Perception

and Individual Decision Making

OB – Robbins

Presenter: Farzoq Chaudhary

What Is Perception, and Why Is It Important?What Is Perception, and Why Is It Important?

• People’s behavior is based on their perception of what reality is, not on reality itself.

• The world as it is perceived is the world that is behaviorally important.

• People’s behavior is based on their perception of what reality is, not on reality itself.

• The world as it is perceived is the world that is behaviorally important.

Perception

A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment.

Factors thatInfluence

Perception

Factors thatInfluence

Perception

E X H I B I T 5–1E X H I B I T 5–1

Person Perception: Making Judgments About Others

Person Perception: Making Judgments About Others

Distinctiveness: Shows different behaviors in different situations.

Consensus: Response is the same as others to same situation.

Consistency: Responds in the same way over time.

Distinctiveness: Shows different behaviors in different situations.

Consensus: Response is the same as others to same situation.

Consistency: Responds in the same way over time.

Attribution Theory

When individuals observe behavior, they attempt to determine whether it is internally or externally caused.

Attribution TheoryAttribution TheoryE X H I B I T 5–2

E X H I B I T 5–2

Errors and Biases in AttributionsErrors and Biases in Attributions

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

In general, we tend to blame the person first, not the situation.

In general, we tend to blame the person first, not the situation.

Errors and Biases in Attributions (cont’d)Errors and Biases in Attributions (cont’d)

Self-Serving Bias

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

Thought: When students get an “A” on an exam, they often say they studied hard. But when they don’t do well, how does the self-serving bias come into play?

Hint: Whose fault is it usually when an exam is “tough”?

Thought: When students get an “A” on an exam, they often say they studied hard. But when they don’t do well, how does the self-serving bias come into play?

Hint: Whose fault is it usually when an exam is “tough”?

Frequently Used Shortcuts in Judging OthersFrequently Used Shortcuts in Judging Others

Selective Perception

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

Frequently Used Shortcuts in Judging OthersFrequently Used Shortcuts in Judging Others

Halo Effect

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

Contrast Effects

Evaluation of a person’s characteristics that are affected by comparisons with other people recently encountered who rank higher or lower on the same characteristics

Frequently Used Shortcuts in Judging OthersFrequently Used Shortcuts in Judging Others

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 OrganizationsSpecific Applications in Organizations

Employment Interview– Perceptual biases of raters affect the accuracy of

interviewers’ judgments of applicants Performance Expectations

– Self-fulfilling prophecy (Pygmalion effect): The lower or higher performance of employees reflects preconceived leader expectations about employee capabilities.

Ethnic Profiling– A form of stereotyping in which a group of individuals

is singled out—typically on the basis of race or ethnicity—for intensive inquiry, scrutinizing, or investigation

Specific Applications in Organizations (cont’d)Specific Applications in Organizations (cont’d)

Performance Evaluations– Appraisals are often the subjective (judgmental)

perceptions of appraisers of another employee’s job performance.

The Link Between Perceptions and Individual Decision Making

The Link Between Perceptions and Individual Decision Making

Perception of the Decision

Maker

Perception of the Decision

Maker

Outcomes

ProblemA perceived discrepancy between the current state of affairs and a desired state

DecisionsChoices made from among alternatives developed from data perceived as relevant

Assumptions of the Rational Decision-making ModelAssumptions of the Rational Decision-making Model

Model Assumptions

• Problem clarity

• Known options

• Clear preferences

• Constant preferences

• No time or cost constraints

• Maximum payoff

Model Assumptions

• Problem clarity

• Known options

• Clear preferences

• Constant preferences

• No time or cost constraints

• Maximum payoff

Rational Decision-making Model

Describes how individuals should behave in order to maximize some outcome

Steps in the Rational Decision-making ModelSteps in the Rational Decision-making Model

1. Define the problem.

2. Identify the decision criteria.

3. Allocate weights to the criteria.

4. Develop the alternatives.

5. Evaluate the alternatives.

6. Select the best alternative.

E X H I B I T 5–3E X H I B I T 5–3

The Three Components of CreativityThe Three Components of Creativity

Creativity

The ability to produce novel and useful ideas

Three-Component Model of Creativity

Proposition that individual creativity requires expertise, creative-thinking skills, and intrinsic task motivation

E X H I B I T 5–4E X H I B I T 5–4

Source: T.M. Amabile, “Motivating Creativity in Organizations,” California Management Review, Fall 1997, p. 43.

How Are Decisions Actually Made in Organizations?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.

How Are Decisions Actually Made in Organizations? (cont’d)

How Are Decisions Actually Made in Organizations? (cont’d)

How/Why problems are Identified– Visibility over importance of problem

• Attention-catching, high profile problems• Desire to “solve 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 ErrorsCommon 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

Common Biases and ErrorsCommon Biases and Errors

Availability Bias– Using information that is most readily at hand

• Recent • Vivid

Representative Bias– “Mixing apples with oranges”– Assessing the likelihood of an occurrence by trying to

match it with a preexisting category using only the facts that support our decision

Winner’s Curse– Highest bidder pays too much– Likelihood of “winner’s curse” increases with the

number of people in auction

Common Biases and ErrorsCommon Biases and Errors

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

IntuitionIntuition

Intuitive Decision Making– An unconscious process created out of distilled

experience Conditions Favoring Intuitive Decision Making

– A high level of uncertainty exists

– There is little precedent to draw on

– Variables are less scientifically predictable

– “Facts” 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

Individual Differences in Decision Making Individual Differences in Decision Making

Source: A.J. Rowe and J.D. Boulgarides, Managerial Decision Making, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29.

Personality Aspects of conscientiousness and escalation of

commitment Self Esteem High self serving bias Gender

Women tend to analyze decisions more than men.

Organizational Constraints on Decision MakersOrganizational Constraints on Decision Makers

Performance Evaluation– Evaluation criteria influence the choice of actions

Reward Systems– Decision makers make action choices that are favored

by the organization Formal Regulations

– Organizational rules and policies limit the alternative choices of decision makers

System-imposed Time Constraints– Organizations require decisions by specific deadlines

Historical Precedents– Past decisions influence current decisions

Cultural Differences in Decision MakingCultural Differences in Decision Making

Problems selected Time orientation Importance of logic and rationality Belief in the ability of people to solve problems Preference for collective decision making

Ethics in Decision MakingEthics in Decision Making

Ethical Decision Criteria– Utilitarianism

• Seeking the greatest good for the greatest number

– Rights• Respecting and protecting basic rights of individuals

such as whistleblowers

– Justice• Imposing and enforcing rules fairly and impartially

Ethics in Decision MakingEthics in Decision Making

Ethics and National Culture– There are no global ethical standards.

– The ethical principles of global organizations that reflect and respect local cultural norms are necessary for high standards and consistent practices.

Ways to Improve Decision MakingWays 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 ErrorsToward 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 wrong challenges our tendencies to think we’re smarter than we actually are.

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 an outstanding one.

E X H I B I T 5–5E X H I B I T 5–5Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control

of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164–68.

It’s your little sister’s senior Prom night, and she

notices that everyone is wearing the same dress she

has on! Which perceptual shortcut may be occurring?

• Escalation of commitment

• Representative bias

• Availability bias

• Hindsight bias

Chapter Check-up: Perception Chapter Check-up: Perception

It’s your little sister’s senior Prom night, and she notices

that everyone is wearing the same dress she has on!

Which perceptual shortcut may be occurring?

Chapter Check-up: PerceptionChapter Check-up: Perception

• Escalation of commitment

• Representative bias

• Availability bias

• Hindsight bias

Discuss with your neighbor what the answer would be

if your sister came home and said “I just knew that

everyone would buy that dress!”

Discuss with your neighbor what the answer would be

if your sister came home and said “I just knew that

everyone would buy that dress!”

If all of these perceptual

shortcuts happen un-

consciously, how can we keep

the stereotypes we have from

interfering with the way we

work in group projects?

Identify two specific things you

could do to help prevent

stereotypes from inhibiting

effective group relationships.

Discuss with a neighbor.

If all of these perceptual

shortcuts happen un-

consciously, how can we keep

the stereotypes we have from

interfering with the way we

work in group projects?

Identify two specific things you

could do to help prevent

stereotypes from inhibiting

effective group relationships.

Discuss with a neighbor.

Chapter Check-up: PerceptionChapter Check-up: Perception

Adeel has just discovered he is registered for two classes

at the same time and must make a decision about which

one to take this semester. He considers the professor

teaching this semester, the time of the class, and the

classes his friends are taking. He then considers his

options for when he can take each class again, as well as

the costs and benefits for taking each this semester versus

later next year. He then makes his decision. Adeel has just

engaged in what?

Chapter Check-up: Decision MakingChapter Check-up: Decision Making

In making his decision, Adeel forgot to consider the implications of the color of paint in the room where each class was being offered. Given that room color can influence mood, which can influence performance, why

didn’t Adeel consider it?

Chapter Check-up: Decision MakingChapter Check-up: Decision Making

Adeel engaged in the

rational decision making model,

and didn’t consider the paint color of the rooms because he operates

under the confines of

bounded rationality.

Chapter Check-up: Decision Making Chapter Check-up: Decision Making

Chapter Check-up: What biases might have affected Martha Stewart’s

judgment? Discuss with a classmate.

Chapter Check-up: What biases might have affected Martha Stewart’s

judgment? Discuss with a classmate.