![paradox that reward can undermine rather than enhance intrinsic
motivation has been observed in many settings and with both
children and adults (Deci & Ryan, 1985; Tang & Hall, 1995).
Accept money for a leisure activity, and before you know it,
what used to be “play” comes to feel more like “work.” In the
long run, this can have unintended
No reward
Unexpected reward
Expected reward
overjustification effect
negative effects on the quality of your performance. In a series
of studies, Teresa Amabile (1996) and others had participants
write poems, draw or paint pictures, make paper collages, and
generate creative solu- tions to business dilemmas.
Consistently, they found that people are more creative when
they feel interested and challenged by the work itself than when
they feel pressured to make money, fulfill obligations, meet
deadlines, win competitions, or impress others. When Amabile
had art experts rate the works of professional artists, she found
that their commissioned work (art they were contracted for) was
judged as lower in quality than their noncommissioned work.
People are likely to be more creative when they are intrinsically
motivated in relation to the task, not compelled by outside
forces.
Looking back over this research, Beth Hennessey (2015) notes
that “[i]f I were secretary of education,” she would focus on
ways to enhance intrinsic motivation in the classroom—as
opposed to the use of grades, testing standards, competition,
and other extrinsic means of motivating students.
But wait. If extrinsic benefits serve to undermine intrinsic
motivation, should teachers and parents not offer rewards to
their children? Are the employee incen- tive programs that are
so often used to motivate workers in the business world doomed
to fail, as some (Kohn, 1993) have suggested? This turns out to
be a complex question that depends on how the reward is
perceived and by whom. If a reward is presented in the form of](https://image.slidesharecdn.com/assignmentoursenseofselfrequiredresourcesreadreviewth-221015124039-6726cab8/85/Assignment-Our-Sense-of-Self-Required-ResourcesReadreview-th-docx-20-320.jpg)
Assignment Our Sense of Self Required ResourcesReadreview th.docx
- 1. Assignment: Our Sense of Self Required Resources Read/review the following resources for this activity: · Textbook: Chapter 3 · Lesson · Minimum of 3 scholarly sources (in addition to the textbook) Instructions This week we explored the topics of self-concept, self-esteem and self-presentation. Take some time to reflect on your own self-concept. Who are you? How do you define yourself? How do you feel about your abilities to be successful and accomplish your goals? What image of yourself do you currently, or do you wish to moving forward present to the world. Keep that introspective reflection in mind as you move through this assignment, considering how your own understanding of these ideas has evolved over the years to your present level of development. Now, pretend that you have been asked to speak to a group of middle school students on the topic of bullying as it relates to self-concept, self-esteem and self-presentation. Create a PowerPoint presentation that addresses the following: · Keeping in mind your audience of 12-14 year olds, define self- concept, self-esteem and self-presentation. · Analyze and explain the possible causes of bullying in the context of these three concepts. · Analyze and explain the impact of bullying (on the victim and aggressor) of these three concepts. · Provide specific actions or behaviors kids in your audience can use to stop or respond positively when they see bullying, are bullied, or are tempted to bully. As you complete your presentation, be sure to: · Use speaker's notes to expand upon the bullet point main ideas on your slides, making references to research and theory with citation.
- 2. · Proof your work · Use visuals (pictures, video, narration, graphs, etc.) to compliment the text in your presentation and to reinforce your content. · Do not just write a paper and copy chunks of it into each slide. Treat this as if you were going to give this presentation live to a group of middle school kids - be relevant, engaging, and focused. Presentation Requirements (APA format) · Length: 8-10 slides (not including title, introduction, and references slides) · Font should not be smaller than size 16-point · Parenthetical in-text citations included and formatted in APA style · References slide (a minimum of 3 outside scholarly sources plus the textbook and/or the weekly lesson for each course outcome) · Title and introduction slide required Chapter 3 p54. Can you imagine living a meaningful or coherent life without a clear sense of who you are? In The Man Who Mistook His Wife for a Hat, neurologist Oliver Sacks (1985) described such a person—a patient named William Thompson. According to Sacks, Thompson suffered from an organic brain disorder that im- pairs a person’s memory of recent events. Unable to recall anything for more than a few seconds, Thompson was always disoriented and lacked a sense of inner continuity. The effect on his behavior was startling. Trying to grasp a constantly vanishing identity, Thompson would construct one tale after another to account for who he was, where he was, and what he was doing. From one moment to the next, he would improvise new identities—a grocery store clerk, a minister, or a medical patient, to name just a few. In social settings, Thompson’s
- 3. behavior was especially intriguing. As Sacks (1985) observed, The presence of others, other people, excite and rattle him, force him into an end- less, frenzied, social chatter, a veritable delirium of identity-making and -seeking; the presence of plants, a quiet garden, the nonhuman order, making no social demands upon him, allow this identity-delirium to relax, to subside. (p. 110) Thompson’s plight is unusual, but it highlights two important points— one about the private “inner” self, the other about the “outer” self we show to others. First, the capacity for self- reflection is necessary for people to feel as if they understand their own motives and emotions and the causes of their behavior. Unable to ponder his own actions, Thompson appeared vacant and without feeling—”desouled,” as Sacks put it. Second, the self is heavily influenced by Putting Common SenSe to the Test social factors. Thompson himself seemed compelled to put on a face for others and to improvise characters for the company he kept. We all do, to some extent. We may not create a kaleidoscope of multiple identities as Thompson did, but the way we manage ourselves is influenced by the people around us. This chapter examines the ABCs of the self: A for affect, B for behavior, and C for cognition. First, we ask a cognitive question: How do people come to know themselves, develop a self-concept, and maintain a stable sense of identity? Second, we explore an affec- tive, or emotional, question: How do people evaluate themselves, enhance their self-images, and defend against threats to their self-esteem? Third, we confront a behavioral question: How do people regulate their own actions and present themselves to others accord- ing to interpersonal demands? As we’ll see, the self is a topic that has attracted unprecedented interest among social psychologists (Leary & Tangney, 2003; Sedikides & Spencer, 2007; Swann & Bosson, 2010; Vohs & Finkel, 2006).
- 4. The Self-Conceptp55 Have you ever been at a noisy gathering—holding a drink in one hand and a spring roll in the other, struggling to have a conversation over music, vibrating phones, and the chatter of voices—and yet managed to hear someone at the other end of the room say your name? If so, then you have experienced the “cocktail party effect”—the tendency of people to pick a personally relevant stimulus, like a name, out of a complex and noisy environment (Cherry, 1953; Conway, Cowan, & Bunting, 2001). Even infants who are too young to walk or talk exhibit the ten- dency to respond to their own name (Newman, 2005). To the cognitive psycholo- gist, this phenomenon shows that human beings are selective in their attention. To the social psychologist, it also shows that the self is a brightly lit object of our own attention. The term self-concept refers to the sum total of beliefs that people have about themselves. But what specifically does the self-concept consist of? Ac- cording to Hazel Markus (1977), the self-concept is made up of cognitive mole- cules she called self-schemas: beliefs about oneself that guide the processing of self-relevant information. Self-schemas are to an individual’s total self-concept what hypotheses are to a theory or what books are to a library. You can think of yourself as masculine or feminine, as independent or dependent, as liberal or conservative, as introverted or extroverted. Indeed, any specific attribute may have relevance to the self-concept for some people but not for others. The self- schema for body weight is a good example. Men and women who regard them-selves as overweight or underweight, or for whom body image is a conspicuous aspect of the self-concept, are considered schematic with respect to weight. For body-weight schematics, a wide range of otherwise mundane events—maybe a trip to the supermarket, the sight of a fashion model, dinner at a restaurant, a day at the beach, or watching a friend diet—may trigger thoughts about the self. In contrast, those who do not regard their own weight as extreme or as an important part of
- 5. their lives are aschematic on that attribute (Markus et al., 1987). It is important to realize that people are multifaceted and that our self-concept may consist of a multitude of self-schemas. As we will see shortly, people who identify with two cultures may have a “double consciousness” about who they are and hold different self-schemas that fit within each culture. African Americans, for example, have one self-schema that fits generally within mainstream American culture and another tied more specifically to African American culture (Brannon, Markus, & Taylor, 2015). Rudiments of the Self-Concept Clearly the self is a special object of our attention. Whether you are mentally focused on a memory, a tweet, a foul odor, the song in your head, your growl- ing stomach, or this sentence, consciousness is like a “spotlight.” It can shine on only one object at a point in time, but it can also shift rapidly from one object to another and process information outside of awareness. In this spotlight, the self is front and center. But is the self so special that it is uniquely represented in the neural circuitry of the brain? And is the self a uniquely human concept, or do other animals also distinguish the self from everything else? Is the Self Specially Represented in the Brain?As illustrated by the story of William Thompson that opened this chapter, our sense of identity is biologically rooted. In The Synaptic Self: How Our Brains Become Who We Are, neuroscientist Joseph LeDoux (2002) argues that the synaptic connections in the brain provide the biological base for memory, which makes possible the sense of continuity that is needed for a normal identity. In The Self Illusion: How the Social Brain Creates Identity, developmental psychologist Bruce Hood (2012) notes that our sense of self emerges in childhood through our social interactions—and that it is a mere illusion, “a powerful deception generated by our brains for our own benefit.” In The Lost Self: Pathologies of the Brain and Identity, Todd Feinberg and Julian Keenan (2005) describe how the self can be
- 6. transformed or completely destroyed by severe head injuries, brain tumors, diseases, and exposure to toxic substances that damage the brain and nervous system. Social neuroscientists have started to explore these possibilities. Using PET scans, fMRI, and other imaging techniques that capture the brain in ac- tion, these researchers are finding that certain areas become more active when laboratory participants see a picture of themselves rather than a picture of another person (Platek et al., 2008), when they viewed self-relevant words such as their own name or street address rather than other-relevant words (Moran et al., 2009), and when they take a first-person perspective while play- ing a video game as opposed to a third-person perspective (David et al., 2006). As we will see throughout this chapter, the self is a frame of reference that powerfully influences our thoughts, feelings, and behaviors. Not all aspects of the self are housed in a single structure of the brain. However, the bulk of research does seem to suggest that various self-based processes can be traced to activities occurring in certain areas (Qin, Duncan, & Northoff, 2013; Heatherton, 2011). Do Nonhuman Animals Show Self-Recognition?When you stand in front of a mirror, you recognize the image as a reflection of yourself. But what about dogs, cats, and other animals—how can we possibly know what nonhumans think about mirrors? In a series of studies, Gordon Gallup (1977) placed different species of animals in a room with a large mirror. At first, they greeted their own images by vocalizing, gesturing, and making other social responses. After several days, only great apes (chimpanzees, gorillas, and orangutans)—but not other animals—seemed capable of self-recognition, using the mirror to pick food out of their teeth, groom themselves, blow bubbles, and make faces for their own entertainment. From all appearances, the apes recognized themselves. In other studies, Gallup anesthetized the animals, then painted an odor- less red dye on their brows and returned them to the mirror. Upon seeing the red spot, only the apes spontaneously
- 7. reached for their own brows—proof that they perceived the image as their own (Povinelli et al., 1997; Keenan et al., 2003). Among the apes, this form of self-recognition emerges in young ad- olescence and is stable across the life span, at least until old age (de Veer et al., 2003). By using a similar red dye test (without anesthetizing the infants), developmental psychologists have found that most humans begin to recognize themselves in the mirror between the ages of 18 and 24 months (Lewis & Brooks-Gunn, 1979). Many researchers believe that self-recognition among great apes and human infants is the first clear expression of the concept “me.” Recent research suggests that certain intelligent non- primates can also recognize themselves. In one study, researchers at a New York aquarium found that two bottlenose dolphins marked with black ink often stopped to examine themselves in a mirror (Reiss & Marino, 2001). In a second study, researchers found that three Asian elephants placed in front of a jumbo-sized mirror used the mirror to inspect themselves—as when they moved their trunks to see the insides of their mouths, a part of the body they usually cannot see (Plotnik et al., 2006). In contrast, testing of thirty-four giant pandas of varying ages showed that they did not recognize their own images in the mirror (Ma et al., 2015). It’s important not to assume from this research that the mirror test is a pure measure of self-recognition or that it emerges at the same age throughout the world. Tanya Broesch and others (2011) tested children between the ages of 33 and 72 months in a number of countries. In line with past research, 88% of American children and 77% of Canadian children “passed” the test. Yet elsewhere it was only 58% in Saint Lucia, 52% in Peru, and 51% in Grenada; only two children passed in Kenya and none did so in Fiji. Based on their observations, the re- searchers speculated that the children in these non-Western countries did not lack self-recognition. They knew it was their image in the mirror but—having been raised for compliance and trained not to ask questions—they did not dare touch or remove
- 8. the mark. Whatever the interpretation, this cross-cultural research raises questions as to whether the mirror test can be used to measure the self-concept (Broesch et al., 2011). What Makes the Self a Social Concept?The ability to see yourself as a dis- tinct entity in the world may be a necessary first step in the evolution and develop- ment of a self-concept. The second step involves social factors. Sociologist Charles Horton Cooley (1902) introduced the term looking-glass self to suggest that other people serve as a mirror in which we see ourselves. Expanding on this idea, George Herbert Mead (1934) added that we often come to know ourselves by imagining what significant others think of us and then incorporating these perceptions into our self-concepts. Picking up where the classic sociologists left off, Susan Andersen and Serena Chen (2002) theorized that the self is “relational”—that we draw our sense of who we are from our past and current relationships with the significant others in our lives. It is interesting that when Gallup tested his apes, those that had been raised in isolation—without exposure to peers— did not recognize themselves in the mirror. Only after such exposure did they begin to show signs of self-recognition. Among human beings, our self-concepts match our perceptions of what others think of us. Illustrating our capacity for “meta- insight,” research also shows that people can distinguish between how they perceive themselves—for example, how smart, funny, or outgoing—and how others see them (Carlson et al., 2011). In fact, it seems that we can tell when our perceptions of what others think of us are more or less correct (Carlson & Furr, 2013). In recent years, social psychologists have broken new ground in the effort to understand the social self. People are not born thinking of themselves as smart, lazy, reckless, likable, shy, or outgoing. So where do their self-concepts come from? In the coming pages, the following sources are considered: introspection, perceptions of our own behavior, other people, autobiographical memories, and the cultures in which we live.
- 9. Introspection Let’s start at the beginning: How do people achieve insight into their own beliefs, attitudes, emotions, desires, personalities, and motivations? Although common sense makes this question seem ludicrous, many social psychologists have sought to answer the question of how, and how well, people gain self-knowledge (Vazire & Wilson, 2012). Think about this: Don’t you know what you think because you think it? And don’t you know how you feel because you feel it? Look through popular books on how to achieve self-insight, and you’ll find the unambiguous answers to these questions to be yes. Whether the prescribed technique is yoga, meditation, psychotherapy, religion, dream analysis, or hypnosis, the advice is basically the same: Self-knowledge is derived from introspection, a looking inward at one’s own thoughts and feelings. If the how-to books are correct, it stands to reason that no one can know you as well as you know yourself. Thus, people tend to assume that for others to know you at all, they would need information about your private thoughts, feelings, and other inner states—not just your behavior. But is this really the case? Most social psychologists are not sure that this faith in introspection is justified. Some forty years ago, Richard Nisbett and Timothy Wilson (1977) conducted a series of experiments in which they found that research participants often could not accurately explain the causes or correlates of their own behavior. This observation forced researchers to confront a thorny question: Does introspection provide a direct pipeline to self-knowledge? In Strangers to Ourselves, Wilson (2002) argued that it does not. In fact, he finds that introspection can sometimes lead us astray on the road to self-knowledge. In a series of studies, he found that the attitudes people reported having about different objects corresponded closely to their behavior toward those objects. The more participants said they enjoyed a task, the more time they spent on it; the more attractive they found a
- 10. scenic landscape, the more pleasure was revealed in their facial expressions; the happier they said they were with a current dating partner, the longer the relationship with that partner ultimately lasted. Yet after participants were told to analyze the reasons for how they felt, the attitudes that they reported no longer corresponded to their behavior. There are two problems. The first, as described by Wilson, is that human beings are mentally busy processing information, which is why we so often fail to understand our own thoughts, feelings, and behaviors. Apparently, it is possible to think too much and be too analytical, only to get confused. In Self-Insight: Roadblocks and Detours on the Path to Knowing Thyself, David Dunning (2005) points to a second type of problem in self- assessment: that people overestimate the posi- tives. Most people, most of the time, think they are better than average, even though it is statisti- cally impossible for this to happen. As we will see in our later discussion of self- enhancement, people from all walks of life tend to overrate their own skills, their prospects for success, the accuracy of their opinions, and the impressions they form of others—possibly with dire consequences for their health and well-being. We will also see, however, that many people have insight into their own positive—and sometimes negative—biases. In a study that demonstrates the point, Kathryn Bollich and others (2015) found that most people who harbor biased self-perceptions (for example, about how warm, dependable, stable, and funny they are relative to how they are rated by their own peers) accurately describe themselves as biased when prompted. When it comes to self-insight, people do have difficulty projecting forward and predicting how they would feel in response to future emotional events—a pro- cess known as affective forecasting. Imagine that you have a favorite candidate in an upcoming political campaign. Can you anticipate how happy you would be one month after the election if this candidate were to win? How unhappy would you be if he or she were to lose? Closer to home, how happy would you be six
- 11. months after winning a million-dollar lottery? Or how unhappy would you be if you were injured in an automobile accident? In a series of studies, Timothy Wilson and Daniel Gilbert (2003) asked re- search participants to predict how they would feel after various positive and nega- tive life events and compared their predictions to how others experiencing those events said they actually felt. Consistently, they and others have found that people overestimate the strength and duration of their emotional reactions, a phenom- enon they call the impact bias (Wilson & Gilbert, 2013). In one study, junior pro- fessors predicted that receiving tenure would increase their happiness levels for several years, yet professors who actually received tenure were no happier several years later than those not granted tenure. In a second study, voters predicted they would be happier a month after an election if their candidate won than if he or she lost. In actuality, supporters of the winning and losing candidates did not differ in their happiness levels one month after the election. There are two possible reasons for the impact bias in affective forecasting. First, when it comes to negative life events—such as an injury, illness, or big fi- nancial loss—people do not fully appreciate the extent to which our psychological coping mechanisms help us to cushion the blow. In the face of adversity, human beings can be remarkably resilient—and not as devastated as we fear we will be (Gilbert et al., 1998). In fact, people are even more likely to overlook the coping mechanisms that others use. The result is a self–other difference by which we tend to predict that others will suffer even longer than we will (Igou, 2008). A second reason for overestimates is that when we introspect about the emotional impact on us of a future event—say, the breakup of a close relationship—we become so focused on that single event that we neglect to take into account the effects of other life experiences. To become more accurate in our predictions, then, we need to force ourselves to think more broadly, about all the events that impact us. In one study, college students were asked to predict their emotional reactions
- 12. to their school football team’s winning or losing an important game. As usual, they tended to overestimate how long it would take them to recover from the victory or defeat. This bias disappeared, however, when the students first completed a “prospec- tive diary” in which they estimated the amount of future time they will spend on everyday activities like going to class, talking to friends, studying, and eating meals (Wilson & Ross, 2000). Self-Perception Regardless of what we can learn from introspection, Daryl Bem (1972) proposed that people can learn about themselves the same way outside observers do—by watching their own behavior. Bem’s self-perception theory is simple yet pro- found. To the extent that internal states are weak or difficult to interpret, people infer what they think or how they feel by observing their own behavior and the situation in which that behavior takes place. Have you ever listened to yourself arguing with someone in an e-mail exchange, only to realize with amazement how angry you were? Have you ever devoured a sandwich in record time, only then to conclude that you must have been incredibly hungry? In each case, you made an inference about yourself by watching your own actions. There are limits to self-perception, of course. According to Bem, people do not infer their own internal states from behavior that occurred in the presence of com- pelling situational pressures such as reward or punishment. If you argued vehe- mently or wolfed down a sandwich because you were paid to do so, you probably would not assume that you were angry or hungry. In other words, people learn about themselves through self-perception only when the situation alone seems insufficient to have caused their behavior. Over the years, a good deal of research has supported self- perception theory. When people are gently coaxed into saying or doing something and when they are not otherwise certain about how they feel, they often come to view themselves in ways that
- 13. are consistent with their public statements and behaviors (Chaiken & Baldwin, 1981; Kelly & Rodriguez, 2006; Schlenker & Trudeau, 1990). In one study, participants induced to describe themselves in flattering terms scored higher on a later test of self-esteem than did those who were led to describe themselves more modestly (Jones et al., 1981; Rhodewalt & Agustsdottir, 1986). In another study, people who were maneuvered by leading questions into describing themselves as introverted or extroverted—whether or not they really were— often came to define themselves as such later on (Fazio & Zanna, 1981; Swann & Ely, 1984). British author E. M. Forster long ago anticipated the theory when he asked, “How can I tell what I think ‘til I see what I say?” Self-perception theory may have even more reach than Bem had anticipated. Bem argued that people sometimes learn about themselves by observing their own freely chosen behavior. But might you also infer something about yourself by observing the behavior of someone else with whom you completely identify? In a series of studies, Noah Goldstein and Robert Cialdini (2007) demonstrated this phenomenon, which they call vicarious self-perception. In one experiment, for example, they asked college students to listen to an interview with a fellow stu- dent who had agreed afterward to spend a few extra minutes helping out on a project on homelessness. Before listening to the interview, all participants were fitted with an EEG recording device on their foreheads that allegedly measured brain activity as they viewed a series of images and words. By random assign- ment, some participants but not others were then told that their brain-wave pat- terns closely resembled that of the person whose interview they would soon hear—a level of resemblance, they were told, that signaled genetic similarity and relationship closeness. Would participants in this similarity feedback condition draw inferences about themselves by observing the behavior of a fellow student? Yes. In a post-interview questionnaire, these participants (compared to those in the no- feedback control group) rated themselves as more sensitive and
- 14. as more self-sacrificing if the student whose helpfulness they observed was said to be similar, biologically. What’s more, when the session was over, 93% of those in the similarity condition agreed to spend some extra time themselves helping the experimenter— compared to only 61% in the no-feedback control group. Introspection and self-perception theory make different predictions about the extent to which people can know themselves. If self-knowledge derives from pri- vate introspection, then clearly you know yourself better than anyone else can. If self-knowledge derives solely from observations of behavior, then it should be possible for others to know us as well as we know ourselves. Assuming that self-knowledge is gained from both sources, then the truth lies somewhere in the middle. But wait. Is it ever possible for others to know us better than we know ourselves? Simine Vazire (2010) asked this very question and came up with a surprising answer. Vazire pro- posed a Self–Other Knowledge Asymmetry (SOKA) model in which she predicts that we know ourselves better than others do when it comes to traits that are “internal” and hard to observe (such as how opti- mistic, anxious, or easily upset a person is) and that there is no self- other difference when it comes to traits that are “external” and easy to observe (such as how quiet, sociable, or messy a person is). She also predicts that others may actually know us better than we know ourselves when it comes to observ- able traits that can be so touchy for self-esteem purposes that we have motivated “blind spots” (such as how smart, creative, or rude a person is). In these latter instances, Vazire predicts, others can be more objective than we are about ourselves. To test these predictions, Vazire asked college students to rate themselves— and then had their friends rate the participants—on a number of per- sonality traits. Three types of traits were studied: 1) high in observ ability (talkativeness, dominance, and leadership), (2) low in observability and not evaluative (self-esteem and anxiety), and (3) low in observability and highly evaluative
- 15. (intelligent and creative). To determine accuracy, Vazire then mea- sured how participants fared on objective measures of these traits using various laboratory exercises and paper-and- pencil tests. The results provided strong support for the SOKA model. d Figure 3.1 shows that self- and friend-ratings were equally ac- curate for highly observable traits, that self-ratings were more accurate for internal non-evaluative traits, but that friend-ratings were more accurate for internal evaluative traits. Clearly, to know thyself requires a combination of information and objectivity (Vazire & Carlson, 2011). Self-Perceptions of emotion Draw the corners of your mouth back and up and tense your eye muscles. Okay, relax. Now raise your eyebrows, open your eyes wide, and let your mouth drop open slightly. Relax. Now pull your brows down and to- gether and clench your teeth. Relax. If you followed these direc- tions, you would have appeared to others to be feeling first happy, then fearful, and finally angry. The question is, how would you have appeared to yourself? Social psychologists who study emotion have asked precisely that question. Viewed within the framework of self-perception theory, the facial feedback hypothesis states that changes in facial expression can trigger corresponding changes in the sub- jective experience of emotion. In the first test of this hypoth- esis, James Laird (1974) told participants that they were taking part in an experiment on activity of the facial muscles. After attaching electrodes to their faces, he showed them a series of cartoons. Before each one, the participants were instructed to contract certain facial muscles in ways that created either a smile or a frown. As Laird predicted, participants rated what they saw As suggested by self-perception theory, we sometimes infer how we feel by observing our own behavior. facial feedback hypothesisThe hypothesis that changes in facial expression can lead to corresponding changes in emotion. as funnier when they were smiling than when they were frowning. Suggesting that this effect is universal, researchers
- 16. recently replicated these find- ings in Ghana, West Africa (Dzokoto et al., 2014). In one particularly interesting field study that illustrates how our emotional state can be influenced by naturally occurring changes in facial expression, re- searchers from Italy stopped a random sample of men and women on a beach and asked them in a questionnaire to report on how angry and aggressive they were feeling. Some of the beach goers faced the bright sun while answering the ques- tion, causing “sun-induced frowning” on their faces. Others were questioned with their back to the sun or while wearing sunglasses. As predicted by the facial feed- back hypothesis, and even though participants themselves said that their mood was not affected by the sunlight, those who frowned at the sun reported higher levels of anger than all others (Marzoli et al., 2013). It is clear that facial feedback can evoke and magnify certain emotional states. It’s important to note, however, that the face is not necessary to the subjective experience of emotion. When neuropsychologists recently tested a young woman who suffered from bilateral facial paralysis, they found that despite her inability to outwardly show emotion, she reported feeling various emotions in response to positive and negative visual images (Keillor et al., 2003). How does facial feedback work? With 80 muscles in the human face that can create over 7,000 expressions, can we actually vary our own emotions by contract- ing certain muscles and wearing different expressions? Research suggests that we can, though it is not clear what the results mean. Laird argues that facial expres- sions affect emotion through a process of self-perception: “If I’m smiling, I must be happy.” Consistent with this hypothesis, Chris Kleinke and others (1998) asked people to emulate either happy or angry facial expressions depicted in a series of photographs. Half the participants saw themselves in a mirror during the task; the others did not. Did these manipulations affect mood states? Yes. Compared to participants in a no-expression control group, those who put
- 17. on happy faces felt better, and those who put on angry faces felt worse. As predicted by self- perception theory, the differences were particularly pronounced among partici- pants who saw themselves in a mirror. Other researchers believe that facial movements spark emotion by produc- ing physiological changes in the brain. For example, Robert Zajonc (1993) argues that smiling causes facial muscles to increase the flow of air-cooled blood to the brain, a process that produces a pleasant state by lowering brain temperature. Conversely, frowning decreases blood flow, producing an unpleasant state by rais- ing temperature. To demonstrate, Zajonc and his colleagues (1989) conducted a study in which they asked participants to repeat certain vowels 20 times each, including the sounds ah, e, u, and the German vowel ü. In the meantime, tem- perature changes in the forehead were measured and participants reported on how they felt. As it turned out, ah and e (sounds that cause people to mimic smil- ing) lowered forehead temperature and elevated mood, whereas u and ü (sounds that cause us to mimic frowning) increased temperature and dampened mood. In short, people need not infer how they feel. Rather, facial expressions evoke physi- ological changes that produce an emotional experience. Other expressive behaviors, such as body posture, can also provide us with sensory feedback and influence the way we feel. When people feel proud, they stand erect with their shoulders raised, chest expanded, and head held high (expansion). When dejected, however, we slump over with shoulders drooping and head bowed (contraction). Clearly, your emotional state is revealed in the way you carry yourself. But is it also possible that the way you carry yourself affects your emotional state? Can people lift their spirits by expansion or lower their spir- its by contraction? Yes. Sabine Stepper and Fritz Strack (1993) arranged for people to sit in either a slumped or an upright position by varying the height of the table they had to write on. Those forced to sit upright reported feeling more pride after succeeding at a task than did those placed in a slumped
- 18. position. Self-Perceptions of Motivation Without quite realizing it, the American author Mark Twain was a self-perception theorist. In The Adventures of Tom Sawyer, written in the late 1800s, he quipped, “There are wealthy gentlemen in England who drive four-horse passenger coaches 20 or 30 miles on a daily line, in the summer, because the privilege costs them considerable money; but if they were offered wages for the service that would turn it into work then they would resign.” Twain’s hypothesis—that reward for an enjoyable activity can under- mine interest in that activity—seems to contradict both our intuition and the results of psychological research. After all, aren’t we all motivated by reward, as B. F. Skinner and other behaviorists have declared? The answer depends on how motivation is defined. A keen observer of human behavior, Twain anticipated a key distinction be- tween intrinsic and extrinsic motivation. Intrinsic motivation originates in factors within a person. People are said to be intrinsically motivated when they engage in an activity for the sake of their own interest, the challenge, or sheer enjoy- ment. Eating a good meal; listening to music; spending time with friends, or on Facebook; or getting engrossed in a book, a Netflix movie, a sports event, or a video game—these are the kinds of activities that you might find intrinsically mo- tivating. In contrast, extrinsic motivation originates in factors outside the person. People are said to be extrinsically motivated when they engage in an activity as a means to an end, for tangible benefit. It might be to acquire money, grades, or some other kind of recognition; to fulfill an obligation; or to avoid a penalty or punishment. Clearly, people strive for reward. But what happens to the intrinsic motivation once that reward is no longer available? From the standpoint of self-perception theory, Twain’s hypothesis makes sense. When someone is offered a reward for something they already like to do—whether it’s listening to music, playing a game, or eating a tasty food—that behavior becomes overjustified, or overrewarded, which means that it can
- 19. be attributed to extrinsic as well as intrinsic motives. By creating ambiguity about a person’s motivation, can the overjustification effect have unintended conse- quences? When athletes are paid millions of dollars to play their sport, does the money overwhelm their love of the game, making play feel like work? Once paid, do people begin to wonder if the activity was ever worth pursuing in its own right? Research has shown that when people start getting rewarded for a task they already enjoy, they sometimes lose interest in it over time. In a classic demon- stration of this phenomenon, Mark Lepper and his colleagues (1973) gave preschool children an opportunity to play with colorful felt-tipped markers—an opportunity most could not resist. By observing how much time the children spent on the activity, the researchers were able to measure their intrinsic motivation. Two weeks later, the children were divided into three groups, all about equal in terms of initial levels of in- trinsic motivation. In one, the children were simply asked to draw some pictures with the markers. In the second, they were told that if they used the markers, they would receive a “Good Player Award,” a certificate with a gold star and a red ribbon. In a third group, the children were not offered a reward for drawing pictures, but—like those in the second group—they received a reward when they were done. About a week later, the teachers placed the markers and paper on a table in the classroom while the experimenters observed through a one-way mirror. Since no rewards were offered on this occasion, the amount of free time the children spent playing with the markers reflected their intrinsic moti- vation. As predicted, those who had expected and rece eived a reward for their efforts were no longer as interested in the markers as they had been. Children who had not received a reward were not adversely affected, nor were those who had received the unexpected reward. Having played with the markers without the promise of tangible benefit, these chil- dren remained intrinsically motivated (see d Figure 3.2). The
- 20. paradox that reward can undermine rather than enhance intrinsic motivation has been observed in many settings and with both children and adults (Deci & Ryan, 1985; Tang & Hall, 1995). Accept money for a leisure activity, and before you know it, what used to be “play” comes to feel more like “work.” In the long run, this can have unintended No reward Unexpected reward Expected reward overjustification effect negative effects on the quality of your performance. In a series of studies, Teresa Amabile (1996) and others had participants write poems, draw or paint pictures, make paper collages, and generate creative solu- tions to business dilemmas. Consistently, they found that people are more creative when they feel interested and challenged by the work itself than when they feel pressured to make money, fulfill obligations, meet deadlines, win competitions, or impress others. When Amabile had art experts rate the works of professional artists, she found that their commissioned work (art they were contracted for) was judged as lower in quality than their noncommissioned work. People are likely to be more creative when they are intrinsically motivated in relation to the task, not compelled by outside forces. Looking back over this research, Beth Hennessey (2015) notes that “[i]f I were secretary of education,” she would focus on ways to enhance intrinsic motivation in the classroom—as opposed to the use of grades, testing standards, competition, and other extrinsic means of motivating students. But wait. If extrinsic benefits serve to undermine intrinsic motivation, should teachers and parents not offer rewards to their children? Are the employee incen- tive programs that are so often used to motivate workers in the business world doomed to fail, as some (Kohn, 1993) have suggested? This turns out to be a complex question that depends on how the reward is perceived and by whom. If a reward is presented in the form of
- 21. verbal praise that is perceived to be sincere or as a special “bonus” for superior performance, then it can enhance intrinsic motivation by providing positive feedback about competence— as when people win competitions, scholarships, or a pat on the back from people they respect (Cameron & Pierce, 1994; Cameron et al., 2005; Eisenberger & Cameron, 1996; Henderlong & Lepper, 2002). The notion that intrinsic motivation is undermined by some types of reward but not others was observed even among 20- month-old babies. In a clever study, Felix Warneken and Michael Tomasello (2006) brought babies into a lab, where the experimenter accidentally dropped a pen or crumpled paper onto the floor and appeared unable to reach it. The child could help by picking up the object and handing it to the experimenter. Most of the babies helped in this situation. In a treatment phase, the researchers responded to the assistance by giving the child a toy cube (“For this you get a cube”), verbal praise (“Thank you, that’s really nice!”), or nothing at all. Would these same children continue to help? Re- sults showed that in a later test phase, when presented with a number of helping opportunities, those in the no-response condition continued to help 89% of the time and that this tendency remained high at 81% in the verbal praise condition. Yet among children who had earlier received a reward, helping in the test phase dropped to 53% when that reward was no longer available (see also Warneken & Tomasello, 2014). Individual differences in people’s motivational orientation toward work must also be considered. For intrinsically oriented people who say, “What matters most to me is enjoying what I do” and “I seldom think about salary and promo- tions,” reward may be unnecessary and may even be detrimental (Amabile et al., 1994). Yet for people who are laser-focused on the achievement of certain goals— whether at school, at work, or in sports—inducements such as grades, scores, bonuses, awards, trophies, and the sheer thrill of competition, as in team sports, tend to boost intrinsic motivation (Durik & Harackiewicz, 2007;
- 22. Harackiewicz & Elliot, 1993). j Influences of Other People As noted earlier, Cooley’s (1902) theory of the looking-glass self emphasized that other people help us define ourselves. In this section, we will see the importance of this proposition to our self-concepts. Social Comparison TheorySuppose a stranger were to ask, “Who are you?” If you had only a minute or two to answer, would you mention your religion or your ethnic background? What about your hometown? Would you describe your talents and your interests or your likes and dislikes? When asked this question, people tend to describe themselves in ways that set them apart from others in their immediate vicinity (McGuire & McGuire, 1988). Among children, boys are more likely to cite their gender when they grow up in families that are predominantly female; girls do the same when living in families that are predominantly male (McGuire et al., 1979). Similarly, on the college campus, “nontraditional” older students are more likely to cite their age than are traditional younger students (Kite, 1992). Regardless of whether the unique attribute is gender, age, height, or eye color, this pattern is basi- cally the same. The implication is intriguing: Change someone’s social surroundings, and you can change that person’s spontaneous self-description. This reliance on distinguishing features in self-description indicates that the self is “relative,” a social construct, and that each of us defines ourselves in part by using family members, friends, acquaintances, and others as a benchmark (Mussweiler & Rüter, 2003; Mussweiler & Strack, 2000). Importantly, the self is also “malleable” according to our need to fit in with those around us. In an article entitled “Reaching Out by Changing What’s Within,” Stephanie Richman and her colleagues (2015) reported on a series of studies showing that when college stu- dents are induced to suffer through a social exclusion experience—being left out of an online three-person game—they go on to modify their self-concept descrip- tions
- 23. (for example, on such traits as warm, adventurous, creative, enthusiastic, thoughtful, and funny) in ways that make them more similar to a fellow student who looms as a potential friend. Enter Leon Festinger’s (1954) social comparison theory. Festinger argued that when people are uncertain of their abilities or opinions—that is, when objective information is not readily available—they evaluate themselves through compari- sons with similar others. The theory seems reasonable, but is it valid? Over the years, social psychologists have put social comparison theory to the test, focusing on two key questions: (1) When do people turn to others for comparative infor- mation? (2) Of all the people who inhabit the Earth, with whom do we choose to compare ourselves? (Suls & Wheeler, 2000). As Festinger proposed, the answer to the “when” question appears to be that people engage in social comparison in states of uncertainty, when more objective means of self-evaluation are not available. It’s not clear whether Festinger under- stated the importance of social comparison processes. Some research suggests that people judge themselves in relation to others even when more objective standards really are available (Klein, 1997). Yet other research supports Festinger’s theory that people are less influenced by social comparisons when objective information is available—for example, through our personal histories of success and failure (Steyn & Mynhardt, 2008). The “with whom” question has also been the subject of many studies. The answer seems to be that when we evaluate our own taste in music, value on the job market, or athletic ability, we look to others who are similar to us in relevant ways (Goethals & Darley, 1977; Wheeler et al., 1982). If you are curious about your flair for writing, for example, you’re more likely to compare yourself with other college students than with high schoolers or best-selling authors. There are exceptions to this rule, of course. Later in this chapter, we will see that people often cope with personal inadequacies by focusing on others who are less able or less fortunate than themselves.
- 24. Facebook as a Venue for Social Comparison Currently, Facebook—the most heavily populated social networking site—has 1.5 billion active users worldwide (Facebook, 2015). On computers, tablets, and mobile phones, more than a billion people a day log into their Facebook accounts, Twitter, LinkedIn, Pinterest, Tumblr, and other sites. Two types of usage can be distinguished: active usage, where peo- ple post information about themselves and communicate with others; and passive usage, in which people consume information from other people’s Facebook pages without making direct contact (Deters & Mehl, 2013; Verduyn et al., 2015). Now that social networking sites enable us to access countless numbers of people, what effect do all the social comparison opportunities available to us have on our self-concepts, our self- evaluations, and our overall well-being? Does looking at other people’s Facebook pages make you feel better about yourself, or worse, or does it depend on whose pages you visit and how they present them- selves? At first, research was reported in the news suggesting a phenomenon that was being called “Facebook Depression”—the more time people spent on Face- book, the more unhappy they were (Feinstein et al., 2013; Kalpidou, Costin, & Morris, 2011; O’Keeffe & Clarke-Pearson, 2011). Immediately, social psychologists were quick to warn that this correlation should not be interpreted to mean that Facebook usage causes depression. There are two reasons why Facebook usage may undermine a person’s well- being. First, as predicted by Festinger’s social comparison theory, recent studies have shown that the link between Facebook usage and self-evaluation depends on whom we compare ourselves to. After college-age adults were randomly assigned to engage in upward—as opposed to downward—social comparisons, with others who are highly active and successful, they came to rate themselves less favorably (Vogel et al., 2014). A second possible reason for this
- 25. negative effect is that people on Facebook, as in life more generally, tend to portray themselves in overly flat- tering ways—which increases the likelihood that the social comparisons we make are not personally favorable. For that reason, research shows that the more Face- book time that people passively scroll through other people’s pages—rather than directly interacting with others—the worse they felt about themselves (Verduyn et al., 2015). Two-Factor Theory of emotionPeople seek social comparison information to evaluate their abilities and opinions. Do they also turn to others to determine something as subjective as their own emotions? In classic experiments on affiliation, Stanley Schachter (1959) found that when people were frightened into thinking they would receive painful electric shocks, most sought the company of others who were in the same predicament. Nervous and uncertain about how they should be feeling, participants wanted to affiliate with similar others, presumably for the purpose of comparison. Yet when they were not fearful and expected only mild shocks or when the “others” were not taking part in the same experiment, participants preferred to be alone. As Schachter put it, “Misery doesn’t just love any kind of company; it loves only miserable company” (p. 24). Intrigued by the possibilit ies, Schachter and his research team took the next step. Could it be, they wondered, that when people are uncertain about how they feel, their emotional state is actually determined by the reactions of oth- ers around them? In answer to this question, the researchers proposed that two factors are necessary to feel a specific emotion. First, the person must experi- ence the symptoms of physiological arousal—such as a racing heart, perspira- tion, rapid breathing, and tightening of the stomach. Second, the person must make a cognitive interpretation that explains the source of the arousal. And that is where the people around us come in: Their reactions help us interpret our own arousal. To test this provocative two-factor theory of emotion, Schachter and Singer (1962) injected male volunteers with epinephrine, a
- 26. drug that heightens physi- ological arousal. Although one group was forewarned about the drug’s effects, a second group was not. Members of a third group were injected with a harmless placebo. Before the drug (which was described as a vitamin supplement) actually took effect, participants were left alone with a male confederate introduced as another participant who had received the same injection. In some sessions, the confederate behaved in a euphoric manner. For 20 minutes, he bounced around happily, doodling on scratch paper, sinking jump shots into the wastebasket, fly- ing paper airplanes across the room, and playing with a Hula-Hoop. In other ses- sions, the confederate displayed anger, making fun of a questionnaire they were filling out and, in a fit of rage, ripping it up and hurling it into the wastebasket. Think for a moment about these various combinations of situations. As the drug takes effect, participants in the drug- informed group will begin to feel their hearts pound, their hands shake, and their faces flush. Having been told to expect these symptoms, however, they need not search for an explanation. Participants in the placebo group will not become aroused in the first place, so they will have no symptoms to explain. But now consider the plight of those in the drug-uninformed group, who suddenly become aroused without knowing why. Trying to identify the sensations, these participants, according to the theory, should take their cues from someone else in the same predicament—namely, the confederate. In general, the experimental results supported Schachter and Singer’s line of reasoning. Drug-uninformed participants reported feeling relatively happy or angry depending on the confederate’s performance. In many instances, they even exhibited similar kinds of behavior. One participant, for example, “threw open the window and, laughing, hurled paper basketballs at passersby.” In the drug- informed and placebo groups, however, participants were, as expected, less influ- enced by these social cues. Schachter and Singer’s two-factor theory attracted controversy
- 27. when some studies corroborated their findings but others did not. In one experiment, for example, participants who were injected with epinephrine and not forewarned about the symptoms later exhibited more fear in response to a scary film, but they were not more angry or amused while seeing films that tend to elicit these other emotions (Mezzacappa et al., 1999). It now appears that one limited but important conclusion can safely be drawn: When people are unclear about their own emotional states, they sometimes interpret how they feel by watching oth- ers (Reisenzein, 1983). The “sometimes” part of the conclusion is important. For other people to influence your emotion your level of physiological arousal cannot be too intense or else it will be experienced as aversive, regardless of the situation (Maslach, 1979; Zimbardo et al., 1993). Also, research shows that other people must be present as a possible explanation for arousal before its onset. Once people are aroused, they turn for an explanation to events that preceded the change in their physiological state (Schachter & Singer, 1979; Sinclair et al., 1994). In subsequent chapters, we will see that the two-factor theory of emotion has far-reaching implications for passionate love, anger and aggression, and other affective experiences. Autobiographical Memories Philosopher James Mill once said, “The phenomenon of the Self and that of Memory are merely two sides of the same fact.” If the story of patient William Thompson at the start of this chapter is any indication, Mill was right. Without autobiographical memories—recollections of the sequences of events that have touched your life (Bernsten & Rubin, 2012; Fivush & Haden, 2003; Rubin, 1996)— you would have no coherent self-concept. After all, who would you be if you could not remember your parents or childhood friends, your successes and fail- ures, the places you lived, the schools you attended, the books you read, and the teams you played for? Clearly, memories shape the self-concept. In this section, we’ll see that
- 28. the self-concept shapes our personal memories as well (Conway & Pleydell-Pearce, 2000). When people are prompted to recall their own experiences, they typically report more events from the recent past than from the distant past. There are, however, two consistent exceptions to this simple recency rule. The first is that older adults tend to retrieve a large number of personal memories from their adolescence and early adult years—a “reminiscence bump” found across many cultures that may occur because these are busy and formative years in one’s life (Conway et al., 2005; Fitzgerald, 1988; Jansari & Parkin, 1996). A second exception is that people tend to remember transitional “firsts.” Reflect for a moment on your own college career. What events pop to mind— and when did they occur? Did you come up with the day you arrived on campus or the first time you met your closest friend? What about notable classes, parties, or sports events? When David Pillemer and his colleagues (1996) asked college juniors and seniors to recount the most memorable experiences of their first year, 32% of all recollections were from the tran- sitional month of September. When college graduates were given the same task, they too cited a disproportionate number of events from the opening two months of their first year, followed by the next major transitional period, the last month of their senior year. Among students, these busy transitional periods are important regardless of whether their schools follow a semester calendar or some other academic schedule (Kurbat et al., 1998). Obviously, not all experiences leave the same impression. Ask people old enough to remember November 22, 1963, and to this day they probably can tell you exactly where they were, who they were with, what they were thinking, and what was happening the moment they heard the news that President John F. Kennedy had been shot. Ask anyone old enough to remember the terrorist attacks of September 11, 2001, and they too could probably recount exquisite levels of detail about the event and their personal relation to it. Roger Brown and James Kulik (1977) coined the term flashbulb memories to describe these
- 29. enduring, detailed, high-resolution recollections and speculated that humans are biologically equipped for survival purposes to “print” dramatic events in memory. These flashbulb memories are not necessarily accurate or even con- sistent over time. Still, these recollections “feel” special and serve as promi- nent landmarks in the biographies that we tell about ourselves (Conway, 1995; Luminet & Curci, 2009). By linking the present to the past and providing us with a sense of inner continuity over time, autobiographical memory is a vital part of—and can be shaped by—our life story and sense of identity. The links between our sense of self and autobiographical memory are subtle, complex, and often not straightfor- ward (Prebble et al., 2013). One complicating factor is that people tend to distort the past in ways that in- flate their own sense of importance and achievement. In one study, Harry Bahrick and others (1996) had college students try to recall all of their high school grades and then checked their reports against the actual transcripts. Overall, the majority of grades were recalled correctly. But most of the errors in memory were grade inflations—and most of these were made when the actual grades were low (see d Figure 3.3). In a second study, Burcu Demiray and Steve Janssen (2015) asked hundreds of adults, 18 to 80 years old, to report the seven most impor- tant events from their lives and to rate these memories for how good, important, emotional, vivid, and close they were. The results showed that respondents felt psychologically “closer” to memories that were positive rather than negative. Suggesting that this bias serves an adap- tive purpose, the results also showed that this tendency that was par- ticularly evident in people who evaluate themselves favorably. These findings bring to mind George Herbert Mead’s (1934) suggestion that our visions of the past are like pure “escape fancies . . . in which we rebuild the world according to our hearts’ desires” (pp. 348–349). Or, as Anthony Greenwald (1980) put it: “The past is remembered as if it were a drama in
- 30. which the self was the leading player” (p. 604). Our autobiographies are so interconnected with our sense of who were are that as our self-concept changes, so does our visual perspective on the past. Think about an important way in which you have changed. Once you were a kid, now you are in college or working. Or maybe you were a smoker and stopped, or obese and lost weight. Or maybe you underwent a religious conversion, or had cancer and survived it—and now you feel “reborn.” Theorizing that our current self-concept col- ors how we see our past selves, Lisa Libby and Richard Eibach (2002) asked college students to write about one aspect of themselves that had changed a lot and another that had not changed since high school. Ana- lyzing the words used to describe these recollections, these researchers found that participants used more third-person pronouns to describe past actions that no longer fit their current selves—and they rated them- selves as more detached from these actions. Finally, it is interesting to note that just as the contents of our auto- biographical memories are intertwined with our sense of who we are, the process of remembering can prove to be a positive emotional expe- rience. Have you ever lost yourself in a daydream, thinking back to a childhood vacation, a graduation, the time you spent at a sports camp, or the day you met a good friend? Nostalgia—defined as a sentimen- tal longing for the past—is common and universal. Research shows that people often become nostalgic during distressing life events such as a breakup or di- vorce, a long distance move, feelings of loneliness, or serious illness (Wildschut et al., 2006). Research also shows that the effect of making people nostalgic is not merely inform or reinforce the self-concept but to boost their self-esteem and positive mood states, instill a sense that life is meaningful and worth living, and increase optimism about the future (Baldwin et al., 2015; Baldwin & Landau, 2014; Cheung et al., 2013; Routledge et al., 2011). j Culture and the Self-Concept The self-concept is also heavily influenced by cultural factors.
- 31. In America, it is said that “the squeaky wheel gets the grease”; in Japan, it is said that “the nail that stands out gets pounded down.” Thus, American parents try to raise their children to be independent, self-reliant, and assertive (a “cut above the rest”), whereas Japanese children are raised to fit into their groups and community. Differences in Cultural OrientationThe preceding example illustrates two contrasting cultural orientations. One values individualism and the virtues of inde- pendence, autonomy, and self-reliance. The other orientation values collectivism and the virtues of interdependence, cooperation, and social harmony. Under the banner of individualism, one’s personal goals take priority over group allegiances. In collec- tivist cultures, by contrast, a person is first and foremost a loyal member of a family, team, company, church, and state, motivated to be part of a group—not different, better, or worse (Triandis, 1994). In what countries are these orientations the most extreme? In a worldwide study of 116,000 employees of IBM, Geert Hofstede (1980) found that the most fiercely individualistic people were from the United States, Australia, Great Britain, Canada, and the Netherlands—in that order. The most col- lectivist people were from Venezuela, Colombia, Pakistan, Peru, Taiwan, and China. Individualism and collectivism are not opposites on a continuum; the similari- ties and differences between countries do not fit a simple pattern. Daphna Oyser- man and others (2002) conducted a meta-analysis of thousands of respondents in 83 studies. Within the United States, they found that African Americans were the most individualistic subgroup and that Asian Americans and Latino Americans were the most collectivistic. Comparing nations, they found that collectivist orien- tations varied within Asia, as the Chinese were more collectivistic than Japanese and Korean respondents. On average, all humans are 99.5% similar to other humans. What is it about cultures, therefore, that creates such different
- 32. orienta- tions among people? In Clash!: How to Thrive in a Multicultural World, Hazel Rose Markus and Alan Conner (2013) describe the conflicts that often arise between groups all over the world— East vs. West, rich vs. poor, urban vs. rural, coastal vs. heartland, and whites vs. people of color, to name a few. They note that national boundaries are not the only source of cultural differences, that each of us combines a special mix of biology and cultures to make us who we are. According to Markus and Conner, culture is made up of four I’s—ideas, institutions, and social interactions that shape how individuals think, feel, and act. In turn, how individuals act influences their ideas, institutions, and so- cial interactions. This dynamic culture cycle is depicted in d Figure 3.4. d FIguRe 3.4 The Culture Cycle The culture cycle shows that individuals are shaped by their interactions with others, by formal institutions, and by commonly shared ideas of what is a good and right way to be a person. In turn, through their actions and behaviors, individuals shape these aspects of their own world. Based on Markus, H.R., & Conner, A. (2013). Clash!: 8 cultural conflicts that make us who we are. New York, NY: Hudson Street Press. Cultural Influences on the Self Individual- ism and collectivism are so deeply ingrained in a culture that they mold our very self-conceptions and identities. According to Hazel Markus and Shinobu Kitayama (1991), most North Ameri- cans and Europeans have an independent view of the self. In this view, the self is an entity that is distinct, autonomous, self-contained, and en- dowed with unique dispositions. Yet in much of Asia, Africa, and Latin America, people hold an interdependent view of the self. Here, the self is part of a larger network that includes one’s family, co-workers, and others with whom one is socially connected. People with an independent view say that “the only person you can count on is yourself” and “I enjoy being unique and different from others.” In contrast, those with an interdependent view are more likely to agree that “I’m partly to blame if one of my family members
- 33. or co-workers fails” and “My happiness depends on the happiness of those around me” (Rhee et al., 1995; Triandis et al., 1998). These contrasting orientations—one focused on the personal self, the other on a collective self—are depicted in d Figure 3.5. Research of various sorts confirms the close link between cultural orientation and conceptions of the self. In one study, David Trafimow and others (1991) had North American and Chinese college students complete 20 sentences beginning with “I am. . . .” Americans were more likely to fill in the blank with trait descrip- tions (“I am shy”), whereas the Chinese were more likely to identify themselves by group affiliations (“I am a college student”). Consistent with this finding, a sec- ond study has shown that when Chinese participants—but not Americans— think about themselves areas of the brain are activated that are also activated when they think about their mothers (Zhu et al., 2007b). A third study has shown that when it comes to making career decisions, Chinese students with interdependent selves are more likely to seek advice from others and compromise than are American students with independent selves (Guan et al., 2015). Our cultural orientations can color the way people perceive, evaluate, and present themselves in relation to others. In this regard, Markus and Kitayama (1991) identified two interesting differences between East and West: The first is that people in individualistic cultures strive for personal achievement, whereas those living in collectivist cultures derive more satisfaction from the status of a valued group. Thus, whereas North Americans tend to overestimate their own contributions to a team effort, seize credit for success, and blame others for failure, people from collectivist cultures tend to un- derestimate their own role and present themselves in more modest, self- effacing terms in relation to other members of the group (Heine et al., 2000). A second consequence of these differing conceptions of the self is that American college students see themselves as less similar
- 34. to other people than do Asian students. This difference reinforces the idea that individuals with independent self- conceptions believe they are unique. In fact, our cultural orientations toward conformity or independence may lead us to favor similarity or uniqueness in all things. In a study that illustrates the point, Heejung Kim and Hazel Markus (1999) showed abstract figures to subjects from the United States and Korea. Each figure contained nine parts. Most of the parts were identical in shape, position, and direction. One or more were different. Look at d Figure 3.6. Which of the nine subfigures within each group do you like most? The American subjects liked the sub- figures that were unique or in the minority, while Korean subjects preferred those that “fit in” as part of the group. In another study, these same researchers approached pedestrians of American and East Asian heritage at San Francisco’s airport to fill out a question- naire. Afterward, as a gift, they offered the participants a choice of one pen from a handful of pens, three or four of which had the same color barrel, green or orange. The result: 74% of the Americans chose a uniquely colored pen, and 76% of the East Asians selected a commonly colored pen! It seems that culturally ingrained orienta- tions to conformity and independence leave a mark on us, leading us to form preferences for things that “fit in” or “stand out.” Are people from disparate cultures locked into thinking about the self in either personal or collective terms, or are both aspects present in everyone, to be expressed according to the situation? Reconsider the study noted earlier, where American students described themselves more in terms of personal traits and Chi- nese students cited more group affiliations. In a follow-up to that study, Trafimow and others (1997) tested students from Hong Kong, all of whom spoke English as a second language. One half of the students were given the “Who am I?” test in Chinese, and the other half took the test in English. Did this variation influence the results? Yes. Students who took the test in English focused more on personal traits,
- 35. whereas those who took the test in Chinese focused more on group affilia- tions. It appears that each of us have both personal and collective aspects of the self to draw on—and that the part that comes to mind depends on the situation we are in. The more closely social psychologists examine cultures and their impact on how people think, the more complex is the picture that emerges. Clearly, research documents the extent to which self-conceptions are influenced by the individual- ist and collectivist impulses within a culture. But there are other core differences as well. Kaiping Peng and Richard Nisbett (1999) note that people in East Asian cultures think in dialectical terms about contradictory characteristics—accepting, for example, that apparent opposites (such as black and white, friend and enemy, and strong and weak) can coexist within a single person either at the same time or as a result of changes over time. Grounded in Eastern traditions, dialecticism is a system of thought characterized by the acceptance of such contradictions through compromise, as implied by the Chinese proverb “Beware of your friends, not your enemies.” This thought style contrasts sharply with the American and European perspective, grounded in Western logic, by which people differentiate seeming opposites on the assumption that if one is right, the other must be wrong. Wondering if a dialectical style of thought has implications for the self, Tammy English and Serena Chen (2007) conducted a series of studies in which they questioned American college students who were of European or Asian descent about what kind of person they are in such different everyday situations as a classroom, a cafeteria, a party, or the gym. Overall, they found that compared to European Americans who portray their “true selves” as stable across the board, Asian Americans vary their self-concepts more to suit different relationship situations—though they are consistent within these situa- tions. Other research too has shown that East Asians are more willing than Americans to see and accept contradic- tory aspects of themselves (Spencer-Rodgers et al., 2009)— as seen in their
- 36. willingness to accept both positive and negative aspects of themselves at the same time (Boucher et al., 2009). The study of cultural aspects of the self is also ex- panded by social psychologists interested in Latin Ameri- can cultures, where social and emotional relationships are a very important part of the collectivist orientation. According to Renee Holloway and others (2009), Latino cultures prize the con- cept of simpatico, which emphasizes expressive displays of personable charm, graciousness, and hospitality. Does this cultural value become part of the Latino self-concept? Clearly, no two individuals are the same. But when these research- ers presented Latino and white Americans with the “Who am I?” task described earlier, they found that the Latino participants on average were more likely to describe themselves using simpatico-related terms such as likable, friendly, sym- pathetic, amiable, and gracious. Similarly, Nairán Ramírez-Esparza and colleagues (2012) found that Mexican participants were more likely to describe their own personality using words about relationships (e.g., parents, house, love, friends) and empathy (e.g., affectionate, honest, noble, tolerant). Finally, it is important to realize that cultures themselves change over time, from one generation to another. Patricia Greenfield (2013) looked at the frequency of word usage from the year 1800 until 2000. She found that accompanying a shift from a more rural to urban population, there was also a shift in cultural values. As the occurrence of words such as “duty,” “obliged,” “give,” “obedience,” “au- thority,” “belong,” and “benevolence” decreased over time, the words “decision,” “choose,” “unique,” “individual,” “self,” and “acquisition” increased over time. Generational changes within a culture can also be seen within smaller frames of time. Americans who were children in the 1940s and 1950s, a generation known as “baby boomers,” grew up in a very different culture than those who grew up in the 1960s and 1970s, a group commonly referred to as “GenX’ers,”
- 37. and those who grew up in the 1980s and 1990s—a group known as “Millennials.” Analyz- ing questionnaire data collected from 9.2 million American high school seniors and college students from 1966 to 2009, Jean Twenge and her colleagues (2012) found that compared to boomers, subsequent generations were more focused on money, fame, and self-image and less concerned with affiliation, community, and civic engagement (see d Figure 3.7). This change in values—often described as a shift from “Generation We” to “Generation Me”—suggests that American culture is more individualistic today than it was a half century ago. Social Class as a Cultural InfluenceIn all cultures of the world, individuals differ in their wealth, material possessions, education, and level of prestige. In a con- tinuum that ranges from people who live in poverty up through multibillionaires, the term social class is used to categorize people within a culture who have in common a low-, working-, middle-, or upper-class socioeconomic status. Social class is another cultural factor that can influence the self-concept. In Western countries, people with more income, education, and status tend to have many opportunities to exhibit individualism by expressing their desires, their autonomy, and the pursuit of personal goals. They have more control over the lives, greater personal choice, and more independence and self-focus. In contrast, people with less income, education, and status are more constrained in terms of what they can and cannot do. Navigating a low-income world means having to rely more on others and fitting-in, fostering “hard interdependence” (Fiske & Markus, 2012; Kraus et al., 2012; Stephens et al., 2014). Recent studies confirm that the characteristics of the self that are associated with social class. In one study,, for example, working-class men were more likely than middle-class men to see themselves in terms of their relationships to others (Markus & Conner, 2013). In a second study, people classified as low in social class were less likely to agree with statements of
- 38. entitlement such as “I honestly feel I’m just more deserving than others” and with statements indicating narcissism such as “I like to look at myself in the mirror” (Piff, 2015). Continue Topics from chapter are: Self-esteem; Need for self-esteem; Socio-meter Theory; Low self-esteem Are There Gender and Race differences? Self-Discrepancy Theory; State of Self-Awareness; Trait of Self-Consciousness –private & public Ironic Mental process; Mechanism of self-enhancement; Implicit Egotism; Self-serving beliefs; Self-handicapping; Basking in Reflecting Glory; Downward Social Comparisons; Are Positive Illusions Adaptive? Culture and self-esteem Self-presentation – Strategic self-presentation Self Verification; Self-monitoring Reflections: The Multifaceted Self www.it-ebooks.info http://www.it-ebooks.info/
- 39. www.it-ebooks.info http://www.it-ebooks.info/ Additional Praise for Implementing Enterprise Risk Management “Educators the world over seeking to make the management of risk an integral part of management degrees have had great difficulties in providing their students with a definitive ERM text for their course. The Standards and associated Handbooks helped, but until the arrival of Implementing Enterprise Risk Management: Case Stud- ies and Best Practices, there has been no text to enlighten students on the application of an effective program to manage risk across an enterprise so that objectives are maximized and threats minimized. Fraser, Simkins, and Narvaez have combined with a group of contributors that represent the cream of risk practitioners, to pro- vide the reader with a clear and concise journey through the management of risk within a wide range of organizations and industries. The knowledge, skills, and experience in the management of risk contained within the covers of this book are second to none. It will provide a much needed resource to students and practition- ers for many years to come and should become a well-used reference on the desk of every manager of risk.”
- 40. —Kevin W. Knight AM, chairman, ISO/TC 262—Risk Management “The authors—Fraser, Simkins, and Narvaez—have done an invaluable service to advance the science of enterprise risk management by collecting an extensive num- ber of wonderful case studies that describe innovative risk management practices in a diverse set of companies around the world. This book should be an extremely valuable source of knowledge for anyone interested in the emerging and evolving field of risk management.” —Robert S. Kaplan, senior fellow, Marvin Bower Professor of Leadership Development, emeritus, Harvard University “Lessons learned from case studies and best practices represent an efficient way to gain practical insights on the implementation of ERM. Implementing Enterprise Risk Management provides such insights from a robust collection of ERM pro- grams across public companies and private organizations. I commend the editors and contributors for making a significant contribution to ERM by sharing their experiences.” —James Lam, president, James Lam & Associates; director and Risk Oversight Committee chairman, E∗ TRADE Financial Corporation;
- 41. author, Enterprise Risk Management—From Incentives to Controls “For those who still think that enterprise risk management is just a fad, the varied examples of practical value-generating uses contained in this book should dispel any doubt that the discipline is here to stay! The broad collection of practices is insightful for students, academics, and executives, as well as seasoned risk man- agement professionals.” —Carol Fox, ARM, director of Strategic and Enterprise Risk Practice, RIMS “Managing risk across the enterprise is the new frontier of business management. Doing so effectively, in my view, will be the single most important differentiating factor for many enterprises in the twenty-first century. Implementing Enterprise Risk Management: Case Studies and Best Practices is an innovative and important addition to the literature and contains a wealth of insight in this critical area. This book’s integration of theory with hands-on, real-world lessons in managing enterprise risk provides an opportunity for its readers to gain insight and understanding that could otherwise be acquired only through many years of hard- earned experience. www.it-ebooks.info http://www.it-ebooks.info/
- 42. I highly recommend this book for use by executives, line managers, risk managers, and business students alike.” —Douglas F. Prawitt, professor of Accounting at Brigham Young University, and Committee of Sponsoring Organizations (COSO) Executive Board member “The real beauty of and value in this book is its case study focus and the wide variety of firms profiled and writers’ perspectives shared. This will provide readers with a wealth of details and views that will help them chart an ERM journey of their own that is more likely to fit the specific and typically customized ERM needs of the firms for whom they toil.” —Chris Mandel, senior vice president, Strategic Solution s for Sedgwick; former president of the Risk Management Society and the 2004 Risk Manager of the Year
- 43. “Implementing Enterprise Risk Management looks at many industries through excel- lent case studies, providing a real-world base for its recommendations and an important reminder that ERM is valuable in many industries. I highly recommend this text.” —Russell Walker, Clinical associate professor, Kellogg School of Management; author of Winning with Risk Management “The body of knowledge in Implementing Enterprise Risk Management continues to develop as business educators and leaders confront a complex and rapidly chang- ing environment. This book provides a valuable resource for academics and prac- titioners in this dynamic area.” —Mark L. Frigo, director, Strategic Risk Management Lab, Kellstadt Graduate School of Business, DePaul University “The management of enterprise risk is one of the most vexatious problems con-
- 44. fronting boards and executives worldwide. This is why this latest book by Fraser, Simkins, and Narvaez is a much needed and highly refreshing approach to the sub- ject. The editors have managed to assemble an impressive list of contributors who, through a series of fascinating real-life case studies, adroitly help educate readers to better understand and deal with the myriad of risks that can assault, seriously maim, and/or kill an organization. This is a ‘how to’ book written with the ‘risk management problem solver’ in mind. It provides the link that has been missing for effectively teaching ERM at the university and executive education levels and it is an exceptional achievement by true risk management advocates.” —Dr. Chris Bart, FCPA, founder and lead faculty, The Directors College of Canada “The Institute of Risk Management welcomes the publication of this highly practi- cal text which should be of great interest to our students and
- 45. members around the world. Implementing Enterprise Risk Management brings together a fine collection of detailed case studies from organizations of varying sizes and working in differ- ent sectors, all seeking to enhance their business performance by managing their risks more effectively, from the boardroom to the shop floor. This book makes a valuable contribution to the body of knowledge of what works that will benefit the development of the risk profession.” —Carolyn Williams, technical director, Institute of Risk Management www.it-ebooks.info http://www.it-ebooks.info/ IMPLEMENTING ENTERPRISE RISK MANAGEMENT
- 46. www.it-ebooks.info http://www.it-ebooks.info/ The Robert W. Kolb Series in Finance provides a comprehensive view of the field of finance in all of its variety and complexity. The series is projected to include approximately 65 volumes covering all major topics and specializations in finance, ranging from investments, to corporate finance, to financial institutions. Each vol- ume in the Kolb Series in Finance consists of new articles especially written for the volume. Each volume is edited by a specialist in a particular area of finance, who develops the volume outline and commissions articles by the world’s experts in that partic- ular field of finance. Each volume includes an editor’s introduction and approx- imately thirty articles to fully describe the current state of financial research and
- 47. practice in a particular area of finance. The essays in each volume are intended for practicing finance professionals, grad- uate students, and advanced undergraduate students. The goal of each volume is to encapsulate the current state of knowledge in a particular area of finance so that the reader can quickly achieve a mastery of that special area of finance. www.it-ebooks.info http://www.it-ebooks.info/ IMPLEMENTING ENTERPRISE RISK MANAGEMENT Case Studies and Best Practices Editors John R.S. Fraser
- 48. Betty J. Simkins Kristina Narvaez The Robert W. Kolb Series in Finance www.it-ebooks.info http://www.it-ebooks.info/ Cover Design: Wiley Cover Image: © iStock.com/clauiad Copyright © 2015 by John R.S. Fraser, Betty J. Simkins, Kristina Narvaev. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of
- 49. the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748- 6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials.
- 50. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
- 51. Library of Congress Cataloging-in-Publication Data: ISBN 978-1-118-69196-0 (Hardcover) ISBN 978-1-118-74576-2 (ePDF) ISBN 978-1-118-74618-9 (ePub) Printed in the United States of America. 10 9 8 7 6 5 4 3 2 1 www.it-ebooks.info http://www.copyright.com http://www.wiley.com/go/permissions http://booksupport.wiley.com http://www.wiley.com http://www.it-ebooks.info/ To Wendy, my wonderful wife and my inspiration, and to my parents who instilled in me a lifelong thirst for learning. —John Fraser To my husband (Russell) and our family: sons and daughters-
- 52. in-law (Luke & Stephanie and Walt & Lauren), daughter and son-in-law (Susan & Jason), and our youngest daughter (April). Thank you for your love, support, and encouragement! —Betty Simkins I would like to thank my husband and four children for support- ing me on my journey of writing two chapters and co-editing this book. I would also like to thank the Risk and Insurance Manage- ment Society for supporting me during my educational years and providing great workshops and conferences on enterprise risk management. —Kristina Narvaez www.it-ebooks.info http://www.it-ebooks.info/ www.it-ebooks.info http://www.it-ebooks.info/
- 53. Contents Foreword xiii 1 Enterprise Risk Management Case Studies: An Introduction and Overview 1 John R.S. Fraser, Betty J. Simkins, and Kristina Narvaez PART I Overview and Insights for Teaching ERM 17 2 An Innovative Method to Teaching Enterprise Risk Management: A Learner-Centered Teaching Approach 19 David R. Lange and Betty J. Simkins PART II ERM Implementation at Leading Organizations 37 3 ERM at Mars, Incorporated: ERM for Strategy and Operations 39 Larry Warner 4 Value and Risk: Enterprise Risk Management at Statoil 59 Alf Alviniussen and Håkan Jankensgård 5 ERM in Practice at the University of California
- 54. Health System 75 Grace Crickette 6 Strategic Risk Management at the LEGO Group: Integrating Strategy and Risk Management 93 Mark L. Frigo and Hans Læssøe 7 Turning the Organizational Pyramid Upside Down: Ten Years of Evolution in Enterprise Risk Management at United Grain Growers 107 John Bugalla ix www.it-ebooks.info http://www.it-ebooks.info/ x Contents 8 Housing Association Case Study of ERM in a Changing Marketplace 119 John Hargreaves
- 55. 9 Lessons from the Academy: ERM Implementation in the University Setting 143 Anne E. Lundquist 10 Developing Accountability in Risk Management: The British Columbia Lottery Corporation Case Study 179 Jacquetta C. M. Goy 11 Starting from Scratch: The Evolution of ERM at the Workers’ Compensation Fund 207 Dan M. Hair 12 Measuring Performance at Intuit: A Value-Added Component in ERM Programs 227 Janet Nasburg 13 TD Bank’s Approach to an Enterprise Risk Management Program 241 Paul Cunha and Kristina Narvaez PART III Linking ERM to Strategy and Strategic Risk Management 251 14 A Strategic Approach to Enterprise Risk Management at Zurich Insurance Group 253
- 56. Linda Conrad and Kristina Narvaez 15 Embedding ERM into Strategic Planning at the City of Edmonton 281 Ken Baker 16 Leveraging ERM to Practice Strategic Risk Management 305 John Bugalla and James Kallman PART IV Specialized Aspects of Risk Management 319 17 Developing a Strategic Risk Plan for the Hope City Police Service 321 Andrew Graham 18 Blue Wood Chocolates 335 Stephen McPhie and Rick Nason www.it-ebooks.info http://www.it-ebooks.info/ CONTENTS xi
- 57. 19 Kilgore Custom Milling 363 Rick Nason and Stephen McPhie 20 Implementing Risk Management within Middle Eastern Oil and Gas Companies 377 Alexander Larsen 21 The Role of Root Cause Analysis in Public Safety ERM Programs 397 Andrew Bent 22 JAA Inc.—A Case Study in Creating Value from Uncertainty: Best Practices in Managing Risk 427 Julian du Plessis, Arnold Schanfield, and Alpaslan Menevse 23 Control Complacency: Rogue Trading at Société Générale 461 Steve Lindo 24 The Role of VaR in Enterprise Risk Management: Calculating Value at Risk for Portfolios Held by the Vane Mallory Investment Bank 489 Allissa A. Lee and Betty J. Simkins 25 Uses of Efficient Frontier Analysis in Strategic Risk
- 58. Management: A Technical Examination 501 Ward Ching and Loren Nickel PART V Mini-Cases on ERM and Risk 523 26 Bim Consultants Inc. 525 John R.S. Fraser 27 Nerds Galore 529 Rob Quail 28 The Reluctant General Counsel 535 Norman D. Marks 29 Transforming Risk Management at Akawini Copper 539 Grant Purdy 30 Alleged Corruption at Chessfield: Corporate Governance and the Risk Oversight Role of the Board of Directors 547 Richard Leblanc www.it-ebooks.info http://www.it-ebooks.info/
- 59. xii Contents 31 Operational Risk Management Case Study: Bon Boulangerie 555 Diana Del Bel Belluz PART VI Other Case Studies 559 32 Constructive Dialogue and ERM: Lessons from the Financial Crisis 561 Thomas H. Stanton 33 Challenges and Obstacles of ERM Implementation in Poland 577 Zbigniew Krysiak and Sl̄ awomir Pijanowski 34 Turning Crisis into Opportunity: Building an ERM Program at General Motors 607 Marc S. Robinson, Lisa M. Smith, and Brian D. Thelen 35 ERM at Malaysia’s Media Company Astro: Quickly Implementing ERM and Using It to Assess the Risk-Adjusted Performance of a Portfolio of Acquired
- 60. Foreign Companies 623 Patrick Adam K. Abdullah and Ghislain Giroux Dufort About the Editors 649 Index 651 www.it-ebooks.info http://www.it-ebooks.info/ Foreword Enterprise Risk Management is an evolving discipline focused on a com-plex and still imperfectly-understood subject. In such a situation, science isadvanced best by collecting data from multiple, independent sites. A rich set of observations educates the field’s scholars and practitioners and provides the foundation for them to develop descriptive and normative theories as well as cod- ified best practices about the subject. The authors—Fraser, Simkins, and Narvaez—have done an
- 61. invaluable service to advance the science of enterprise risk management by collecting an extensive number of wonderful case studies that describe innovative risk management prac- tices in a diverse set of companies around the world. This book should be an extremely valuable source of knowledge for anyone interested in the emerging and evolving field of risk management. We should be grateful to the editors and to each chapter author for expanding the body of knowledge for risk management professionals and academics. Robert S. Kaplan Senior Fellow, Marvin Bower Professor of Leadership Development, Emeritus Harvard University xiii www.it-ebooks.info
- 62. http://www.it-ebooks.info/ www.it-ebooks.info http://www.it-ebooks.info/ CHAPTER 1 Enterprise Risk Management Case Studies An Introduction and Overview JOHN R.S. FRASER Senior Vice President, Internal Audit, and former Chief Risk Officer, Hydro One Networks Inc. BETTY J. SIMKINS Williams Companies Chair of Business and Professor of Finance, Oklahoma State University KRISTINA NARVAEZ
- 63. President and Owner of ERM Strategies, LLC Businesses, business schools, regulators, and the public are now scrambling to catch up with the emerging field of enterprise risk management. —Robert Kaplan (quote from Foreword in Fraser and Simkins, 2010) Most executives with MBA degrees were not taught ERM. In fact, there are only a few universities that teach ERM. So some business school graduates are strong in finance, marketing, and management theory, but they are limited in terms of critical thinking, business acumen, and risk analysis skills. —Paul Walker1 THE EVOLUTION OF ENTERPRISE RISK MANAGEMENT Over the past two decades enterprise risk management (ERM) has evolved from concepts and visions of how risks should be addressed to a method-
- 64. ology that is becoming entrenched in modern management and is now increasingly expected by those in oversight roles (e.g., governing bodies and regulators). As Felix Kloman describes in his chapter “A Brief History of Risk Man- agement,” published in Fraser and Simkins (2010), many of the concepts go back a very long time and many of the so-called newly discovered techniques can be 1 www.it-ebooks.info http://www.it-ebooks.info/ 2 Implementing Enterprise Risk Management referenced to the earlier writings and practices described by Kloman. However, it is only from around the mid-1990s that the concept of giving a name to manag- ing risks in a holistic way across the many operating silos of an
- 65. enterprise started to take hold. In the 1990s, terms such as integrated risk management and enterprise- wide risk management were also used. Many thought leaders, for example, those who created ISO 31000,2 believe that the term risk management is all that is needed to describe good risk management; however, many others believe that the latter term is often used to describe risk management at the lower levels of the organiza- tion and does not necessarily capture the concepts of enterprise- level approaches to risk. As a result, the term ERM is used throughout this book. As ERM continues to evolve there is still much discussion and confusion over exactly what it is and how it should be achieved. It is important to realize that it is still evolving and may take many more years before it is fully codified and practiced in a consistent way. In fact, there is a grave danger now of believing that there is only one way of doing ERM. This is probably a mistake by regula-
- 66. tors who have too eagerly seized some of these concepts and are trying to impose them when the methods are not fully understood, and in some cases the require- ments are unlikely to produce the desired results. As Fraser and Simkins (2010) noted in their first book on ERM: “While regulatory interest can force ERM into companies, if not done well, it can become another box-ticking exercise that adds little value.”3 The leading and most commonly agreed4 guideline to holistic risk manage- ment is ISO 31000. However, it should be mentioned that in the United States the COSO 2004 Enterprise Risk Management–Integrated Framework has been the dominant framework used to date. Many organizations are currently adopting one or the other of these frameworks and then customizing them to their own context. WHY THE NEED FOR A BOOK WITH ERM
- 67. CASE STUDIES? Following the success of the earlier Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives by Fraser and Simkins (2010), we found through our own teaching experiences, and by talking to others, that there was an urgent need for a university-level textbook of ERM case studies to help educate executives, risk practitioners, academics, and students alike about the evolving methodology. As a result, Fraser and Simkins, together with Kristina Narvaez, approached many of the leading ERM specialists to write case studies for this book. Surveys have also shown that there is a dire need for more case studies on ERM (see Fraser, Schoening-Thiessen, and Simkins 2008). Additionally, surveys of risk executives report that business risk is increasing due to new technologies, faster rate of change, increases in regulatory risk, and more (PWC 2014). As Paul Walker
- 68. of St. John’s University points out in the opening quote of the 2014 American Pro- ductivity & Quality Center (APQC) report on ERM, “Most executives with MBA degrees were not taught ERM. In fact, there are only a few universities that teach ERM. So some business school graduates are strong in finance, marketing, and www.it-ebooks.info http://www.it-ebooks.info/ ENTERPRISE RISK MANAGEMENT CASE STUDIES 3 management theory, but they are limited in terms of critical thinking, business acu- men, and risk analysis skills.” Learning Centered Teaching (LCT), as discussed in Chapter 2, is an ideal way to achieve this. Using LCT and the case study approach, students actively participate in the learning process through constructive reflective reasoning, critical thinking and analysis, and discussion of key
- 69. issues. This is the first book to provide such a broad coverage of case studies on ERM. The case studies that follow are from some of the leading academics and prac- titioners of enterprise risk management. While many of the cases are about real-life situations, there are also those that, while based on real-life experiences, have had names changed to maintain confidentiality or are composites of several situations. We are deeply indebted to the authors and to the organizations that agreed so kindly to share their stories to help benefit future generations of ERM practition- ers. In addition, we have added several chapters where we feel the fundamentals of these specialized techniques (e.g., VaR) deserve to be understood by ERM stu- dents and practitioners. Each case study provides opportunities for executives, risk practitioners, and students to explore what went well, what could have been done differently, and what lessons are to be learned.
- 70. Teachers of ERM will find a wealth of material to use in demonstrating ERM principles to students. These can be used for term papers or class discussions, and the approaches can be contrasted to emphasize different contexts that may require customized approaches. This book introduces the reader to a wide range of con- cepts and techniques for managing risks in a holistic way, by correctly identifying risks and prioritizing the appropriate responses. It offers a broad overview of the various types of ERM techniques, the role of the board of directors, risk tolerances, profiles, workshops, and allocation of resources, while focusing on the principles that determine business success. Practitioners interested in implementing ERM, enhancing their knowledge on the subject, or wishing to mature their ERM program, will find this book an abso- lute must resource to have. Case studies are one of the best ways to learn more on
- 71. this topic. This book is a companion to Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives (Fraser and Simkins 2010). Together, these two books can create a curriculum of study for business students and risk practitioners who desire to have a better understanding of the world of enterprise risk management and where it is heading in the future. Boards and senior leadership teams in progressive organizations are now engaging in building ERM into their scenario-planning and decision-making processes. These forward- looking organizations are also integrating ERM into the business-planning pro- cess with resource allocation and investment decisions. At the business unit level, ERM is being used to measure the performance of risk- taking activities of employees. As these case studies demonstrate, ERM is a continuous
- 72. improvement process and takes time to evolve. As can be gleaned from these case studies, most firms that have taken the ERM journey started with a basic ERM language, risk identification, and risk-assessment process and then moved down the road to broaden their pro- grams to include risk treatments, monitoring, and reporting processes. The ulti- mate goal of ERM is to have it embedded into the risk culture of the organization and drive the decision-making process to make more sound business decisions. www.it-ebooks.info http://www.it-ebooks.info/ 4 Implementing Enterprise Risk Management SUMMARY OF THE BOOK CHAPTERS As mentioned earlier, the purpose of this book is to provide case studies on ERM in order to educate executives, risk practitioners, academics,
- 73. and students alike about this evolving methodology. To achieve this goal, the book is organized into the following sections: Part I: Overview and Insights for Teaching ERM Part II: ERM Implementation at Leading Organizations Part III: Linking ERM to Strategy and Strategic Risk Management Part IV: Specialized Aspects of Risk Management Part V: Mini-Cases on ERM and Risk Part VI: Other Case Studies Brief descriptions of the contributors and the chapters are provided next. PART I: OVERVIEW AND INSIGHTS FOR TEACHING ERM The first two chapters provide an overview of ERM and guidance on ERM educa- tion. As we have pointed out, education on ERM is crucial and more universities need to offer courses in this area. Our conversations with many ERM educators and consultants highlight how extremely challenging it is to
- 74. achieve excellence in ERM education. Chapter 2, “An Innovative Method to Teaching Enterprise Risk Manage- ment: A Learner-Centered Teaching Approach,” offers insights and suggestions on teaching ERM. This chapter covers the concept of flipping the classroom with learner-centered teaching (LCT), distinguishes it from traditional lectures, and describes how it can be used in teaching ERM. The LCT approach emphasizes active student participation and collaboration on in-class activities such as case studies versus the traditional lecture approach. This chapter provides several examples as to how LCT can be applied in teaching ERM, utilizing Fraser and Simkins’ (2010) book. David R. Lange and Betty J. Simkins, both experienced ERM educators, team together to write this chapter. David Lange, DBA, is an Auburn University Montgomery (AUM) Distinguished Research and Teaching Professor of
- 75. Finance. He has received many prestigious awards for both research and teaching from the University and from several academic associations. He has taught many courses in the area of risk management and has consulted in a significant num- ber of individual and class insurance–related cases in both state and federal court. Betty Simkins, PhD, the Williams Companies Chair of Business and Professor of Finance at Oklahoma State University, is coeditor of this book. PART II: ERM IMPLEMENTATION AT LEADING ORGANIZATIONS Part II is a collection of ERM case studies that give examples of how ERM was developed and applied in major organizations around the world. Note that there is no perfect ERM case study and the objective is for readers to assess what they believe was successful or not so successful about these ERM programs. www.it-ebooks.info
- 76. http://www.it-ebooks.info/ ENTERPRISE RISK MANAGEMENT CASE STUDIES 5 The first case study in this book describes ERM at Mars, Inc. Larry Warner, who is the former corporate risk manager at Mars, Inc. and now is president of Warner Risk Group, describes the ERM program at the company in Chapter 3. Mars is a global food company and one of the largest privately held corporations in the United States. It has more than 72,000 associates and annual net sales in excess of $33 billion across six business segments—Petcare, Chocolate, Wrigley, Food, Drinks, and Symbioscience. Its brands include Pedigree, Royal Canin, M&M’s, Snickers, Extra, Skittles, Uncle Ben’s, and Flavia. With such complex business oper- ations, Mars recognized the importance of providing its managers with a tool to knowledgably and comfortably take risk in order to achieve its long-term goals.
- 77. Mars business units use its award-winning process to test their annual operating plan and thereby increase the probability of achieving these objectives. The case study in Chapter 4 entitled “Value and Risk: ERM in Statoil” was writ- ten by Alf Alviniussen, who is the former Group Treasurer and Senior Vice Pres- ident of Norsk Hydro ASA, Oslo, Norway, and Håkan Jankensgård who holds a PhD in risk management from Lund University, Sweden. Håkan is also a for- mer risk manager of Norsk Hydro. In this case study, the authors discuss ERM at Statoil, one of the top oil and gas companies in the world, located in Norway. In Statoil, understanding and managing risk is today considered a core value of the company, which is written into the corporate directives and widely communicated to employees. ERM is thoroughly embedded in the organization’s work processes, and its risk committee has managed the transition from a “silo”- mentality to pro-
- 78. moting Statoil’s best interests in areas where risk needs to be considered. Chapter 5, called “ERM in Practice at University of California Health Systems,” is written by their former Chief Risk Officer (CRO), Grace Crickette, who is now the Senior Vice President and Chief Risk and Compliance Officer of AAA Northern California, Nevada, and Utah. The University of California’s (UC) Health System is comprised of numerous clinical operations, including five medical centers that support the clinical teaching programs for the university’s medical and health sci- ence school and handle more than three million patient visits each year. ERM plays an important role at the UC Health System and assists the organization in assess- ing and responding to all risks (operational, clinical, business, accreditation, and regulatory) that affect the achievement of the strategic and financial objectives of the UC Health System.
- 79. The descriptive case study in Chapter 6, written by Dr. Mark Frigo from DePaul University and Hans Læssøe, the Strategic Risk Manager of the LEGO Group, provides a great example of integrating risk management in strategy devel- opment and strategy execution at the LEGO Group, which is based on an initiative started in late 2006 and led by co-author Hans Læssøe. The LEGO methodology is also part of the continuing work of the Strategic Risk Management Lab at DePaul University, which is identifying and developing leading practices in integrating risk management with strategy development and execution. United Grain Growers (UGG), a conservative 100-year-old Winnipeg, Canada- based grain handler and distributor of farm supplies, was an ERM pioneer. Chap- ter 7 called “Turning the Organizational Pyramid Upside Down: Ten Years of Evo- lution in Enterprise Risk Management at United Grain Growers” analyzes the ERM program at United Grain Growers 15 years later. When UGG
- 80. announced that it had implemented a new integrated risk-financing program in 1999, it received a great deal of attention in the financial press. CFO magazine hailed the UGG www.it-ebooks.info http://www.it-ebooks.info/ 6 Implementing Enterprise Risk Management program as “the deal of the decade.” The Economist characterized it as a “revo- lutionary advance in corporate finance,” and Harvard University created a UGG case study. While most outside attention focused on the direct financial benefits of implementing the program (protection of cash flow, the reduced risk-capital required, and a 20 percent increase in stock price), scant attention was given to the less tangible and therefore less measurable issues of governance, leadership, and
- 81. corporate culture—the conditions that enabled such innovation. It was a combi- nation of a collaborative leadership open to new ideas, a culture of controlled risk taking, and active risk oversight by the board that produced a strategic approach to UGG’s risk management process. This chapter is written by John Bugalla, who is the principal of ermINSIGHTS. John Hargreaves has written Chapter 8 titled “Housing Association Case Study of ERM in a Changing Marketplace.” He has a mathematics degree from Cambridge University and six years strategy consultancy experience at KPMG. This case study features four real-life charitable housing associations in England and Wales, each with a different strategy and risk environment. Simple yet prac- tical tools to assist in risk identification and prioritization are also presented. This case study has two main aims. The first is to help develop an understanding of the importance of ERM in a charitable context, showing that
- 82. modern charities are often very active organizations that face significant risks. Second, the case aims to illustrate the need for a close relationship between risk assessment and strategy development, particularly in sectors where objectives are defined in social as well as economic terms. Each of the four cases has a different perspective and challenges the student or practitioner to identify and assess the risk and develop possible risk treatments for each. Chapter 9, “Lessons from the Academy: ERM Implementation in the Univer- sity Setting,” was written by Anne E. Lundquist. She is pursuing a PhD in the Educational Leadership program at Western Michigan University with a concen- tration in Higher Education Administration. This chapter explores the unique aspects of the University of Washington’s (UW) risk environment, including how leadership, goal-setting, planning, and decision-making differ from the for-profit
- 83. sector. The lack of risk management regulatory requirements, combined with cul- tural and environmental differences, helps explain why there are a limited number of fully evolved ERM programs at colleges and universities. The second half of the chapter explores the decision to adopt and implement ERM at UW, including a description of early decisions, a timeline of how the program evolved, a discus- sion of the ERM framework, and examples of some of the tools used in the risk management process. It traces the evolution of the UW program as well as demon- strates decisions that administrators made to tailor ERM to fit the decentralized culture of a university. The case study in Chapter 10, “Developing Accountability in Risk Manage- ment: The British Columbia Lottery Corporation Case Study,” demonstrates how ERM was successfully implemented in a Canadian public sector organization over a 10-year period. Jacquetta Goy, author of this chapter, was the
- 84. Senior Manager, Risk Advisory Services at British Columbia Lottery Corporation and was respon- sible for establishing and developing the ERM program. Currently, Jacquetta is the Director of Risk Management at Thompson Rivers University, Canada. This case study focuses on initiation, early development, and sustainment of the ERM www.it-ebooks.info http://www.it-ebooks.info/ ENTERPRISE RISK MANAGEMENT CASE STUDIES 7 program, highlighting some of the barriers and enablers that affected implemen- tation. This case study includes a focus on developing risk profiles; the role of risk managers, champions, and committees; and the development of effective risk evaluation tools. The approach to ERM has evolved from informal conversations
- 85. supported by an external assessment, through a period of high- level corporate focus supported by a dedicated group of champions using voting technology to an embedded approach, where risk assessment is incorporated into both opera- tional practice and planning. Chapter 11, “Starting from Scratch: The Evolution of ERM at the Workers Com- pensation Fund,” describes the evolution of a formal ERM program at a midsize property casualty insurance carrier. This chapter is authored by Dan Hair, the CRO of the Workers Compensation Fund. In this chapter, the motivations of executive management and the board of directors in taking existing strategic risk manage- ment discussions to a higher level are reviewed. The step-by- step actions taken by the company to develop the ERM program are explained in chronological order. External resources used are also commented upon. The chapter concludes with a discussion of striking an ongoing balance between program
- 86. rigor, documentation, and business needs. Chapter 12, “Measuring Performance at Intuit: A Value-Added Component in ERM Programs,” shows how Intuit, maker of Quicken, QuickBooks, and Turbo- Tax, is committed to creating new and easier ways for consumers and businesses to tackle life’s financial chores, giving them more time to live their lives and run their businesses. This case study shows how Intuit, a global company, is exposed to a wide range of customer-related and operational risks. Understand- ing the risk landscape enables Intuit to formulate and execute strategies to address potential pitfalls and opportunities. The author, Janet Nasburg, is Chief Risk Offi- cer at Intuit. Janet is responsible for driving Intuit’s ERM capability, ensuring that the company appropriately balances opportunities and risks to achieve optimal business results. Before Intuit, Janet spent 16 years in various finance roles at Visa,
- 87. and has more than 30 years of risk management and finance experience. Chapter 13 describes TD Bank’s ERM program and how it has been developed to reinforce the risk culture and ensure that all stakeholders have a common under- standing of how risks are addressed within the organization. This is achieved by identifying the risks to TD Bank’s business strategy and operations, determining the types of risk it is prepared to take, establishing policies and practices to gov- ern risks, and following an ERM framework to manage those risks. This chapter is co-authored by Paul Cunha and Kristina Narvaez. Paul Cunha is Vice President, Enterprise Risk Management at TD Bank. During his career at TD Bank, he has spent time in risk management, internal audit, retail banking, commercial bank- ing, and corporate and investment banking. Kristina Narvaez is the president and owner of ERM Strategies, LLC, and is co-editor of this book.
- 88. PART III: LINKING ERM TO STRATEGY AND STRATEGIC RISK MANAGEMENT Part III of this book demonstrates the link between ERM and strategy in what is now being called strategic risk management (SRM). SRM represents an important evolution in enterprise risk management, shifting from a reactive approach to a www.it-ebooks.info http://www.it-ebooks.info/ 8 Implementing Enterprise Risk Management proactive approach in dealing with the large spectrum of risks across the organi- zation. These case studies view their risk-taking activities in a strategic way, not only to protect the organization’s value and assets, but also to be able to capture new value that is in alignment with the strategic goals of the organization.
- 89. Zurich Insurance Group, the case study in Chapter 14, demonstrates the link between ERM and strategy. Zurich is a global insurance carrier and is exposed to a wide range of risks. Zurich recognizes that taking the right risks is a necessary part of growing and protecting shareholder value. It is careful not to miss valu- able market opportunities that could attract the best talent and investor capital, but must also balance the growth opportunities with the reality that it is operating in a complex world economy. This chapter is co-authored by Linda Conrad, Director of Strategic Business Risk Management at Zurich and Kristina Narvaez, president and owner of ERM Strategies, LLC and co-editor of this book. Linda leads a global team responsible for delivering tactical solutions to Zurich and to its customers on strategic issues such as business resilience, supply chain risk, ERM, risk culture, and total risk profiling. Chapter 15, “Embedding ERM into Strategic Planning at the
- 90. City of Edmon- ton,” is written by Ken Baker, who is their ERM Program Manager. This study examines the process used by the City of Edmonton in Alberta, Canada, to estab- lish its strategic ERM model. After examining several existing frameworks, the City decided on a framework based on the ISO 31000 risk management standard, but customized to suit the City’s needs. During the process, administration had to weigh factors common to any large organization, as well as those specific to governments in general and municipalities in particular. The chronicling of this process may assist those in similar organizations to more successfully implement their own ERM and SRM programs. Chapter 16 describes a brief history of the evolution of enterprise risk management and describes a new and innovative approach (value mapping) to measuring the potential value by taking risks. This chapter also provides a model
- 91. for incorporating the ERM process into strategic planning. John Bugalla, Principal of ermINSIGHTS and author of Chapter 7, and James Kallman, a finance professor at St. Edward’s University, co-author this chapter. John’s experience includes 30 years in the risk management profession serving as Managing Director of Marsh & McLennan, Inc., Willis Group, Plc., and Aon Corp., before founding ermINSIGHTS. James teaches courses in finance, statistics, and risk management. PART IV: SPECIALIZED ASPECTS OF RISK MANAGEMENT Part IV of the book captures unique aspects of ERM so that the reader can learn about the many broad applications, including insights into managing specific types of risk. This part starts with a case study in Chapter 17 of the challenges of risk management within a typical police department. This case is followed by eight additional chapters addressing other intriguing aspects of risk management.
- 92. Andrew Graham reveals the complex and challenging aspects of risk manage- ment in Chapter 17, “Developing a Strategic Risk Plan for the Hope City Police Ser- vice.” This fictional case study was developed based on many years of teaching risk management to police forces. The setting is a medium-sized but growing city that www.it-ebooks.info http://www.it-ebooks.info/ ENTERPRISE RISK MANAGEMENT CASE STUDIES 9 is facing many issues, including changes in demographics, traffic issues, budgetary challenges, and so on. The student is required to act as a consultant who has been hired by the chief of police to assist him in briefing the Police Services Board and the mayor in understanding the most critical risks to their objective of having a best-
- 93. in-class police service for their citizens. Andrew Graham researches, teaches, and writes on public-sector management, financial management, integrated risk man- agement, and governance at Queen’s University School of Policy Studies, Canada, as well as a variety of international and Canadian venues. Andrew had an exten- sive career in Canada’s criminal justice system and has taught and worked with police services and police boards and commissioners in a variety of ways for the past 10 years. Chapter 18, “Blue Wood Chocolates,” is designed to facilitate discussion of the implementation of an ERM framework, corporate governance issues, and com- modity risk management. The situation that this fictional company faces is typi- cal of many midsize companies that have performed satisfactorily in the past but are exposed, often unknowingly, to major potential risks and do not have the internal governance and risk management structures to identify,
- 94. quantify, and manage such risks adequately. In particular, this case illustrates commodity and foreign currency exposures, and challenges the student to investigate the specifics of hedging such positions. Rick Nason, PhD, CFA, and Stephen McPhie, CA, coau- thored this chapter. Rick is an associate professor of finance at Dalhousie Univer- sity, Canada, and is also a founding partner of RSD