropriately how confirmation bias may impact planning: 4 marks. Non-heuristic and biases explanations: 2


Term 5, 2015-16



Q3. As the Chief of Procurement of your company, you wish to develop long-term relationship with XYZ Ltd, a supplier. They make a technologically advanced product that will enhance the reliability and performance of the equipment your firm makes. There are only two other companies in the world that make equivalent products. You would like to obtain fair price and commercial terms from the supplier. Equally, you are interested in a co-operative relationship in which XYZ will develop new products for the next generation equipment your firm intends to manufacture over the next year or so. Would you ensure that you and your team members behave in a courteous, warm, and friendly manner with representatives and senior managers of XYZ? Why? What heuristic would you hope to leverage in managers of XYZ by your behaviour? Explain in no more than 150 words.

Answer: Courteous, warm and friendly behaviour (it is not obsequious) creates a good feeling in other person(s). They tend to develop a liking for people who behave in a warm and friendly manner. This favourable and pleasant impression easily translates to trust. We use Affect heuristic to store and recall experiences. Friendly behaviour triggers this heuristic in others. When they like us, they tend to trust us. When they trust us, they are likely to co-operate. Courteous and friendly behaviour is, therefore, likely to help our company set the stage for interest based (as opposed to position based) negotiation of commercial terms. It is likely to foster free and frank discussion of issues and their amicable resolution. It is also likely to encourage long-term partnership with the vendor in which the partner may be willing to invest significant resources. Observations: 1. Affect may or may not trigger representativeness heuristic. This second order heuristic may not

have a noticeable impact, if any. 2. Affect is unlikely to trigger framing effect. Affect heuristic impacts perception of risk-benefit. That

is why framing effect is unlikely. Marking protocol: Affect heuristic creates trust – properly explained: 10 Proportionate marks for quality of explanation.


Term 5, 2015-16



Q4. Write TRUE or FALSE against each of the following statements. Each statement carries one (1) mark.

1. Bewildering variety of choices often leave consumers dissatisfied with their purchases because of

loss aversion.

TRUE

2. We know System 2 uses heuristics to make rapid judgements. Heuristics, or thumb rules, are solely the result of human evolution over hundreds of thousands of years.

FALSE

3. We tend to avoid people who are brusque but honest and of high integrity, because of Availability bias.

FALSE

4. Most advertisements feature smiling human models. Advertisers try to leverage Affective bias to favourably influence consumers.

TRUE

5. Superstitions are irrational beliefs in coincidence of unrelated factors. For example, a journey will turn out to be unsuccessful if a black cat crosses one’s path. They arise from confirmation bias.

TRUE

6. Status quo bias results from framing effect when we perceive choices between gains.

TRUE

7. Concept of human beauty differs from one culture to another. This is most likely the result of Affect heuristic.

TRUE

8. Indoctrination is a systematic process of creating confirmation bias in subjects.

TRUE

END

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Model Answers_IDM Mid-term Exam_2015!12!29