Financial Problems in Ireland and Groupthink

Groupthink and Irish Financial Crisis

  • Efstathiou Thalia
  • Papaeracleous Elena
  • Papoulla Pantelitsa
  • Tritas Tasos
  • Tsoulli Andri
  1. Introduction

The complexity of today's modern organizations has increased the need of for effective decision-making. The capability of an company to build up and progress is dependent heavily on the power of its customers to arrive constantly at appropriate decisions. There are plenty of forces that influence your choice making process in an organization, one of these is groupthink [Thalia Ef1].

Professor Janis L. Irving, a research psychologist introduced the word "groupthink" to describe the happening where people in a group embrace the opinion of other members of the group because they really want harmony and conformity. People reserve their own values, try to decrease issue and reach a consensus decision without critical evaluation of alternative solutions. The conformity of the group gets rid of the individual's creativeness or responsibility for a step of progress decision. The participants of the group, victims of the groupthink impact, tend to bargain with the decisions of the group, leading to sub-optimized decisions. The repeated non-optimum decisions that are made lead to negative performance which may lead the downfall of the organisationorganization.

Groupthink impact can be detrimental for organizations. Individuals curb their personal thoughts and accept others view without further investigation. Groupthink can crush the invention in an corporation. Innovators may be ready to take alternative pathways but often those programs of action aren't very reasonable in a groupthink environment. Because of that many organizations neglect to respond to market movements or adopt new technologies. The organization is following a "safe" direction however in reality is unable to take decision that will extent and empower its presence in marketplaces [Thalia Ef2].

Behavioural research and studies also show that behind corporate and business and general public disasters, there is a group of individuals accountable for the decisions made, that often are victims» of the occurrence called groupthink.

A good example of such devastation was observed in the Irish financial meltdown. Peter Nyberg was appointed to research what went wrong and sometimes found behaviour exhibiting bandwagon results such as groupthink. [Thalia Ef3]

"The more amiability and esprit de corps there is among the members of your policy-making in-group, the greater the danger that the self-employed critical thinking will be replaced by groupthink, which is likely to cause irrational and dehumanizing activities aimed against out-group. "[1 [Thalia Ef4]]

2. Symptoms

According to Janis's studies the next eight symptoms of groupthink can be found:

Invulnerability

The customers of the group show an illusion of invulnerability that creates extreme optimism and promotes those to take extreme hazards, failing to reply to clear warnings of danger.

Rationale

The members tend to construct collective rationalization and they also discount warnings or other negative opinions and because of this they do not reconsider their assumptions.

Morality

Believing in inherent morality leads the group associates to ignore the moral and moral implications of their decisions.

Stereotypes

The group thinkers maintain stereotyped views of out-groups, or the "enemy groups". This makes them believe attempts to work out differences are unnecessary and unwarranted.

Pressure

The customers of the group are under direct pressure never to express quarrels or concerns against any of the group's views.

Self-censorship

Victims of groupthink avoid expressing concerns and deviations from the recognized group consensus, "they keep silent about their misgivings and even lessen the importance with their uncertainties".

Unanimity

The group members reveal the illusion of unanimity, since the majority of those customers who speak have views and judgments which appear to be unanimous, by causing the phony assumption that anyone who remains silent during a discussion is completely agreement with the others.

Mind-guards

Victims of groupthink tend to be self-appointed mind-guards, to protect the group and the leader from problematic or contradictory information that might ruin the group's cohesiveness, or create doubts about the morality of the group's views or decision

When the symptoms identified above exist in a group that is trying to produce a decision, there's a sensible chance that groupthink will happen, though it is definitely not so. When communities are under great pressure and are highly cohesive, groupthink has a greater chance of influencing the decision making process. In addition, when pressure for unanimity seems overpowering, members find it more challenging to realistically appraise the alternative courses of action open to them. These group pressures lead to irrational thinking and carelessness since teams experiencing groupthink fail to consider all alternatives and seek to keep unanimity.

Decisions formed by groupthink have low probability of achieving successful benefits.

An example of such devastation was seen in the Irish financial meltdown. Doctor of Political Sciences was appointed by the Irish Federal government to research what went wrong between bankers, regulators while others and sometimes found habit exhibiting bandwagon effects such as groupthinkDoctor o. [Thalia Ef5]

.

Commission of Investigation into the Bank Sector of Ireland,

3. Financial Problems in Ireland and Groupthink

"In economics the majority is often wrong" - J. K Galbraith [Thalia Ef6]

As with most countries worldwide, Ireland has been facing an financial recession, which includes started in 2008. Ireland presently is performing positively and it is considered so it has come out of this recession. However, by analyzing the factors that led the country up to now, groupthink was recognized as one of the reasons responsible for the crisis.

The major reason for the crisis in the united states was the unhindered expansion of the property bubble financed by the banks using low cost market funding.

Groupthink in the financial meltdown of Ireland, is mostly predicated on the survey that was published from the Commission rate Investigation in to the Bank Sector of Ireland m. Nyberg concludes that bankers, regulators and more were victim to "groupthink".

Biases in common sense and decision-making were instrumental in the development and seriousness of the crisis in Ireland. The fast financial integration and having less relevant previous experience may have increased the vulnerability of decision-makers to economic and financial reasoning that demonstrated disadvantageous.

Nyberg uses the word 'groupthink' to describe the state of mind that prevailed through the increase years, when banking companies lent out money indiscriminately. His criticism was not limited to the banks, but to other communities, like the 'mainstream'???, which bought into the bubble mentality.

Ireland's economy started to grow in the mid1990s, which is recognized as "late" compared to their European neighbours. Ireland's current economic climate took the path of expansion by offering a business friendly environment, namely with low duty rates, an extremely educated workforce as well as perhaps most of all, land property to invest. "After getting started with the Eurozone, Ireland's lenders gained increased access to wholesale money at a relatively low cost as retail and corporate deposits weren't sufficient to fund lending expansion and enabled the lenders to respond to competition. " [elena [Thalia Ef7] 1]. . As a consequence, the need for the federal government and the banking companies to keep up with this new flow became even much better, leading banks to get overly enthusiastic by the advancements before they even became alert to them.

Banks their members started to feel the huge competitiveness by overseas banks and international property investment agents and to be able to remain in the house market, they started out taking risks. They performed so without logical thinking and target. Those decisions put at risk the entire economy due to the lack of legal supervision and an insufficient regulation plan. They offered low rates and, similarly, other smaller bankers and foreign-owned banking institutions felt obliged to do the same. Those decisions put at risk the entire market because of the absence of legal guidance and an inadequate regulation policy, ignoring ethical and moral effects and having the illusion that little or nothing could go wrong, both symptoms with aspects of morality and invulnerability in groupthink setting. [UCY8]

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Banks exposed assertions with huge money and property as belongings and became more and more tempting for potential investors. Somehow, both banks and borrowers disregarded risks. Borrowers needed good thing about the formal financing policy and, as a result, lending on credit broadened so rapidly that it resulted in severe liquidity and solvency problems. As a result, Ireland experienced an economical downturn, dropped into deep tough economy and was forced to request school funding from Europe. [UCY9] ОО№ ПППОО¶ОП ОґООЅ ПЇППОПО±ОЅ ПОїП ПО№ ОёО± П†ПО±ОЅО±ОЅ ПО О±ПП ПОї ПО·ОјОО№Ої О±П†Ої ОєО±О№ ПО»О№ ПППП‡О О· О±ППО±ППО· ПОїП О±ППОјО·ПОїП ПОїП ПО ОєОЅОО№ ОЅО± О±ООЅОїОЇП ПО± ПОјО±ПО± ОєО№ОЅОґОЅОїП.

Financial integration in the euro area was deepening, and banks in Ireland got unprecedented usage of cross-border financing. This put pressure on loan provider margins in Ireland. The survey investigated the handling of the bank crisis and discovered that the turmoil was essentially "home grown". It was due to home Irish decisions and activities, rather than international trends. [UCY10] PRESSURE

The indication of unanimity, as explained above is happening again in the case irish crisis, relating to Nybergs statement. It has been argued in a number of reports that human behaviour was a determinant factor in the economic problems that Ireland confronted. As Nyberg areas in his record (research_1) when the warnings commenced, the group acted in defensive mode and overlooked their existence. It is believed that there have been arguments against a few of the determinant decisions nonetheless they were never portrayed because of unanimity and dread to express themselves led them to follow the coverage of the group). And if they were indeed portrayed, they were overlooked. [UCY11]

We could dispute that other main symptoms of groupthink such as stereotypes, where each member is totally loyal and focused on the group and its own decisions and, invulnerability, which causes group customers to be over optimistic and delusional, take risks and practice risky management, were also present.

Conclusions

The financial crisis Ireland confronted led specialists and policy creators to question their system. Investigations were conducted and they were obligated to make several re-evaluations and build stricter laws and regulations and insurance plan regulators, to be able to ensure that a crisis like the one they experienced could not emerge again.

Team leaders and facilitators need to take positive activities to avoid Groupthink, including creating constructive issue within the group, breaking framework to avoid context traps for individuals, fostering the role of the devil's advocate, using sub-groups, the 'second chance' method, a heterogeneous group and in general to use tools that foster available expression of all points of view. A head must consider that the cohesiveness of a group intensifies as time goes by, making its associates accept the goals, decisions and norms without reservation. Leaders also needs to recognize that their early manifestation of opinion can impact and inhibit an neutral talk of a project. Obviously, the culture of an organization effects the openness with which lower echelon members take part, but even in the most available organizations, people are unwilling to contradict the manager. As Andy Grove astutely points out, "It requires years to build a weather of openness, but one impulsive take action by a mature person to a divergent viewpoint can quickly eliminate it. " [reference point_2]

What is necessary now could be a vigorous individuality that participates, takes responsibility and stocks in its repercussions. The right of dissent must be reinvigorated. We have a challenge to face up to, to exercise the responsibilities of citizenship we've systematically shirked.

Ireland 's overall economy started to develop in the mid-1990s- which is regarded as "late" in comparison to their European neighbours. Ireland's economy had taken the road to expansion, by offering business friendly conditions low duty rates (i. e. ), high educated work-force and perhaps most important they offered land-property to invest. "Joining the Eurozone, Irelands banks gained increased access to wholesale money at a comparatively low priced. As retail and commercial deposits weren't sufficient to fund lending progress and enabled the banking companies to react to competition. " [elena [Thalia Ef12] 1]. Ireland 's output increased followed by, foreign lenders and property investors who began to show involvement in growing their business and services in Ireland. As collection the necessity from the Government and Banks to keep up with this new movement became more extreme; leading Bankers to get overly enthusiastic by that depth before they even became aware with it.

Banks and their people [Thalia Ef13] acquired started to feel the huge competitiveness by other overseas banks and from other overseas invest-property competitors. To be able to remain in the property market field they commence taking risks; with no rational thinking and aim; nor did they may have any second thoughts. The decisions that jeopardized the entire economy were established due to the lack of legal guidance and an insufficient regulation insurance plan. They offered low rates and likewise other smaller banks and foreign-owned lenders felt emerged to do same. Lenders exposed statements with huge cash and property as property and became increasingly more tempting for potential traders. Somehow, risks were ignored by both banks and borrowers. Borrowers had taken benefit of the formal loaning policy so that as consequence the financing on credit broadened so rapidly which it resulted in severe liquidity problems and solvency. As consequence, Ireland falls into an economical downturn, in profound recession and compelled to request school funding from Europe[Thalia Ef14].

We could dispute [Thalia Ef15] that the participants of the Finance institutions board who took the key decisions were in line with the norms of groupthink. Our example for the groupthink and financial crisis in Ireland, is mainly based on the statement that was published from the Commission payment for Investigation in to the Bank Sector in Ireland (Nyberg, 2011), which concludes that bankers, regulators yet others were based on the norms of groupthink. Mr. Peter Nyberg was appointed as the only real Member of the Payment of Research. Nyberg use the word 'groupthink' to describe the attitude that prevailed during the years of problems, when banks lent out thoroughly. [Thalia Ef16]

The illusion that nothing could go wrong, the failure to explore for other alternatives,

According to Nybergs survey (elena 3 [Thalia Ef17])as warnings started out to warn, the group acted in protective mode ignoring their existence. It is believed that there were arguments against a few of the determinant decisions but they were never raised, or if indeed they were brought up they were ignored. That is one of the primary symptoms of groupthink, were the members of the group possess the illusion of invulnerability.

Another sign that is in line with the above,

A idea in the fundamentals of the Irish property market and in the reliable procedure of financial marketplaces resulted in Groupthink, a emotional process that reduces the probability of critical views being shown.

Financial integration in the euro area was deepening, and banks in Ireland got unprecedented access to cross-border financing. This put pressure on loan company margins in Ireland. The statement looked into the handling of the bank crisis and discovered that the problems was essentially "home grown". It had been a result of local Irish decisions and actions, and not international advancements.

Groupthink occurs when a band of decision makers chooses on a course of action without questioning fundamental assumptions. As the time of prosperity sustained, executives took increasingly more financial risks based on previous judgments.

[Thalia Ef18] It's been argued by several studies that human habit was a determinant element in the economy problems Ireland experienced.

That is from associates within their group, we're able to therefore argue that group acted and were in the mode of groupthink. "As groupthink is seen as a inward-looking, self-regulating and stereotypical tendencies that can often lead to distorted and defective decision making "(elena 2). In line with this we're able to also state that the group didn't see other alternatives, didn't filter their data that is to examine them more tightly and failed re -study their analysis. The financial crisis Ireland faced, resulted in deep concerns by government bodies and policy manufacturers about their system, investigations were conducted likewise these were required to make several re-evaluations and build stricter law and insurance policy regulators, all in lines, that a crisis like the main one the experienced will never be confronted again.

[Thalia Ef19]

4. How to prevent Groupthink

Through assessment of techniques of successful communities and those of groupthink-style, analysts in this area have been able to come up with ways to avoid or limit groupthink.

Open Communication

Firstly, the group innovator should encourage wide open communication within the group and at the same time avoid stating his personal preferences and prospects. [1, 2] [Thalia Ef20]An open communication environment offers a program for objections, disagreements, misgivings, concerns and alternatives. Group market leaders should establish an environment where every judgment is important and carefully considered. It really is much more likely for group members to talk about their ideas when they know that the group they can be part of fosters open communication. [1] Relating to Janis L. Irving a head should not point out his view when assigning an activity to a group and should be absent from lots of the group meetings to avoid excessively influencing the results. [2]

Devils Advocate

Another effective way to prevent groupthink is by instructing a team member to experiment with the role of the 'devil's advocate' within the group. The team member assigned the role can take an opposing view to the majority. This method activates the dialogue of opposing views leading each member to defend his ideas and decisions in order to encourage others of their importance. Group members who cannot support their views should revise them or take up the views of others. [1]

Outside Expert

An outside expert is considered a very important shield to help guard against groupthink. The non-biased point of view predicated on research that the exterior experts bring, helps the associates to see the subject material from a variety of angles. The actual fact that outdoors experts do not possess an allegiance to the group but seek to act in the best interest of the organization makes this technique an invaluable advantage against groupthink. A business should bring in or be consulted by experts on a regular basis to allow group participants to open up to the thoughts and opinions of others. [1, 2]

Sub-groups

Furthermore, by splitting up the homogeneous mother nature of the group associates will be inspired to explore alternatives. This can be achieved by dividing the group into sub-groups, where each sub-group will present its views and then the complete group makes a decision to select one of the ideas presented. [1]

Second Chance

Lastly, the group can hold a 'second-chance' conference at a later time that provides the group one last chance to rethink the entire issue prior to making a definitive choice. [1, 2]

5. Empower work teams [Thalia Ef21]

Whether the relationship is with your team, supervisor, administrator, customer or coworker, you want to make your social romantic relationships positive, supportive, clear, and empowering. In all circumstances and situations, working and cooperating with others is very important to all kind of associations. Whether that is at an individual level, professional level, or even nationwide level as explained above. Therefore, it's important to maintain groups that are based on trust and keep the lines of communication between your group members open.

Creating reliable and competent teams is challenging but necessary for an organisation?? to be successful. A comfortable and warm atmosphere is vital, so as the associates will feel free and self-confident to express their thoughts and opinions. However, the amount of informality differs, with respect to the situation.

The concept of synergy is of pivotal importance in a group, thus the target setting up systems must target not only on the individual level but on the group level as well. Mutual respect within a group should be advertised by regarding everyone in the decision-making process.

In order to have well performing groups, there should be clear goals, clear tasks and duties, positive romantic relationships, strong management, clear types of procedures for problem solving, planning, completing jobs and analyzing performance. The introduction of team nature is also very important to empowering work clubs.

In addition to the aforementioned, the conferences must be effective, so that resources and energy wil not go to squander. The objectives from the team's performance and expected results should be obviously communicated, as well as why the team was created in the first place.

The team members and especially the first choice should focus on conflicts that may come up. If people let the problems to come to the surface, but in a constructive way this is gainful for the team.

6. Conclusions

Conclusions

The financial crisis Ireland faced led regulators and policy creators to question their system. Investigations were conducted and they were forced to make several re-evaluations and build stricter laws and regulations and insurance plan regulators, in order to ensure a crisis like the main one they experienced would never emerge again.

Team market leaders and facilitators need to take positive actions to avoid Groupthink, including creating constructive turmoil within the group, breaking context to avoid context traps for participants, fostering the role of the devil's advocate, using sub-groups, the 'second chance' method, a heterogeneous group and generally speaking to utilize tools that foster wide open expression of most tips of view. A leader must consider that the cohesiveness of an organization intensifies as time goes by, making its associates accept the goals, decisions and norms without booking. Leaders should also notice that their early manifestation of view can impact and inhibit an unbiased discussion of a task. Definitely, the culture of a business impacts the openness with which lower echelon participants take part, but even in the most available organizations, people are reluctant to contradict the boss. As Andy Grove astutely points out, "It requires years to create a environment of openness, but one impulsive action by a senior person to a divergent viewpoint can quickly demolish it. " [guide_2]

What is necessary now is a vigorous personality that participates, will take responsibility and stocks in its consequences. The proper of dissent must be reinvigorated. We have a challenge to face up to, to exercise the tasks of citizenship we have systematically shirked.

REFERENCES

Thalia

[1] Irving Janis, Groupthink (early on draft), p3 http://department. monm. edu/cata/McGaan/Classes/INTG415/Group-think. pdf, seen September 2014

tasos

http://www. irishexaminer. com/viewpoints/columnists/guest-columnist/we-need-to-learn-lessons-of-irish-history-and-avoid-group-think-190190. html

2 http://www. au. af. mil/au/awc/awcgate/army/groupthink. htm

  • http://humanresources. about. com/od/involvementteams/a/team_one_stop. htm
  • http://humanresources. about. com/od/involvementteams/a/twelve_suggestion_team. htm
  • http://www. trg-inc. com/services-build. html
  • http://www. indianresearchjournals. com/pdf/IJSSIR/2012/August/13. pdf
  • http://people. rice. edu/uploadedFiles/People/TEAMS/Twelve%20Ways%20to%20Build%20an%20Effective%20Team. pdf

http://www. irishtimes. com/blogs/politics/2012/04/10/the-mainstream-and-groupthink/

http://www. tara. tcd. ie/bitstream/handle/2262/56169/WP389. pdf?sequence=1

http://www. politics. ie/forum/economy/158625-nyberg-report-findings. html

http://www. thejournal. ie/nyberg-report-irish-banks-corporate-governance-department-of-finance-123744-Apr2011/

http://oneoffireland. wordpress. com/2011/05/31/the-nyberg-generation/

1

[Thalia Ef1]To groupthink sinithw exei arnitika influences. . isws na prepei na allaxei oli I protasi

[Thalia Ef2]Isws na thelei kai kati allo edw I akoma tha mporuse to sigkekrimeno topic " why is it damaging for organizations" na mpei meta ta symptoms.

[Thalia Ef3] NA MPEI META. . . EISAGWGIKO IRLANDIAS

[Thalia Ef4]quote

[Thalia Ef5] NA MPEI META. . . EISAGWGIKO IRLANDIAS

[Thalia Ef6]citation

quote

[Thalia Ef7]Citation

[UCY8]Morality

[UCY9]Invulrenability

[UCY10]pressure

[UCY11]Unanimity & mindguards

[Thalia Ef12]Citation

[Thalia Ef13]?

[Thalia Ef14]ООјОПОїОјО·ОЅО№О± / IMF

[Thalia Ef15]?

[Thalia Ef16]to idio akrivws anaferete pio panw. PLAGIARISM

[Thalia Ef17]Nyberg

[Thalia Ef18]Apo pantelitsa_ taftisi me symptoms

[Thalia Ef19]Apo elena _ epimeleia-taftisi me sypmtoms

[Thalia Ef20]citation

[Thalia Ef21]to sigkekrimeno part den to anefere katholu sto lecture. Na sigureftume oti to thelei

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