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Chapter

FIVE

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

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

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

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

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

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

Frequently 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 Organizations  Employment Interview – Perceptual biases of raters affect the accuracy of interviewers’ judgments of applicants. scrutinizing.  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. 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.

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

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 .

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

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

.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.

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. . – Engaging in incremental rather than unique problem solving through successive limited comparison of alternatives to the current alternative in effect.

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

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. and believing that you accurately predicted the outcome of an event . once the outcome has occurred.

Intuition  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 .

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

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

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 .

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

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

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!” .

. Discuss with a neighbor. 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.Chapter Check-Up: Perception If all of these perceptual shortcuts happen unconsciously.

He considers the professor teaching this semester. He then makes his decision. Michael has just engaged in what? . as well as the costs and benefits for taking each this semester versus later next year. He then considers his options for when he can take each class again. the time of the class. and the classes his friends are taking.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.

why didn’t Michael consider it? . which can influence performance. Given that room color can influence mood. Michael forgot to consider the implications of the color of paint in the room where each class was being offered.Chapter Check-Up: Decision Making In making his decision.

and didn’t consider the paint color of the rooms because he operates under the confines of bounded rationality.Chapter Check-Up: Decision Making Michael engaged in the rational decision making model. .

Chapter Checkup: What biases might have affected Martha Stewart’s judgment? Discuss with a classmate. .