Perception and Individual Decision Making

MAN201: Organizational Behaviour Class 5

 Perception

What we perceive can be substantially different from objective reality... People’s

behaviour is based on their perception of what reality is, not on reality itself.
 People Perception: How and Why We Judge Others

❖ Attribution theory: How we judge others based on attributions we make about their
behaviour, and whether it was internally- or externally-caused:
❖ Internally-caused behaviours are those we attribute to individual control.
❖ Externally-caused behaviours are those we attribute to situational factors.
❖ We make attributions of internally- or externally-caused behaviour based on::
❖ Distinctiveness: “Is it unusual for this person to do something like this?”
❖ Consensus: “Did other people behave similarly in the same situation?”
❖ Consistency: “Does this person do this regularly?”
Fundamental attribution error: Over-estimating internal factors and
under-estimating external factors in others’ failures (i.e. “Too quick to blame the person
and not the situation.”)
Self-serving bias: Over-estimating external factors and under-estimating internal
factors in our own failures (i.e. “Too quick to blame the situation and not ourselves.”)
 Cognitive Biases and Perceptual Shortcuts

❖ Cognitive biases: A set of predictable mental errors that arise from our
limited ability to process information objectively. It can result in illogical and
irrational decisions, and it can cause you to misjudge risks and threats.
❖ Perceptual shortcuts: Occur when the perceiver categorizes the
perceived and infers something about the perceived based on past
experiences or the influence of other subjective influences. Such judgments
are made quickly, without attending to objective information.
❖ Managerial processes involving interpersonal communications and
interactions with other people are imperfect because they are greatly
influenced by perception. Perception often involves biases and shortcuts
which may have significant negative effects on managerial functions.
Cognitive Biases and Perceptual Shortcuts
BIAS DESCRIPTION
Anchoring Bias Why we tend to rely heavily upon the first piece of information we receive
Confirmation Bias Why we favour our existing beliefs
Endowment Effect Why we value items more if they belong to us
Framing Effect Why our decisions depend on how options are presented to us
Halo Effect Why positive impressions in one area influence our opinions in another area
Hindsight Bias Why we view unpredictable events as predictable after they occur
Observer Expectancy Effect Why we change our behavior when we’re being watched
Ostrich Effect Why we prefer to ignore negative information
Salience Bias Why we focus on items or information that are prominent and ignore others
Sunk Cost Fallacy Why we continue with an investment even if it would be rational to give it up
 Decision Making: Risks and Uncertainty
❖ “If all risks are known, good decisions require logic and statistical
thinking.”
❖ “If some risks are unknown, good decisions also require intuition and
smart rules of thumb.”
❖ “We have to learn to live with uncertainty.”
❖ “In the real world of uncertainty, where we do not know all the
alternatives or the consequences, and the risks are very hard to
estimate because everything is dynamic, there are domino effects,
surprises happen, all kinds of things happen.”
❖ “People with a high need for certainty are more prone to stereotypes
than others and are less inclined to remember information that
contradicts their stereotypes.”
❖ “If we become aware of our different biases and our perception
errors, we can correct for the problems of instinct and use it to
compliment our analysis.”
 Individual Differences in Decision-Making
❖ Energy and Metabolism
❖ People differ in their ability to use different energy sources effectively and efficiently.
❖ Personality
❖ Personality traits like conscientiousness influence our decision-making quality.
❖ Intelligence
❖ Higher IQ better allows people to overcome many decision-making errors.
❖ Gender
❖ Women are more likely to ruminate than men – (more likely to overanalyze problems before
making a decision and to try to change a decision once it has been made).
❖ Men are more likely to make impulse decisions than women – (more likely to make risky
decisions with low information based on perceived short-term gain).
❖ Cultural Differences
❖ Limited research available, but individual differences in cultural experience undoubtedly
influence decision-making in some way.
Organisational Constraints on Decision-Making

❖ Performance Evaluation
❖ People may hide or withhold important information if it reflects badly on their performance.
❖ Reward Systems
❖ The rewards and incentives in an organisation influence how “rationally” decisions are made.
❖ Formal Regulations
❖ Most organisations have rules and norms which restrict the range of possible decisions.
❖ Time Constraints
❖ Time is always a factor in decision making, but organisational deadlines are an additional
factor that influences perceptions of time.
❖ Historical Precedents
❖ “Decisions made in the past are like ghosts that haunt current choices.”
 Ethics and Creativity in Decision Making
❖ Three criteria for ethical decision-making:
❖ Utilitarianism: “The greatest good for the greatest number.” (e.g. productivity; profitability)
❖ Deontology: Protecting basic rights of individuals (e.g. due process for employees)
❖ Justice and fairness: Costs and benefits distributed in an equitable manner.

❖ Leaders have to make the “right” ethical trade-offs for a particular decision.
❖ Different ethical standards in different cultures change the decision dynamics
❖ Using the 3-Component Model of Creativity for better decision-making:
❖ Expertise: The potential for creativity is enhanced when individuals have abilities, knowledge,
proficiencies, and similar expertise in their field of endeavor.
❖ Creative-Thinking Skills: The ability to use novelty and analogies as thinking tools.
❖ Intrinsic task motivation: The desire to work on something because it’s interesting,
involving, exciting, satisfying, or personally challenging.
 Fair and Inclusive Decision Making

❖ When a group is cooperative and includes multiple perspectives, better information is

used to make decisions.
❖ Cooperative groups make better decisions than individuals, and divergent perspectives
often reflect the different risks and opportunities involved in the decision.
❖ Inclusive decision-making systems are more resilient over time because they are less
dependent upon individuals and their specific preferences.
 Fair and Inclusive Decision Making
❖ Psychological flexibility helps make sharing decision-making power a lot
less threatening. It can help people be OK with the discomfort of
disagreements and bold decisions, to be less attached to defending their
positions and identity, and to feel empowered to readily step up to make
decisions to influence their own circumstances.
❖ Decision making is about commoning:
❖ Enable those who have the urgency to take the initiative to make
proposals to actually make them.
❖ Move authority to whomever has the best information, provided they are
willing to take the authority.
❖ If we are creative and intelligent, we can come up with better ways to
make decisions that include everybody who is affected by the decisions.