Perception and Individual Decision Making

Perception and
Individual Decision Making
Copyright © 2017 Pearson India Education Services Pvt. Ltd

Learning Objectives
Define perception and explain the factors that

influence it.
Explain attribution theory, and list the three
determinants of attribution.
Explain the link between perception and decision
making.
Contrast the rational model of decision making
with bounded rationality and intuition.
Describe the common decision biases or errors.
6-2

Perception
Perception is a process by which individuals

organize and interpret their sensory
impressions in order to give meaning to their
environment.
It is important to the study of OB because

people’s behaviors are based on their
perception of what reality is, not on reality itself.
6-3

Also…..
Perception may be defined as “a cognitive
process by which people attend to incoming
stimuli, organize and interpret such stimuli into
behavior.”
“The process of receiving, selecting, organizing,

interpreting, checking, and reacting to sensory
stimuli or data” (Parekh).
Peoples actions, emotions, thoughts or feelings 6-4

are triggered by the perception of their
surroundings.
Factors influencing perception
6-5

Attribution Theory
Attribution theory suggests that when we
observe an individual’s behavior, we attempt to
determine whether it was internally or externally
caused.
Determination depends on three factors:

 Distinctiveness
 Consensus
 Consistency
6-6

Determinants of Attribution
Clarification of the differences between internal

and external causation
 Internally caused – those that are believed to

be under the personal control of the individual.
 Externally caused – resulting from outside
causes.
6-7

Errors in perception
Fundamental attribution error

 We have a tendency to underestimate the
influence of external factors and overestimate
the influence of internal or personal factors.
Self-serving bias
 Individuals attribute their own successes to
internal factors.
6-8

Selective perception
 Any characteristic that makes a person,
object, or event stand out will increase the
probability that it will be perceived.
 Since we can’t observe everything going on
around us, we engage in selective perception.
Halo effect
 The halo effect occurs when we draw a
general impression on the basis of a single
characteristic. 6-9

Identify the Shortcuts Individuals
Use in Making Judgments About
Others
Contrast effects
 We do not evaluate a person in isolation.
 Our reaction to one person is influenced by
other persons we have recently encountered.
 For example, an interview situation in which
one sees a pool of job applicants can distort
perception.
Distortions in any given candidate’s
evaluation can occur as a result of his or her
6-10
place in the interview schedule.
Cont’d..
Stereotyping
 Judging someone on the basis of our
perception of the group to which he or she
belongs.
 This is a means of simplifying a complex
world, and it permits us to maintain
consistency.
We have to monitor ourselves to make sure
we’re not unfairly applying a stereotype in
our evaluations and decisions. 6-11

Explain the Link Between
Perception and Decision Making
Decision making occurs as a reaction to a
problem.
 There is a discrepancy between some current
state of affairs and some desired state, requiring
consideration of alternative courses of action.
One person’s problem is another’s satisfactory
state of affairs.
 Every decision requires interpretation and
evaluation of information.
Data are typically received from multiple sources.
Which data are relevant to the decision and which
are not? 6-12
 Alternatives will be developed, and the strengths
and weaknesses of each need to be evaluated.
Explain the Link Between
Perception and Decision Making
Decision making occurs as a reaction to a
problem.
 There is a discrepancy between some current
state of affairs and some desired state, requiring
consideration of alternative courses of action.
One person’s problem is another’s satisfactory
state of affairs.
 Every decision requires interpretation and
evaluation of information.
Data are typically received from multiple sources.
Which data are relevant to the decision and which
are not? 6-13
 Alternatives will be developed, and the strengths
and weaknesses of each need to be evaluated.
Contrast the Rational Model of Decision
Making with Bounded Rationality and Intui
6-14

Making with Bounded Rationality and Intuition
Assumptions of the Rational Model
 The decision maker…
Has complete information.
Is able to identify all the relevant options in
an unbiased manner.
Chooses the option with the highest utility.
Most decisions in the real world don’t follow the
rational model.
6-15

Bounded Rationality
 Most people respond to a complex problem by
reducing it to a level at which it can be readily
understood.
People satisfice – they seek solutions that
are satisfactory and sufficient.
 Individuals operate within the confines of
bounded rationality.
They construct simplified models that extract
6-16
the essential features.
Intuition
 Intuitive decision making occurs outside
conscious thought; it relies on holistic
associations, or links between disparate
pieces of information, is fast, and is
affectively charged, meaning it usually
engages the emotions.
 The key is neither to abandon nor rely solely
on intuition, but to supplement it with
evidence and good judgment. 6-17

Describe the Common
Decision Biases or Errors
 Anchoring Bias
It occurs when people rely too much on pre-
existing information or the first information they
find when making decisions.
Fixating on initial information as a starting point

and failing to adequately adjust for subsequent
information.
6-18

Overconfidence Bias
It is a tendency to hold a false and misleading
assessment of our skills, intellect, or talent. In
short, it's an egotistical belief that we're better
than we actually are.
6-19

Describe the Common
Confirmation Bias
 Type of selective perception.
 Seek out information that reaffirms past
choices, and discount information that
contradicts past judgments.
Availability Bias
 Tendency for people to base judgments on
information that is readily available. 6-20

Describe the Common
Risk Aversion
 The tendency to prefer a sure thing instead of a
risky outcome. .
People will more likely engage in risk-seeking
behavior for negative outcomes, and risk-
averse behavior for positive outcomes, when
under stress.
Hindsight Bias
 The tendency to believe falsely that one has 6-21
accurately predicted the outcome of an event,
after thatCopyright
outcome is actually known.
© 2017 Pearson India Education Services Pvt. Ltd
Explain How Individual Differences and
Organizational Constraints Affect Decision
Making
Individual Differences
 Personality
High self-esteem
 Mental Ability
 Cultural Differences
6-22

Behavioral economics
Behavioral economics studies the effects of
psychological, cognitive, emotional, cultural and
social factors on the economic decisions of
individuals and institutions and how those
decisions vary from those implied by classical
theory.
Behavioral economics is primarily concerned

with the bounds of rationality of
economic agents.
6-23

https://www.youtube.com/watch?v=FI5ipq-qi-w
6-24

Implications for Managers
To influence productivity, assess how your
employees perceive their jobs. Clue into
employee absenteeism, turnover, and job
satisfaction levels for indicators of their
perception.
Adjust your decision making approach to the

national culture you’re operating in and to the
criteria your organization values. If you’re in a
country that doesn’t value rationality, don’t feel
compelled to follow the rational decision-making 6-25
model or to try to make your decisions appear
rational. Copyright © 2017 Pearson India Education Services Pvt. Ltd
Contd…
Be aware of biases. Then try to minimize
their impact.
Combine rational analysis with intuition.

These are not conflicting approaches to
decision making.
Try to enhance your creativity. Actively look

for novel solutions to problems, attempt to
6-26
see problems in new ways, use analogies,
and hire creative talent.
6-27

Questions
6-28

Perception and Individual Decision Making

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Perception and

Individual Decision Making

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Define perception and explain the factors that

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Perception is a process by which individuals

It is important to the study of OB because

Copyright © 2017 Pearson India Education Services Pvt. Ltd

“The process of receiving, selecting, organizing,

Peoples actions, emotions, thoughts or feelings 6-4

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Determination depends on three factors:

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Clarification of the differences between internal

 Internally caused – those that are believed to

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Fundamental attribution error

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Fixating on initial information as a starting point

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Behavioral economics is primarily concerned

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Adjust your decision making approach to the

Combine rational analysis with intuition.

Try to enhance your creativity. Actively look

Copyright © 2017 Pearson India Education Services Pvt. Ltd

Copyright © 2017 Pearson India Education Services Pvt. Ltd

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