SESSION 11-13

Perception
and
Individual Decision-Making
 Meaning of Perception

A process by which individuals organize and

interpret their sensory impressions in order to give

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meaning to their environment
Factors influencing perception
• Factors can reside in
• the Perceiver
• the target

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• the situation
• Individual may look at same thing but perceive it
differently
Factors influencing perception

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Person perception: Making judgment about others

• Attribution theory

• An attempt to determine whether an individual’s behavior is

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internally or externally caused

• E.g. Coming late to office by an employee

• (Internally caused/Externally caused)

LATE!!!
• Inform your boss ASAP
• Honesty is the best policy, so always be honest
• Do not mention the detailed version of your excuse.

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• Miss work only if necessary
• Try to make your skipping avoidable.
 Determining factors of attribution theory
• Distinctiveness: refers to
whether an individual
displays different behaviors in
different situations.
• Consensus: if everyone who

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faces the similar situation,
responds in the same way ,
we can say the behavior
shows consistency
• Consistency: Does the person
respond the same way over
time
• 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
e.g. Performance issues

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• Self-serving bias
• The tendency for individuals to attribute their own
successes to internal factors and put the blame for
failures on external factors
• E.g. Sales target
 Common shortcuts in judging others
1. Selective Perception

• The tendency to selectively interpret what one sees

based on one’s interests, background, experience and

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attitudes

• Why boss punishes only a few and not others who are
doing the same job?
• 2. Halo Effect
• The tendency to draw a general impression about an
individual based on a single characteristic
• E.g. intelligence, Enterprising, Entrepreneurial, Sociability
or appearance
• Critic or Admirer Activity

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• Select two personalities one whom you are a critic and
another whom you admire
• Write 3 good qualities of the person whom you are critic
• Write 3 Negative qualities about a person whom you
admire/favor
• 3. Contrast Effect
• Evaluation of a person’s characteristics that is
affected by comparisons with other people
recently encountered
• E.g. Job Interview

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• If preceded by mediocre applicants- more
favorable evaluation
• If preceded by strong applicants- less favorable
evaluation
• Stereotyping
• Judging someone based on one’s perception of the group to which that
person belongs
• Common stereotypes formed based on gender, age, race, religion, ethnicity,
height, weight etc.,
• Frequent stereotyping comment
• Women won’t relocate for a promotion
• Men are not interested in childcare

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• Older workers can’t learn new skills
• Asian migrants are hardworking
 Specific applications of shortcuts in organizations
• Employment interview
• Research shows we form impressions of others within
tenth of a second based on our first glance
• Performance expectations
• Self-fulfilling prophecy or Pygmalion effect describe

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how an individual’s behavior is determined by others’
expectations
• Performance Evaluation
• Although the appraisal can be objective, many jobs
are evaluated in subjective terms
 Pygmalion effect
• The Pygmalion effect, or Rosenthal effect, is the phenomenon whereby higher
expectations lead to an increase in performance.

• The effect is named after the Greek myth of Pygmalion, a sculptor who fell in love

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with a statue he had carved.

• The idea behind the Pygmalion effect is that increasing the leader's expectation of
the follower's performance will result in better follower performance
 Linkage Between Perception and
Individual Decision-making
Perception has a crucial role in individual
decision-making in organizations, by affecting

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both the decision as well as the quality of the
decision.
 Rational Decision making
• Rational Decision-making model
• A decision-making model that describes how individuals should behave in
order to maximize some outcome

• Steps in Rational Decision-making model

1. Define the problem

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2. Identify the decision standards
3. Allocate weights to the standards
4. Develop the alternatives
5. Evaluate the alternatives
6. Select the best alternative
Common biases
and errors in

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decision making
 Common biases and errors in decision making

• Overconfidence bias
• Tend to be overconfident about our
abilities and of others
• E.g. Selection of stocks
• In a national poll in the US

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• 86% of the respondents felt Mother
Teresa was in heaven
• In another national poll
• 90% of the adults expected go to
heaven
 Common biases and errors on decision making

• Anchoring bias

• A tendency to fixate on initial information, from which one then

fails to adequately adjust for subsequent information

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• It occurs because our mind gives a disproportionate amount of
emphasis to the first information it receives

• Remember this when you negotiate your salary

• Set anchor as high as you truthfully can

• The more precise you anchor, the smaller the adjustments

• Confirmation bias
• The tendency to seek out information that
reaffirms past choices and discount information
that contradicts past judgements

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• Selective perception plays a major role
• Less prone to confirmation bias, more accurate
decisions
• Availability bias
• Tendency to base judgment on information readily
available
• Events that are more recent tend to be more available
in our memory

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• Fear- Flying vs driving in a car
• Elections consequent to the demise of party leader
• Emotional factors in reality shows
• Appraisal or credit ratings
Escalation of commitments
• An increased commitment to a
previous decision in spite of negative
information
• Staying with a decision even if there is
clear evidence it’s wrong
• Contesting in the not-so-prospective
elections
• Not resigning the job in-spite of
knowing the company is on the verge
of closure
Randomness error
• The tendency of individuals to believe that they can predict
the outcome of random events
• Decision making suffers when we try to create meaning in
random
• Turn imaginary patterns into superstitions
• I don’t take important decisions on Fridays

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• No 13 is unlucky
• Mark- FB wears gray T-shirts while making presentations
Risk aversion
• The tendency to prefer a sure gain of a moderate amount over
a riskier outcome, even if the riskier outcome might have a
higher expected payoff

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Ethics in decision-making
• Utilitarianism
• A system of which decisions are made to provide
the greatest good for greatest number
• Whistle-blowers

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• Individuals who report unethical practices by
their employers to outsiders
• Behavioral ethics
• Analyzing how people behave when confronted
with ethical dilemmas