How Managers Perceive the World Around ThemThem

Finkelstein et al. (2008: 49) propose a three stage information-ltering model in order to understand how business elites perceive what is going on around them. On the basis of the perception and interpretation of the information that nally reaches the business elites' minds after passing through the lters, the top executives will later take action

and make decisions. The three stage information-ltering process comprises: limited

eld of vision, selective perception and interpretation.

4.3.1. Limited Field of Vision

The rst lter is the limited eld of vision. In this stage of the ltering process, the business elites decide on which issues they will focus their attention and time, and in which mixture ratio they will distribute their time and attention on the issues they con-sider to be important (e.g. research&development, nance, competitors, advertisement, sales, operations and production, political connections, eciency, legal issues, forming top-management teams, communication, etc.). Due to a constant information overload, they face the problem that they have to choose on which issues they focus their time and attention without having been able to study all issues in depth previously. Therefore, it is dicult to determine which issues are the most important ones. They cannot look at everything, just like nobody can look 360 degrees around oneself. Furthermore, the business elites may not even be aware of some important issues, developments, threats and opportunities within and outside of their organizations. It is about setting priorities with the risk of neglecting something that is of crucial importance (Finkelstein et al., 2008: 46-47). The situation of the top executive is similar to the one of a busy university professor: he or she has a limited amount of time and attention and has to decide which books he reads and which research projects he conducts. He may not even be fully aware of all the important books that are published around the world every month and all the research projects that he could do.

After having decided on which issues the top manager focuses his time and attention, he or she will have to decide which information channels and sources he uses and which he neglects. He may decide, for example, to read the report of a consultant instead of asking employees of the enterprise he leads. Or he studies an annual report instead of attending a meeting. Or he attends an international conference instead of visiting and controlling the production plants of his enterprise. Or he spends time making political connections instead of talking to the contractors or observing the competitors. These decisions are strongly inuenced by his or her personality (See more on how the elite's personality inuences which eld of vision they choose in the section Cognitive structure and style).

4.3.2. Selective Perception

The next ltering stage is the selective perception of what the business elites are reading, hearing or seeing. When a CEO decides, for example, to focus his time and attention mainly on reading business and consultant's reports, which parts of these reports does he really read carefully, analyze, think about, make notes and interpret them, and which parts does he ignore or only rapidly skim? Usually, top managers do not read entire reports carefully, instead they focus on what they feel is most important. The same occurs during meetings: some of what has been said will be meaningful to him and catch his attention, while other information, which may be equally important, may not reach the top executives attention and mind, because he may not understand it or because it does not t into his world-view, or because he does not value the opinion of the speaker (Finkelstein et al., 2008: 47-48).

4.3.3. Interpretation

The third step is the interpretation and categorization of the information which has reached the business elites' minds. Here the top executives apply the prefabricated cat-egories, theories and methods in which they are used to think and to make sense of the information and attach meaning and importance to it. Dierent top managers may attach dierent degrees of importance to the categories and categorize the information dierently. Some top executives may primarily try to avoid threats and risks and, there-fore, scan the information for anything that could be a risk, ignoring other important issues like opportunities, innovation and chances.

Some of the categories in which business elites may think include:

opportunity or threat,

protable or not protable,

conict or harmony,

innovative or not innovative,

exceptional or standard,

is it necessary to take actions or is it better to wait and observe?,

good for my career or not good for my career,

increases my power or decreases my power,

increases my pay or decreases my pay,

increases the company's or the business elites' prestige or not?,

interesting and fun or boring and conventional.

Information that cannot be categorized in the way the executives are used to do it, is more likely to be ignored because it would take considerable time and be more ex-hausting to develop new categories, theories and ways of thinking. Depending on the

software of the mind, which was developed by the executives' education, prior experi-ences and socialization, business elites come to dierent interpretations and conclusions.

One example may clarify how during the interpretation stage of the information-ltering process, dierent interpretation and conclusions can be drawn from the same data basis:

Milliken (1990) found that college executives varied widely in drawing implications from a well-publicized and veriable external trend, the imminent shrinking of the eighteen-to twenty-two-year-old population in the United States. Some executives saw this trend as a grave threat, others expressed little concern, and some even asserted that the trend would not occur. Beyond their varying interpretations of the trend itself, the executives diered even more widely in their judgments about how their institutions should respond to the trend (Finkelstein et al., 2008: 48).

Conscious and unconscious decisions of the business elites during these three stages of the information-ltering process are all strongly inuenced by the elites' personalities, values, habits and socialization that is, above all, their education and prior experiences:

It is the `executive's orientation', the person's interwoven set of psychological and ob-servable characteristics, that engages the ltering process, and which in turn yields a construed reality, gives rise to strategic choices, and ultimately aects organizational performance. These orienting characteristics are the `given' that an executive brings to an administrative situation (March and Simon 1958) (Finkelstein et al., 2008: 49).

4.4. How Cognitive Content, Structures and Styles Inuence the Decision-Making Process

After modeling the information-ltering process of business elites, the next task is to analyze which factors inuence the decision business elites take on every stage of the information-ltering process. The cognitive content, structure and style inuence every stage of the information-ltering process. Finkelstein et al. describe these three terms as follows:

Ranging from the most basic and disaggregated to the most complex and interwoven, the three elements are (1) cognitive content, or what the executive knows; (2) cognitive structure, or how an executive's knowledge and beliefs are arranged in his or her mind;

and (3) cognitive style, or how the executive's mind works. (Finkelstein et al., 2008:

59).

4.4.1. Cognitive Content

The cognitive content is what the top manager has experienced and learned, in particu-lar the top executive's education and professional experience. A top executive who has studied engineering, for example, may have a great and extensive knowledge of technol-ogy and may be able to understand and assess new technological developments faster than other top executives who have studied nance, management or law. In addition, he may be more interested in technology than in nancial issues and therefore set his

eld of vision, his focus, on new technological developments. That is where he has a rapid understanding and where he is at best. Top executives often seem to gravitate towards what they are best at. He possibly decided to study engineering because he already considered it to be more important and more interesting. Later, during his pro-fessional career, he is likely to continue with this value orientation, setting his eld of vision on technological developments. But cognitive content also inuences the decisions that top executives make on the other two stages of the information-ltering process (se-lective perception and interpretation). The top executive may be able to interpret the meaning and eects of new technological developments and innovations faster and more accurately than some of his colleagues, while he may neglect or just rapidly skim the marketing, legal or nancial aspects of the new technology. He may not be interested in the question whether the new technology is appealing to a mass market.

Similar eects may be expected with top executives who studied IT, nance, business administration or law. The lawyers may focus on legal issues because that is what they understand rapidly and what they consider to be most important. In the rst information-ltering stage, they may set the focus on legal issues. In the second, they may read carefully the parts of reports which purely deal with legal issues, while ignoring numbers and technical or mathematical issues because it would take too much time and eort for them to understand them. The top managers who studied marketing may only focus on marketing related issues, because they may nd it dicult to understand technological, legal or nancial issues (Finkelstein et al., 2008: 60-61).

Another aspect are prior experiences which may still inuence the decisions and attitudes of top managers many years after having made these experiences because they have left deep marks in their memories. Those who have experienced stock-market crashes, economic crisis and ination at some time of their lives, for example, may later focus primarily on the stability of their enterprise instead of taking risks and searching for