19011052 Perception IDM

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Perception and DecisionMaking



Perception

Perception

A process by which individuals organize and

interpret their sensory impressions in order to give

meaning to their environment

Perceptual processes differ across individuals

Perception is basis of meaning

Behaviors are based on perceptions, not onreality



Perception

Source: Robbins, 2001



Shortcuts in Perception

Selective perception

Categorical thinking

Mental models



Social Identity Theory

Personal identity

Social identity

Social perceptions Categorization

Homogenization

Differentiation

Stereotyping



Errors in Perception

Primacy effect

Recency effect

Projection Halo effect

Contrast effect



Attribution Theory

How do people determine the source or cause of

others¶ behaviors?

Internal attribution

External attribution

1. Distinctiveness: shows different behaviors in

different situations.

2. Consensus: response is the same as others to

same situation.

3. Consistency: responds in the same way over time.



Attribution Theory




Attribution Theory

Errors in attributions

Fundamental Attribution Error

The tendency to underestimate the influence of external factors and overestimate the influence of

internal factors

Self-serving Bias

The tendency for individuals to attribute their own

successes to internal factors while putting the blame

for failures on external factors



The Link Between Perceptions

and Individual Decision Making

Perception of the Decision

Maker

Outcomes

Problem A perceived discrepancy

between the current state of

affairs and a desired state

DecisionsChoices made from among

alternatives developed fromdata perceived as relevant



The Classical Model of

Decision Making

1. Identify and define the Problem

2. Identify decision criteria

3. Allocate weights to criteria

4. Develop alternatives

5. Analyze alternatives

6. Select the ³best´ alternative

7. Implement the alternative

8. Evaluate decision effectiveness



Assumptions of

rationality in

classical decision

making model

Problem is

clear and

unambiguous

Single, well-

defined goal

is to be achievedAll alternatives

and

consequences areknown

Preferences

are clear

Preferences

are constant

and stable

No time or cost

constraints exist

Final choice

will maximize

payoff


Classical Model of Decision

Making



Behavioral Model of Decision

Making

Classical model is ³prescriptive´: It tells

managers what they should do

Behavioral model is ³descriptive´: It tells ushow managers actually make decisions

Managers attempt to be rational, but

assumptions of complete rationality are relaxed

(i.e., we know managers don¶t have complete andaccurate information) ± ³bounded rationality´



ProcessingProcessingInformationInformation

EvaluationEvaluationTimingTiming

Rational: People can process all information

Rational: Choices evaluated simultaneously

GoalsGoals Rational: Clear, compatible, agreed upon

OB: Ambiguous, conflicting, lack agreement

OB: People process only limited information

OB: Choices evaluated sequentially

Making Ch

oices:R

ational vs OB

Source: Shane & Von Glinow, 2005



Info QualityInfo Quality

DecisionDecisionObjectiveObjective

Rational: People rely on factual information

Rational: Maximization -- the optimal choice

StandardsStandards Rational: Evaluate against absolute standards

OB: Evaluate against implicit favorite

OB: Rely on perceptually distorted information

OB: Satisficing -- a ³good enough´ choice

Making Choices: Rational vs OB




Behavioral Model of Decision

Making

How do managers actually make decisions?

They satisfice rather than optimize

They use their intuition They act politically (e.g., coalitions)

They take risks

They escalate their commitment

They have their own decision making styles

They use heuristics



How Are Decisions Actually Made

in Organizations?

How/Why problems are Identified

Visibility over importance of problem

Attention-catching, high profile problems

Desire to ³solve problems´ Self-interest (if problem concerns decision maker)

Alternative Development

Satisficing: seeking the first alternative that solves

problem

Engaging in incremental rather than unique

problem solving through successive limited

comparison of alternatives to the current

alternative in effect



Common Biases and Errors

Overconfidence Bias

Believing too much in our own ability to make

good decisions

Anchoring Bias

Using early, first received information as the

basis for making subsequent judgments

Confirmation Bias

Using only the facts that support our decision




Availability Bias Using information that is most readily at hand

Recent

Vivid Representative Bias ³Mixing apples with oranges´

Assessing the likelihood of an occurrence by

trying to match it with a preexisting category usingonly the facts that support our decision




Escalation of Commitment

In spite of new negative information, commitment

actually increases

Randomness Error

Creating meaning out of random events

Hindsight Bias

Looking back, once the outcome has occurred,

and believing that you accurately predicted the

outcome of an event



Intuition Intuitive Decision Making

An unconscious process created out of distilled

experience

Conditions Favoring Intuitive DecisionMaking A high level of uncertainty exists

There is little precedent to draw on

Variables are less scientifically predictable ³Facts´ are limited

Facts don¶t clearly point the way

Analytical data are of little use

Several plausible alternative solutions exist

Time is limited and pressing for the right decision



Ways to Improve Decision

Making

1. Analyze the situation and adjust your decision

making style to fit the situation.

2. Be aware of biases and try to limit their impact.

3. Combine rational analysis with intuition to increase

decision-making effectiveness.

4. Don¶t assume that your specific decision style is

appropriate to every situation.

5. Enhance personal creativity by looking for novel

solutions or seeing problems in new ways, and

using analogies.



Toward Reducing Bias and

Errors

Focus on goals.

Clear goals make decision making easier and

help to eliminate options inconsistent with your

interests.

Look for information that disconfirms

beliefs.

Overtly considering ways we could be wrongchallenges our tendencies to think we¶re smarter

than we actually are.

Source: S.P. Robbins, Decide & C onquer: Maki ng Wi nni ng Decisi ons and Taki ng C ont r ol

of Y our Li f e (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164±68.



Toward Reducing Bias and

Errors

Don¶t try to create meaning out of random

events.

Don¶t attempt to create meaning out of coincidence.

Increase your options.

The number and diversity of alternatives

generated increase the chance of finding anoutstanding one.

Source: S.P. Robbins, Decide & C onquer: Maki ng Wi nni ng Decisi ons and Taki ng C ont r ol

of Y our Li f e (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164±68.



Common Biases in Decision

Making

Heuristics are ³rules of thumb´

The availability heuristic: use information that is

easily recalled

The representativeness heuristic: categorize and

stereotype based on limited information (e.g., you

can tell a book by its cover)

The anchoring and adjustment heuristic: place toomuch weight on initial information



Source: Prentice-Hall 2003




Making

Escalation of Commitment

The tendency of decision makers to invest

additional time, money, or effort into what are

essentially bad decisions or unproductive courses

of action that are already draining organizational

resources.




Making

Escalation of commitmentoccurs because of« Ego / Self-justification

Sunk costs fallacy

Gambler¶s fallacy

Stopping costs

Perceptual filters

To help resolve andprevent escalation of commitment« Don¶t look at other people

to set what you should do

Continually remind yourself of the costs

Set limits on your involvement and

commitment Focus on the quality of the

decision, not the quantity of the outcome

Stay vigilant



Employee Involvement Model

Potential InvolvementPotential Involvement

OutcomesOutcomes

ContingenciesContingenciesof Involvementof Involvement

EmployeeEmployee

InvolvementInvolvement

Better problemidentification

More/better

solutions

generated

Best choice morelikely

Higher decision

commitment




Contingencies of Involvement

KnowledgeKnowledge

SourceSource

DecisionDecision

CommitmentCommitment

Employees have relevant knowledge

beyond leader

Employees would lack commitment

unless involved

Risk of Risk of

ConflictConflict

Norms support firm¶s goals

Employee agreement likely

DecisionDecision

StructureStructure

Problem is new & complex

(i.e non-programmed decision)

More employee involvement is better when:More employee involvement is better when:




Characteristics of Creative

People

Above average intelligence

Persistence

Relevant knowledge and experience

Inventive thinking

Source: McShane & VonGinow, 2006



Creativity in Decision Making

Preparation Incubation Insight Verification

Education

S

tudy Knowledge

Intelligence

Persistence

Reflection

Thinking Consideration

Rest

Breakthrough

³ah-hah!´ ³light turned on´

Test

Check

The Creative Process



Creative Work Environments

Learning orientation Encourage experimentation

Tolerate mistakes

Intrinsically motivating work

Task significance, autonomy, feedback

Open communication and sufficient resources

Team trust and project commitment




Creative Activities

ReviewReview

abandonedabandonedprojectsprojects

Explore issueExplore issuewith other with other

peoplepeople

RedefineRedefine

the Problemthe Problem

StorytellingStorytelling

Artistic Artisticactivitiesactivities

MorphologicalMorphological

analysisanalysis

AssociativeAssociative

PlayPlay

Diverse teamsDiverse teams

InformationInformationsessionssessions

InternalInternal

tradeshowstradeshows

CrossCross--

PollinationPollination




1. Looking for the ³right´

answer.

2. Always trying to be logical.

3. Strictly following the rules.

4. Insisting on being practical.

5. Avoiding ambiguity.

6. Fearing and avoiding failure.

7. Forgetting how to play.

8. Becoming too specialized.

9. Not wanting to look foolish.

10. Saying ³I¶m not creative.´

Source: Krietner, 2004

Ten Mental ³Locks´ on

Creativity



Organizational Factors Impeding

Creativity

1. Expected evaluation

2. Surveillance

3. External motivators

4. Competition

5. Constrained choice


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