Chapter 5:

Perception and Individual

Decision Making
 What are you responsible to learn?
 Explain how two people can see the same thing and interpret it differently.
 List the three determinants of attribution.
 Describe how shortcuts can assist in or distort our judgment of others.
 Explain how perception affects the decision-making process.
 Outline the six steps in the rational decision-making model.
 Describe the actions of the boundedly rational decision maker.
 List and explain eight (8) common decision biases or errors.
 Identify the conditions in which individuals are most likely to use intuition in decision making.
 Describe four styles of decision making.
 Contrast the three ethical decision criteria
What is Perception?
 A processby which individuals organize and interpret their
sensory impressions in order to give meaning to their
environment.
Why is it Important?
 Because people’s behavior is based on their perception of
what reality is, not on reality itself. The world that is
perceived is the world that is behaviorally important.
Factors Influencing Perception
 ThePerceiver – attitudes, motives, interests,
experiences, expectations
– novelty, motions, sounds, size,
 The Target
background, proximity, similarity
 The Situation – time, work setting, social
situation
Person Perception: Making Judgments About Others

Attribution Theory
· When individuals observe behavior, they attempt to determine
whether it is internally (under the personal control of the individual)
or externally (outside causes “force” you to behave a certain way)
caused.
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.

Self-Serving Bias
– The tendency for individuals to attribute their own successes to
internal factors while putting the blame for failures on external factors.
Attribution Theory - Frequently Used Shortcuts in Judging Others

- Selective Perception
– People selectively interpret what they see on the basis of their interest,
background, experience, and attitudes.
- Halo Effect
– Drawing a general impression about an individual on the basis of a single
characteristic.
- Contrast Effects
– Evaluations of a person’s characteristics that are affected by comparisons with
other people recently encountered who rank higher or lower on the same
characteristics.
- 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
– Early impressions are very important! Perceptual judgments are often
inaccurate! (Another reason we should use structured interviews!)
- Performance Expectations
– People attempt to validate their perceptions of reality – even when they are
faulty! Self-fulfilling prophecy (Pygmalion Effect) is based on the notion that
expectations can determine behavior – this is a very powerful managerial technique!
- Ethnic Profiling – Is it right to profile employees?
- Performance Evaluations
– Many subjective components (perceptions) are used in the evaluation of
employees
- Employee Effort
– How is “effort” perceived? It is often a “reason” for terminations
The Link Between Perception and Individual Decision
Making

Decisions = Choosing between 2 or more alternatives

Problems = A discrepancy between some current state of
affairs and some desired state

How should we make decisions in organizations?

To maximize a particular outcome, try the “rational decision
making model”…
Steps in the Rational Decision-Making Model

· Define the problem.

· Identify the decision criteria.
· Allocate weights to the criteria.
· Develop the alternatives.
· Evaluate the alternatives.
· Select the best alternative.
Assumptions of the Rational Decision-Making Model

Problem Clarity-
– The problem is clear and unambiguous.
Known Options-
– The decision-maker can identify all relevant criteria and
viable alternatives.
Clear Preferences-
– Rationality assumes that the criteria and alternatives can be
ranked and weighted.
Constant Preferences-
– Specific decision criteria are constant and that the weights
assigned to them are stable over time.
No Time or Cost Constraints-
– Full information is available because there are no
time or cost constraints.
-Maximum Payoff-
– The choice alternative will yield the highest
perceived value.

How can we improve creativity in decision making?

– You can produce novel and useful ideas by
emphasizing the three component model of creativity:
1) expertise, 2) creative-thinking skills, and 3) intrinsic
task motivation
So, 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.
· Intuitive Decision Making
– Intuition = an unconscious process created out of distilled
experience.
– Intuition is often used when there is a high level of uncertainty, there
is little precedent to go on, when the variable in question are less
predictable, when “facts” are limited, these facts don’t lead you in one
particular direction, data is of little use, when there are several plausible
choices, and there is time pressure
Problem Identification
- Problems that are visible tend to have a higher
probability of being selected than ones that are
important. Why?
– It is easier to recognize visible problems.
– Decision-Makers want to appear competent and
“on-top of problems.”
– Decision-Makers self-interest affects problem
selection because it is usually in the Decision-Maker’s
best interest to address problems of high visibility and
high payoff. This demonstrates an ability to perceive
and attack problems.
Alternative Development
- Decision makers rarely seek optimum solutions but satisficing or
“good enough” ones.
– Efforts made are simple and confined to the familiar.
– Efforts are incremental rather than comprehensive.
– Many successive limited comparisons rather than calculating
value for each alternative.
– This approach makes it unnecessary for the decision maker to
thoroughly examine an alternative and its consequences.
– Thus the decision makers steps are small and limited to
comparisons of the current or familiar options.
Common Biases & Errors
- We tend to “take shortcuts” in decision making and this allows
error and bias to enter our decisions. Common biases and errors
include:
– Overconfidence Bias – We tend to be overly optimistic
(especially when our intellect and interpersonal abilities are low)
– Anchoring Bias – Tendency to focus on initial information as a
starting point.
– Confirmation Bias – We tend to seek out info that reaffirms our
past choices and we discount info that contradicts our past judgments.
– Availability Bias --or the tendency of people to base their
judgments on information readily available to them.
– Representative Bias -- The tendency to assess the likelihood
of an occurrence by drawing analogies and seeing identical situations in
which they don’t exist.
– Escalation of Commitment --an increased
commitment to a previous decision in spite of
negative information (all too often creeps into
decision making)
– Randomness Error – We tend to create
meaning out of random events (and superstitions).
– Hindsight Bias – We tend to believe falsely
that we’d have accurately predicted the outcome
of an event, after that outcome is actually known.
Intuitive Decision Making – An unconscious process created out of
distilled experience. (see example about firefighters – pg. 153).
Individual Differences in Decision-Making Styles
- Research on decision styles has identified four different individual
approaches to making decisions.
– Directive Style -- people using this style have a low tolerance for
ambiguity and seek rationality.
– Analytic Style -- people using this style have a much greater
tolerance for ambiguity than do directive decision makers.
– Conceptual Style -- people tend to be very broad in their outlook and
consider many alternatives
– Behavioral Style -- people who tend to work well with others.
These are based on our tolerance for ambiguity and way of thinking.
Gender: Women tend to analyze decisions more than men.
Women tend to analyze a decision prior to and after the fact.
This rumination (reflecting at length) difference is largest in
the earlier stages of life and adulthood.
Organizational Constraints

· Performance Evaluations
· Reward Systems
· Formal Regulations
· System-Imposed Time Constraints
· Historical Precedents
Cultural Differences
– The rational model does NOT acknowledge cultural
differences
– There are differences in what problems to focus on, the
depth of analysis, importance of logic and rationality, and
preference for individual vs. group decision making
What about Ethics in Decision Making?

- An individual can use three different criteria in framing or

making ethical choices. Each has advantages and
disadvantages…
– Utilitarian criterion -- Decisions are made solely on the
basis of their outcomes or consequences. The greatest good for
the greatest number.
– Rights criterion -- Decisions consistent with fundamental
liberties and privileges as set forth in documents like the Bill of
Rights.
– Justice criterion -- Decisions that impose and enforce rules
fairly and impartially so there is an equitable distribution of
benefits and costs.
Summary and Implications for Managers
 - Perception
– Individuals behave based not on the way their external
environment actually is but, rather, on what they see or believe
it to be.
– Evidence suggests that what individuals perceive from
their work situation will influence their productivity more than
will the situation itself.
– Absenteeism, turnover, and job satisfaction are also
reactions to the individual’s perceptions.
Individual Decision Making
– Individuals think and reason before they act.
– Under some decision situations, people follow the rational
decision-making model. However, this doesn’t happen very
often…
– So, what can managers do to improve their decision
making?
• Analyze the situation.
• Be aware of biases.
• Combine rational analysis with intuition.
• Don’t assume that your specific decision style is
appropriate for every job.
• Try to enhance your creativity