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Chapter 13: Business
• Role of social factors in workplace and their influence on economic decisions.
• Industrial/Organizational (I/O) Psychology: Study of human behaviour in business and organizational
• Hawthorne Effect: The finding that workers who were given special attention (being tested) increased
their productivity regardless of what actual changes were made in the work setting.
The Typical Job Interview
• Submit resume, fill out application, bring in work samples, take standardized tests of abilities and
personality. Face-to-face interview with representative to discuss the job, where applicant and employer
evaluate each other.
• Does the interview process produce decisions biased by job-irrelevant personal characteristics?
o Relative lack of racial bias – perhaps interaction humanizes applicants and brings attributes to life
o Bias towards physical attractiveness, but not in most experienced hiring managers
• Are interviews valid and predictive of performance?
o Those who engage in the most self-promotion are most likely to get hired. Predictive factors of
confidence, quality of handshake, etc.
o “Faking” by presenting oneself in distorted ways to create a favourable impression: outright lying,
exaggeration, ingratiation, and image protection.
o Employer’s pre-interview expectations and “recruiting” vs. “evaluating” behaviour. May also play
into self-fulfilling prophecy as employers with positive expectations are warmer, more outgoing,
more cheerful, and give more information about/to promote the company.
“Scientific” Alternatives to Traditional Interviews
• Computerized interviews: may be forum for initial screening, but too impersonal for important life
• Some use polygraph as screening device, comparing interviewee’s level of arousal in response to
various questions. Opponents argue this invades privacy, is easily misinterpreted, and results are not
o Use is prohibited except in matters involving large sums of money, public safety, and national
• Three types of standardized written tests: intellectual and cognitive abilities, job-specific knowledge and
skills, and common sense (“street smarts”).
• General intelligence tests:
o Benefits: Predictive of job success in high-stakes work settings, does not discriminate against
o Drawbacks: Discriminates against those with other important abilities or intelligences not factored
into tests, and different jobs require different cognitive abilities
• Some companies use personality tests to measure traits predictive of work-related outcomes: leadership
potential, helpfulness, conscientiousness, extroversion, self-confidence, self-monitoring etc. Page 2 of 8
• Integrity Tests: Questionnaires designed to test a job applicant’s honesty and character, including
questions on illicit drug use, shoplifting, petty theft, and other transgressions. Arbitrary cutoff scores
determine pass or fail.
• Personality test results can be faked to present onself in overly positive ways. What about integrity tests?
o Overt tests: Purpose is obvious to test taker. Subjects instructed to fake good results, and
especially those coached on how to do so, achieve higher scores.
o Covert tests: Items measure broad personality characteristics not clearly related to workplace.
Scores are not affected by attempt to fake good, even when coached.
• Structured Interviews: An interview in which each applicant is asked a standard set of questions and
evaluated on the same criteria.
o This prevents biased interviews, is more predictive than written tests, and more difficult to fake.
• Assessment centers: Structured and multidimensional setting in which job applicants are exhaustively
tested and judged by multiple evaluators for selection. Multiple activities include written tests, situational
tests, and role-playing exercises. This approach results in hiring decisions predictive of job performance.
Personnel Selection as a Two-Way Street
• Job seekers see concrete, job-specific tests and interview situations as the most fair; they dislike
general, standardized tests of intelligence, personality, and honesty.
• In-person interviews are seen as fairer, with the outcome more favourable and more likely to accept job
offers – than computer-mediated, telephone or videoconferencing interviews.
• Affirmative Action: Policy that gives special consideration to women and minority group members in
recruitment, hiring, admissions, and promotion decisions. One side that preferential treatment is
necessary to overcome historical inequities and promote diversity; other side claims that policy results in
unfair reverse discrimination.
• Opposition associated with strong belief in principle of merit, where everyone receives an equal
opportunity and rewards are matched to contributions – not due to racial prejudice. Thus when
discrimination in particular workplace is highlighted, which undermines principles of merit, they become
more favourable to the system.
• Affirmative action policies affect target group members it is designed to help, non-target members who
feel excluded, organizations that implement policy, and interactions among these groups.
o Nacoste (1996): People react to procedures used to implement concept, and these reactions set off
procedural reverberations within system – dissatisfaction leads to policy set secretly, lack of open
expression of views, and membership considerations seen as more important than individual
• People more favourable towards soft forms than hard forms of affirmative action: outreach programs to
recruit or train applicants from underrepresented groups, vs. preferences and quotas.
• Those helped by policy who believe they were chosen for their gender and race will devalue their own
performance. Three explanations:
o 1) Perceive procedure as unjust since it excludes people based on non-membership in group
o 2) Recipients less able to attribute success due to their own abilities and efforts, leading to lowered
self-esteem and doubts about competence
o 3) Preferential selection seen as form of assistance, and react with feeling of stigmatization by what
is assumed to be negative perceptions of others
• Negative inferences can be avoided if preferential selection process also takes into account merit-based
factors: preferential equivalent (chosen when of similar competence to male counterpart) rather than Page 3 of8
preferential minimum standard (chosen if minimally qualified) or preferential absolute (chosen regardless
Culture and Organizational Diversity
• Researchers look at workplace through broader lens: due to affirmative action programs increasing
number of women and minorities, and worldwide trend towards globalization.
• Workers have multidimensional identity that can be characterized within a cultural mosaic – demographic
group (age, gender, race), geographical background (country of origin, region, population density), and
personal associations (religion, profession, politics).
• Diversity may breed division and conflict based on ingroup and outgroup categorizations, leading to less
effective teams. On the other hand, diversity increases range of perspectives and skills, enhancing
productivity and creativity.
• Minority workers are more engaged when the company acknowledges differences and celebrates
multiculturalism, rather than ignoring differences to encourage a uniform environment.
• Performance Appraisal: The process of evaluating an employee’s work within the organization. They
provide basis for placement decisions, transfers, promotions, raises and salary cuts, bonuses, and
layoffs. They also give feedback to employees about quality of work and status within organization.
• Objective quantitative measures often not available, and do not take into account work quality.
• Supervisors assumed to be most informed about performance of subordinates. They do base ratings
most on work performance, knowledge, and dependability than less relevant factors. However, many
• Halo Effect: Failure to discriminate among different and distinct aspects of a worker’s performance. Due
to implicit personality theory and preconceptions of relationships between traits, assume that one aspect
of performance implies other aspects as well (e.g. unproductive implies poor teamwork, creativity, etc.)
• Contrast Effect: Repeated evaluations may lead to judging performance in light of previous
• Restriction of Range Problem: Differences between evaluators on usage of numerical ratings –
uniformly high and lenient, stingy and low, or gravitate to center; may be influenced by rater’s personality.
All who use restricted ranges fail to make adequate distinctions.
• Self-evaluations are consistently more positive than ratings made by supervisors and less predictive of
job success: people have biased perceptions of themselves and want to present themselves favourably
• Individuals differ in extent to which they tend to present themselves favourably: higher self-evaluations
for those with more power in organization, and for men.
New and Improved Methods of Appraisal
• Evaluations less prone to error when made right after performance. Evaluators should also take notes
and keep clear records of observations, to avoid using stereotypes and other biases.
• Teach raters skills for making accurate appraisals: educating about biases, focusing attention on job-
relevant behaviours, informing of performance norms, providing feedback on use of rating scales, etc. Page 4 of8
• 360-degree performance appraisal to collect and combine ratings from multiple evaluators – superiors,
peers, subordinates, employees themselves, outside stakeholders like clients. This way, idiosyncratic
bias from individual is offset.
• To enhance perceptions of fairness in performance appraisal, “due process” used to guard rights of
o 1) Adequate notice: Clear performance standards that employees can understand and question.
o 2) Fair hearing: Evaluated by supervisor who knows their work and in which they receive timely
feedback, as well as opportunity to present their own case.
o 3) Evidence: Appraisals based on evidence, not prejudice, corruption, or external considerations.
• Procedural fairness of how decisions are made just as important as favourable outcome. Combination of
specific types of justice influence people’s satisfaction, commitment, and performance in workplace.
• A leader is someone who can move a group of people toward a common goal – a head of state,
president of university, principal investigator of research team, executive of corporation, coach of sports
• Some are successful by winning supporters, others lead by uniting rivals, negotiating deals, etc.
The Classic Trait Approach
• Great Person Theory of History: Exceptional individuals rise up to determine the course of human events.
• Certain stable characteristics are associated with successful leadership: cognitive ability, inner drive,
leadership motivation (desire to influence others to reach a common goal), expertise, creativity, self-
confidence, integrity, and flexibility. Unique combinations of attributes best predict leadership.
• Emergence of leader also depends on time, place, and circumstances – needs, expectations, and
resources of group change,