Perception and Individual Decision Making

What Is Perception, and Why Is It Important?
Perception A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment.

• 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.

Factors That Influence Perception

E X H I B I T 5–1

Person Perception: Making Judgments About Others Attribution Theory When individuals observe behavior. Consistency: responds in the same way over time. Distinctiveness: shows different behaviors in different situations. . they attempt to determine whether it is internally or externally caused. Consensus: response is the same as others to same situation.

Attribution Theory E X H I B I T 5–2 .

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

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. how does the self serving bias come into play? Hint: Whose fault is it usually when an exam is “tough”? . But when they don’t do well. they often say they studied hard. Thought: When student gets an “A” on an exam.

Frequently Used Shortcuts in Judging Others Selective Perception People selectively interpret what they see on the basis of their interests. . experience. background. and attitudes.

Frequently 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 .

Stereotyping Judging someone on the basis of one’s perception of the group to which that person belongs. .Frequently Used Shortcuts in Judging Others Projection Attributing one’s own characteristics to other people.

 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. .Specific Applications in Organizations  Employment Interview – Perceptual biases of raters affect the accuracy of interviewers’ judgments of applicants. scrutinizing. or investigation.  Performance Expectations – Self-fulfilling prophecy (Pygmalion effect): The lower or higher performance of employees reflects preconceived leader expectations about employee capabilities.

Specific Applications in Organizations (cont’d)  Performance Evaluations – Appraisals are often the subjective (judgmental) perceptions of appraisers of another employee’s job performance. .

Decisions Choices made from among alternatives developed from data perceived as relevant. Perception of the decision maker Outcomes .The Link Between Perceptions and Individual Decision Making Problem A perceived discrepancy between the current state of affairs and a desired state.

Assumptions of the Rational Decision-Making Model Rational DecisionMaking Model Describes how individuals should behave in order to maximize some outcome. Model Assumptions • Problem clarity • Known options • Clear preferences • Constant preferences • No time or cost constraints • Maximum payoff .

Steps in the Rational Decision-Making Model 1. 3. Identify the decision criteria. Define the problem. Develop the alternatives. 2. 4. Evaluate the alternatives. Select the best alternative. Allocate weights to the criteria. E X H I B I T 5–3 . 6. 5.

. “Motivating Creativity in Organizations.The Three Components of Creativity Creativity The ability to produce novel and useful ideas.M. Fall 1997.” California Management Review. p. 43. E X H I B I T 5–4 Source: T. Amabile. and intrinsic task motivation. Three-Component Model of Creativity Proposition that individual creativity requires expertise. creative-thinking skills.

.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.

. – Engaging in incremental rather than unique problem solving through successive limited comparison of alternatives to the current alternative in effect. high profile problems • Desire to “solve problems” – Self-interest (if problem concerns decision maker)  Alternative Development – Satisficing: seeking the first alternative that solves problem.How Are Decisions Actually Made in Organizations? (cont’d)  How/Why problems are Identified – Visibility over importance of problem • Attention-catching.

Common Biases and Errors  Overconfidence Bias – Believing too much in our own ability to make good decisions.  Confirmation Bias – Using only the facts that support our decision. .  Anchoring Bias – Using early. first received information as the basis for making subsequent judgments.

Common Biases and Errors  Availability Bias – Using information that is most readily at hand.  Winner’s Curse – Highest bidder pays too much – Likelihood of ―winner’s curse‖ increases with the number of people in auction. • 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. .

Common 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 .

 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 .Intuition  Intuitive Decision Making – An unconscious process created out of distilled experience.

p.  Self Esteem  Gender High self serving bias  Women tend to analyze decisions more than men. 1992). Boulgarides. NJ: Prentice Hall.D. Rowe and J. 29. Source: A.J. (Upper Saddle River.Individual Differences in Decision Making  Personality  Aspects of conscientiousness and escalation of commitment. . Managerial Decision Making.

 Historical Precedents – Past decisions influence current decisions.  Reward Systems – Decision makers make action choices that are favored by the organization.Organizational Constraints on Decision Makers  Performance Evaluation – Evaluation criteria influence the choice of actions. .  Formal Regulations – Organizational rules and policies limit the alternative choices of decision makers.  System-imposed Time Constraints – Organizations require decisions by specific deadlines.

Cultural 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 .

– Rights • Respecting and protecting basic rights of individuals such as whistleblowers. . – Justice • Imposing and enforcing rules fairly and impartially.Ethics in Decision Making  Ethical Decision Criteria – Utilitarianism • Seeking the greatest good for the greatest number.

.Ethics 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.

. 2. Be aware of biases and try to limit their impact. Analyze the situation and adjust your decision making style to fit the situation.Ways to Improve Decision Making 1. Don’t assume that your specific decision style is appropriate to every situation. Combine rational analysis with intuition to increase decision-making effectiveness. 4. Enhance personal creativity by looking for novel solutions or seeing problems in new ways. 5. 3. and using analogies.

– Clear goals make decision making easier and help to eliminate options inconsistent with your interests. – Don’t attempt to create meaning out of coincidence. Robbins. E X H I B I T 5–5 . – The number and diversity of alternatives generated increases the chance of finding an outstanding one. – Overtly considering ways we could be wrong challenges our tendencies to think we’re smarter than we actually are. NJ: Financial Times/Prentice Hall.P. 2004). 164 –68.Toward Reducing Bias and Errors  Focus on goals.  Look for information that disconfirms beliefs. pp. Decide & Conquer: Making Winning Decisions and Taking Control of Your Life (Upper Saddle River.  Don’t try to create meaning out of random events. Source: S.  Increase your options.

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 It’s your little sister’s senior Prom night.

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? • • • 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!” .

Chapter Check-Up: Perception If all of these perceptual shortcuts happen unconsciously. . 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: Decision Making Michael has just discovered he is double registered for two classes at the same time and must make a decision about which one to take this semester. as well as the costs and benefits for taking each this semester versus later next year. Michael has just engaged in what? . He then makes his decision. the time of the class. He considers the professor teaching this semester. He then considers his options for when he can take each class again. and the classes his friends are taking.

Michael 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. why didn’t Michael consider it? . which can influence performance.Chapter Check-Up: Decision Making In making his decision.

Chapter Check-Up: Decision Making Michael 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 Checkup: What biases might have affected Martha Stewart’s judgment? Discuss with a classmate. .

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