Chapter FIVE

Perception
and Individual
Decision Making
What
What Is
Is Perception,
Perception, and
and Why
Why Is
Is ItIt Important?
Important?

Perception
A process by which
••People’s
People’s behavior
behavior isis
individuals organize and based
based on on their
their
interpret their sensory perception
perception of of what
what
impressions in order to reality
reality is,is, not
not on
on
give meaning to their reality
reality itself.
itself.
environment.
••The
The world
world as as itit isis
perceived
perceived isis thethe worldworld
that
that isis behaviorally
behaviorally
important.
important.
Factors
FactorsThat
That
Influence
Influence
Perception
Perception

E X H I B I T 5–1
E X H I B I T 5–1
Person
Person Perception:
Perception: Making
Making Judgments
Judgments About
About
Others
Others

Attribution Theory
When individuals observe
behavior, they attempt to
determine whether it is
internally or externally
caused.

Distinctiveness:
Distinctiveness:shows
showsdifferent
differentbehaviors
behaviorsinindifferent
differentsituations.
situations.
Consensus:
Consensus:response
responseisisthe
thesame
sameasasothers
otherstotosame
samesituation.
situation.
Consistency:
Consistency:responds
respondsininthe
thesame
sameway
wayover
overtime.
time.
Attribution
AttributionTheory
Theory E X H I B I T 5–2
E X H I B I T 5–2
Errors
Errors and
and Biases
Biases in
in Attributions
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.
In general, we
tend to blame the
person first, not
the situation.
Errors
Errors and
and Biases
Biases in
in Attributions
Attributions (cont’d)
(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.
Thought: When student
gets an “A” on an exam,
they often say they
studied hard. But when
they don’t do well, how
does the self serving
bias come into play?

Hint: Whose fault is it

usually when an exam is
“tough”?
Frequently
Frequently Used
Used Shortcuts
Shortcuts in
in Judging
Judging Others
Others

Selective Perception
People selectively interpret what they see on the
basis of their interests, background, experience,
and attitudes.
Frequently
Frequently Used
Used Shortcuts
Shortcuts in
in Judging
Judging Others
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
Frequently Used
Used Shortcuts
Shortcuts in
in Judging
Judging Others
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
Specific Applications
Applications in
in Organizations
Organizations
 Employment Interview
– Perceptual biases of raters affect the accuracy of
interviewers’ judgments of applicants.
 Performance Expectations
– Self-fulfilling prophecy (Pygmalion effect): The lower or
higher performance of employees reflects preconceived
leader expectations about employee capabilities.
 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, scrutinizing, or investigation.
Specific
Specific Applications
Applications in
in Organizations
Organizations (cont’d)
(cont’d)
 Performance Evaluations
– Appraisals are often the subjective (judgmental)
perceptions of appraisers of another employee’s job
performance.
The
The Link
Link Between
Between Perceptions
Perceptions and
and Individual
Individual
Decision
Decision Making
Making

Problem
A perceived discrepancy
between the current state of
affairs and a desired state. Perception
Perception
of
ofthe
the
decision
decision
Decisions maker
maker
Choices made from among
alternatives developed from
data perceived as relevant.

Outcomes
Assumptions
Assumptions of
of the
the Rational
Rational Decision-Making
Decision-Making
Model
Model

Rational Decision- Model

ModelAssumptions
Assumptions
Making Model
•• Problem
Problemclarity
clarity
Describes how
•• Known
Knownoptions
options
individuals should
behave in order to •• Clear
Clearpreferences
preferences
maximize some •• Constant
outcome. Constant
preferences
preferences
•• No
Notime
timeor
orcost
cost
constraints
constraints
•• Maximum
Maximumpayoff
payoff
Steps
Steps in
in the
the Rational
Rational Decision-Making
Decision-Making Model
Model

1. Define the problem.

2. Identify the decision criteria.
3. Allocate weights to the criteria.
4. Develop the alternatives.
5. Evaluate the alternatives.
6. Select the best alternative.

E X H I B I T 5–3
E X H I B I T 5–3
 The
The Three
Three Components
Components of
of Creativity
Creativity
Creativity
The ability to produce
novel and useful ideas.

Three-Component
Model of Creativity
Proposition that individual
creativity requires expertise,
creative-thinking skills, and
intrinsic task motivation.

E X H I B I T 5–4
Source: T.M. Amabile, “Motivating Creativity in Organizations,” California Management Review, Fall 1997, p. 43.
E X H I B I T 5–4
How
How Are
Are Decisions
Decisions Actually
Actually Made
Made in
in
Organizations?
Organizations?

Bounded Rationality
Individuals make decisions by constructing
simplified models that extract the essential
features from problems without capturing
all their complexity.
How
How Are
Are Decisions
Decisions Actually
Actually Made
Made in
in
Organizations?
Organizations? (cont’d)
(cont’d)
 How/Why problems are Identified
– Visibility over importance of problem
• Attention-catching, high profile problems
• Desire to “solve problems”
– Self-interest (if problem concerns decision maker)
 Alternative Development
– Satisficing: seeking the first alternative that solves
problem.
– Engaging in incremental rather than unique problem
solving through successive limited comparison of
alternatives to the current alternative in effect.
 Common
Common Biases
Biases and
and Errors
Errors

 Overconfidence Bias
– Believing too much in our own ability to make good
decisions.

 Anchoring Bias
– Using early, first received information as the basis for
making subsequent judgments.

 Confirmation Bias
– Using only the facts that support our decision.
Common
Common Biases
Biases and
and Errors
Errors
 Availability Bias
– Using information that is most readily at hand.
• 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.

 Winner’s Curse
– Highest bidder pays too much
– Likelihood of “winner’s curse” increases with the number of
people in auction.
Common
Common Biases
Biases and
and Errors
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
Intuition
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
 Individual
Individual Differences
Differences in
in Decision
Decision Making
Making
 Personality
 Aspects of conscientiousness and escalation of
commitment.
 Self Esteem High self serving bias
 Gender
 Women tend to analyze decisions more than men.

Source: A.J. Rowe and J.D. Boulgarides, Managerial Decision

Making, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29.
Organizational
Organizational Constraints
Constraints on
on Decision
Decision Makers
Makers
 Performance Evaluation
– Evaluation criteria influence the choice of actions.
 Reward Systems
– Decision makers make action choices that are favored
by the organization.
 Formal Regulations
– Organizational rules and policies limit the alternative
choices of decision makers.
 System-imposed Time Constraints
– Organizations require decisions by specific deadlines.
 Historical Precedents
– Past decisions influence current decisions.
Cultural
Cultural Differences
Differences in
in Decision
Decision Making
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
Ethics in
in Decision
Decision Making
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
Ethics in
in Decision
Decision Making
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.
Ways
Ways to
to Improve
Improve Decision
Decision Making
Making
1. Analyze the situation and adjust your decision
making style to fit the situation.
2. Be aware of biases and try to limit their impact.
3. Combine rational analysis with intuition to
increase decision-making effectiveness.
4. Don’t assume that your specific decision style is
appropriate to every situation.
5. Enhance personal creativity by looking for novel
solutions or seeing problems in new ways, and
using analogies.
 Toward
Toward Reducing
Reducing Bias
Bias and
and Errors
Errors
 Focus on goals.
– Clear goals make decision making easier and help to
eliminate options inconsistent with your interests.
 Look for information that disconfirms beliefs.
– 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.
– Don’t attempt to create meaning out of coincidence.
 Increase your options.
– The number and diversity of alternatives generated
increases the chance of finding an outstanding one.
Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control E X H I B I T 5–5
of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164–68.
E X H I B I T 5–5
 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
 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. He considers the professor teaching this
semester, the time of the class, and the classes his friends are
taking. He then considers his options for when he can take each
class again, as well as the costs and benefits for taking each this
semester versus later next year. He then makes his decision.
Michael has just engaged in what?
 Chapter Check-Up: Decision
Making

In making his decision, 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, which
can influence performance, why didn’t
Michael consider it?
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.