20 Mar Summary: Select one of the following terms for your research: centralization, contingency, decentralization, efficiency, mechanis

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Groupthink

John Smith

Campbellsville University

BA611 – Organizational Theory

Dr. Jane Corbett

January 17, 2021

Definition

Groupthink is a pattern of thought characterized by self-deception, forced manufacture of consent, and conformity to group values and ethics.

Summary

Valine (2018) discussed how powerful an effect groupthink can have on community and peers. It followed two case studies about JPMorgan Chase and Wells Fargo, which explains how many sources and credentials the author has used. The focus of the article is that circumstances have occurred inside these companies which were able to affect the entire economy as well. Groupthink is usually followed by irrational thinking and decision making which completely ignores alternatives and constantly goes for the primary decision. The large difference between group and groupthink is that the group consists of members of various backgrounds and experiences, while groupthink usually has members of similar ones. Further, there is no way for groupthink to recover from bad decisions mainly because all members have a similar understanding and point of the view towards a certain topic. The illusion of invulnerability is the main characteristic related to groupthink, where teammates ignore the danger, take extreme risks, and act highly optimistic.

Discussion

Groupthink is characterized by incorrect decisions that groups make mainly due to mental efficiency, reality testing, and moral judgment. Many conditions can cause groupthink to occur, and the most frequent ones are collective rationalization, belief in inherent morality, stereotyped views of out-groups, direct pressure on dissenters, and self-censorship.

The collective rationalization explains how different warnings are against the group thinking, so and where those opinions can create a misunderstanding. Belief in inherent morality points out that members ignore the ethical and moral consequences of decisions because they believe the correctness of their cause. The stereotyped views of out-groups are the characters to create a negative feeling about opposition outside the group environment. The direct pressure on dissenters is where team leaders discuss all members that have different opinions and philosophies than the group’s commitments and agreement. Lastly, the self-censorship is where teammates keep their thoughts and opinions without expressing them to others.

The case study about the London Whale explains how JPMC, one of the largest banks in the world, has lost 6.5 billion dollars due to bad and poor investment decisions. Everything occurred in April and May of 2012, where larger trading loss happened in Chase’s Investment Office throughout the London branch. The main transaction that affected Morgan Chase was credit default swaps (CDS) and it was shown that famous trader Bruno Iksil has gathered significant CDS position in the market at that time. Following this case, the internal control has risen on a higher level while many requirements and investigations have occurred as well (Valine, 2018).

The situation about Wells Fargo was slightly different, where the company’s philosophy mainly focused on risk management at every single level. As groupthink believes that their motto is better than everyone’s else, Wells Fargo executives hardly believed that their operating model was superior to any other company in the market. However, push strategy and sales scandal put too much darkness on all good things that Wells Fargo has been creating during the decades, which still has consequences today (Valine, 2018).

Groupthink is characteristically based on dependent thinking of group members where there is no encouragement for different opinions. Valine (2018) explained how beneficial and dangerous groupthink can be at the same time, so a sense of awareness must always be present. Large corporations such as JPMorgan Chase and Wells Fargo have almost destroyed all their operations and success with one bad decision which explains why decision-making is critical in the business world today. An organization can go from nowhere to enormous success, or from success to complete disaster in only one day. 

References

Valine, Y. A. (2018). Why cultures fail: The power and risk of groupthink. Journal of Risk Management in Financial Institutions, 11(4), p. 301-307.