Chapter 5: Perception and Individual Decision Making

What are you responsible to learn?

Explain how two people can see the same thing and interpret it differently.
 List the three determinants of attribution.
Describe how shortcuts can assist in or distort our judgment of others.
Explain how perception affects the decision-making process.
Outline the six steps in the rational decision-making model.
Describe the actions of the boundedly rational decision maker.
List and explain eight (8) common decision biases or errors.
Identify the conditions in which individuals are most likely to use intuition in
decision making.
 Describe four styles of decision making.
 Contrast the three ethical decision criteria
Perception
What is Perception?
A process by which individuals organize and interpret their sensory impressions in order
to give meaning to their environment.

Why is it Important?

Because people’s behavior is based on their perception of what reality is, not on reality
itself. The world that is perceived is the world that is behaviorally important.

Factors Influencing Perception

· The Perceiver – attitudes, motives, interests, experiences, expectations

· The Target – novelty, motions, sounds, size, background, proximity, similarity

· The Situation – time, work setting, social situation

Person Perception: Making Judgments About Others

Attribution Theory

· When individuals observe behavior, they attempt to determine whether it

is internally (under the personal control of the individual) or externally (outside
causes “force” you to behave a certain way) caused.

Fundamental Attribution Error

 · The tendency to underestimate the influence of external factors
and overestimate the influence of internal factors when making judgments about
the behavior of others.

Self-Serving Bias

– The tendency for individuals to attribute their own successes to internal factors
while putting the blame for failures on external factors.

Attribution Theory - Frequently Used Shortcuts in Judging Others

- Selective Perception

– People selectively interpret what they see on the basis of their interest,
background, experience, and attitudes.

- Halo Effect

– Drawing a general impression about an individual on the basis of a single

characteristic.

- Contrast Effects

– Evaluations of a person’s characteristics that are affected by comparisons with

other people recently encountered who rank higher or lower on the same
characteristics.

- Projection

– Attributing one’s own characteristics to other people

- Stereotyping

– Judging someone on the basis of one’s perception of the group to which that
person belongs.

Specific Applications in Organizations

- Employment interview

– Early impressions are very important! Perceptual judgments are often

inaccurate! (Another reason we should use structured interviews!)
- Performance Expectations

– People attempt to validate their perceptions of reality – even when they are
faulty! Self-fulfilling prophecy (Pygmalion Effect) is based on the notion that
expectations can determine behavior – this is a very powerful managerial
technique!

- Ethnic Profiling – Is it right to profile employees?

- Performance Evaluations

– Many subjective components (perceptions) are used in the evaluation of

employees

- Employee Effort

– How is “effort” perceived? It is often a “reason” for terminations

The Link Between Perception and Individual Decision Making

Decisions = Choosing between 2 or more alternatives

Problems = A discrepancy between some current state of affairs and some desired state

How should we make decisions in organizations?

To maximize a particular outcome, try the “rational decision making model”…

Steps in the Rational Decision-Making Model

· Define the problem.

· Identify the decision criteria.

· Allocate weights to the criteria.

· Develop the alternatives.

· Evaluate the alternatives.

· Select the best alternative.

Assumptions of the Rational Decision-Making Model

- Problem Clarity-

– The problem is clear and unambiguous.

- Known Options-

– The decision-maker can identify all relevant criteria and viable alternatives.

- Clear Preferences-

– Rationality assumes that the criteria and alternatives can be ranked and
weighted.

- Constant Preferences-

– Specific decision criteria are constant and that the weights assigned to them
are stable over time.

- No Time or Cost Constraints-

– Full information is available because there are no time or cost constraints.

-Maximum Payoff-

– The choice alternative will yield the highest perceived value.

How can we improve creativity in decision making?

– You can produce novel and useful ideas by emphasizing the three component
model of creativity: 1) expertise, 2) creative-thinking skills, and 3) intrinsic task
motivation

So, how are decisions actually made in organizations?

· Bounded Rationality

- individuals make decisions by constructing simplified models that extract the

essential features from problems without capturing all their complexity.

· Intuitive Decision Making

 – Intuition = an unconscious process created out of distilled experience.

– Intuition is often used when there is a high level of uncertainty, there is little
precedent to go on, when the variable in question are less predictable, when
“facts” are limited, these facts don’t lead you in one particular direction, data is of
little use, when there are several plausible choices, and there is time pressure

Problem Identification

- Problems that are visible tend to have a higher probability of being selected than ones
that are important. Why?

– It is easier to recognize visible problems.

– Decision-Makers want to appear competent and “on-top of problems.”

– Decision-Makers self-interest affects problem selection because it is usually in

the Decision-Maker’s best interest to address problems of high visibility and high
payoff. This demonstrates an ability to perceive and attack problems.

Alternative Development

- Decision makers rarely seek optimum solutions but satisficing or “good enough”
ones.

– Efforts made are simple and confined to the familiar.

– Efforts are incremental rather than comprehensive.

– Many successive limited comparisons rather than calculating value for each
alternative.

– This approach makes it unnecessary for the decision maker to thoroughly

examine an alternative and its consequences.

– Thus the decision makers steps are small and limited to comparisons of the
current or familiar options.

Common Biases & Errors

- We tend to “take shortcuts” in decision making and this allows error and bias to
enter our decisions. Common biases and errors include:
 – Overconfidence Bias – We tend to be overly optimistic (especially when
our intellect and interpersonal abilities are low)

– Anchoring Bias – Tendency to focus on initial information as a starting

point.

– Confirmation Bias – We tend to seek out info that reaffirms our past
choices and we discount info that contradicts our past judgments.

– Availability Bias --or the tendency of people to base their judgments on

information readily available to them.

– Representative Bias -- The tendency to assess the likelihood of an

occurrence by drawing analogies and seeing identical situations in which they
don’t exist.

– Escalation of Commitment --an increased commitment to a previous

decision in spite of negative information (all too often creeps into decision
making)

– Randomness Error – We tend to create meaning out of random events

(and superstitions).

– Hindsight Bias – We tend to believe falsely that we’d have accurately

predicted the outcome of an event, after that outcome is actually known.

Intuitive Decision Making – An unconscious process created out of distilled

experience. (see example about firefighters – pg. 153).

Individual Differences in Decision-Making Styles

- Research on decision styles has identified four different individual approaches to

making decisions.

– Directive Style -- people using this style have a low tolerance for ambiguity and
seek rationality.

– Analytic Style -- people using this style have a much greater tolerance for
ambiguity than do directive decision makers.

– Conceptual Style -- people tend to be very broad in their outlook and consider
many alternatives

– Behavioral Style -- people who tend to work well with others.

These are based on our tolerance for ambiguity and way of thinking.

Gender: Women tend to analyze decisions more than men. Women tend to analyze a
decision prior to and after the fact. This rumination (reflecting at length) difference is
largest in the earlier stages of life and adulthood.

Organizational Constraints

· Performance Evaluations
· Reward Systems
· Formal Regulations
· System-Imposed Time Constraints
· Historical Precedents

Cultural Differences

– The rational model does NOT acknowledge cultural differences

– There are differences in what problems to focus on, the depth of analysis,
importance of logic and rationality, and preference for individual vs. group
decision making

What about Ethics in Decision Making?

- An individual can use three different criteria in framing or making ethical choices.
Each has advantages and disadvantages…

– Utilitarian criterion -- Decisions are made solely on the basis of their outcomes
or consequences. The greatest good for the greatest number.

– Rights criterion -- Decisions consistent with fundamental liberties and privileges

as set forth in documents like the Bill of Rights.

– Justice criterion -- Decisions that impose and enforce rules fairly and impartially
so there is an equitable distribution of benefits and costs.

Ethics & National Culture

· There are NO global ethical standards

· Most issues are not “black and white” (i.e., easy to say as being “right” or “wrong”)
· Q: How far should we go in punishing rule breakers? Execution?

Summary and Implications for Managers

- Perception

– Individuals behave based not on the way their external environment actually is
but, rather, on what they see or believe it to be.

– Evidence suggests that what individuals perceive from their work situation will
influence their productivity more than will the situation itself.

– Absenteeism, turnover, and job satisfaction are also reactions to the

individual’s perceptions.

- Individual Decision Making

– Individuals think and reason before they act.

– Under some decision situations, people follow the rational decision-making

model. However, this doesn’t happen very often…

– So, what can managers do to improve their decision making?

• Analyze the situation.

• Be aware of biases.

• Combine rational analysis with intuition.

• Don’t assume that your specific decision style is appropriate for every job.

• Try to enhance your creativity