PERCEPTION

PERCEPTION && INDIVIDUAL

INDIVIDUAL DECISION
DECISION
MAKING
MAKING

5–1
 After
After studying
studying this
this chapter,
OBJECTIVES
chapter,
you
you should
should be
be able
able to:
to:
1. Explain how two people can see the same thing and
interpret it differently.
2. List three determinants of attribution.
LEARNING

3. Describe how shortcuts can assist in or distort our judgment

of others.
4. Explain how perception affects the decision-making process.
5. Outline the six steps in the rational decision-making model.
6. Describe the actions of a bounded rational decision maker.
7. Define heuristics and explain how they bias decisions.

5–2
 What
What Is
Is Perception,
Perception, and
and Why
Why Is
Is ItIt Important?
Important?

Perception
A process by which individuals
organize and interpret their
sensory impressions in order to
give meaning to their environment.

••People’s
People’sbehavior
behaviorisisbased
basedon ontheir
their perception
perceptionof
ofwhat
what
reality
realityis,
is,not
noton
onreality
realityitself.
itself.

5–3
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

5–4
Factors
Factors in
in Perceiver
Perceiver
 ATTITUDE
 A boss having negative attitude towards an employee would not
even listen his sincere opinion

 MOTIVE
 A person’s needs and desires will effect

 INTEREST
 Even superficial data can be evaluated by the finance manager

 EXPERIENCE
 Successful experiences enhance the perceptive ability
 EXPECTATION
 First benchers or last benchers
5–5
5–6
 Figure – Ground Perception
– Ambiguous, unstable figures, we shift back & forth
 Attribution Theory
• How people assign causes to events…
• It involves perception about why things happen or why
people behave in the way they do.
• It explains how we make judgments about people at work.
• We make an attribution when we perceive and describe
other people’s actions and try to discover why they behaved
in the way they did.
5–9
 Criteria
Criteriafor
for deciding
decidingwhether
whetherbehaviour
behaviour isisattributable
attributableto
to
personal
personalrather
ratherthan
thanexternal
external(situational)
(situational)causes
causes
Reference: Kelly, H.H. (1967) Attribution theory in social psychology, in (ed) D.
Levine, Nebraska Symposium on Motivation, University of Nebraska Press, Lincoln,
NB

That
Thatdetermination
determinationdepends
dependslargely
largelyon onfour
fourfactors:
factors:
1.1.Distinctiveness:
Distinctiveness:The Thebehaviour
behaviourcan canbe bedistinguished
distinguishedfromfrom
the
thebehaviour
behaviour ofofother
otherpeople
peopleininsimilar
similarsituations.
situations.
2.2.Consensus:
Consensus:IfIfother
otherpeople
peopleagree
agreethatthatthe
thebehaviour
behaviourisis
governed
governedby bysome
somepersonal
personalcharacteristic.
characteristic.(i.e.,
(i.e.,response
responseisis
the
thesame
sameas asothers
othersto tosame
samesituation.)
situation.)
3.3.Consistency
Consistencyover overTime:
Time:Whether
Whetherthe thebehaviour
behaviourisis
repeated
repeated(i.e.,
(i.e.,responds
respondsininthe
thesame
sameway wayover
overtime.)
time.)
4.4.Consistency
Consistencyover overModality
Modality(i.e.,
(i.e.,the
themanner
mannerininwhich
which
things
thingsare
aredone):
done):Whether
Whetheror ornot
notthethebehaviour
behaviourisisrepeated
repeatedinin
different
differentsituations.
situations. 5–10
Criteria
Criteria for
for deciding
deciding whether
whether behaviour
behaviour is is
attributable
attributable toto personal
personal rather
rather than
than external
external
(situational)
(situational) causes
causes
That determination depends largely on four factors:
1. Distinctiveness: The behavior can be distinguished
from the behavior of other people in similar situations.
2. Consensus: If other people agree that the behavior is
governed by some personal characteristic. (i.e., response
is the same as others to same situation.)
3. Consistency over Time: Whether the behavior is
repeated (i.e., responds in the same way over time.)
4. Consistency over Modality (i.e., the manner in which
things are done): Whether or not the behavior is
repeated in different situations.
5–11
Attribution
AttributionTheory
Theory

5–12
 Errors
Errors and
and Biases
Biases in
in Attributions
Attributions
1. 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.

Example: Why a sales manager is prone to attribute the poor

performance of his sales representatives to laziness rather than to the
innovative product line introduced by a competitor?
2. Self-serving bias
Blame external factors for your failure
Taking credit for your success

5–13
 Clarification…
Clarification…
Reference: Weiner, B. (1974) Achievement Motivation and Attribution
Theory, General Learning Press, New Jersey

Attribution theory is concerned with the way in which people

attribute success or failure to themselves. Research by
Weiner (1974) and others have indicated that when people
with high achievement needs have been successful they
ascribe this to internal factors such as their ‘ability’ and
‘efforts’.

High achievers tend to attribute failure to lack of effort and

not lack of ability.

Low achievers tend not to link success with effort but to

ascribe their failure to lack of ability. 5–14
Frequently
Frequently Used
Used Shortcuts
Shortcuts in
in Judging
Judging Others
Others 5-15

• Selective Perception
– People selectively interpret what they see on the basis
of their interests, background, experience, and
attitudes.
• Halo Effect & Horn Effect
– Drawing a general(positive/negative) 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
Another
Another Shortcut:
Shortcut: Stereotyping
Stereotyping 5-16

Judging someone on the basis of one’s

perception of the group to which that person
belongs – a prevalent and often useful, if not
always accurate, generalization

Profiling
– A form of stereotyping in which members
of a group are singled out for intense
scrutiny based on a single, often racial,
trait.
Specific
Specific Shortcut
Shortcut Applications
Applications in
in Organizations
Organizations 5-17

 Employment Interviews
– 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.

 Performance Evaluations
– Appraisals are often the subjective (judgmental)
perceptions of appraisers of another employee’s job
performance.
– Critical impact on employees.
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

5–18
Perceptions
Perceptions and
and Individual
Individual Decision
Decision Making
Making 5-19

• Problem
– A perceived discrepancy between the current state of
affairs and a desired state
• Decisions
– Choices made from among alternatives developed from
data
• Perception Linkage:
– All elements of problem identification and the decision
making process are influenced by perception.
• Problems must be recognized
• Data must be selected and evaluated
Decision
Decision Making
Making in
in Organizations
Organizations
Steps in the Rational Decision-Making 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.

5–20
Decision-Making
Decision-Making Models
Models in
in Organizations
Organizations 5-21

 Rational Decision-Making
– The “perfect world” model: assumes complete
information, all options known, and maximum payoff
– Six-step decision-making process

 Bounded Reality
– The “real world” model: seeks satisfactory and
sufficient solutions from limited data and alternatives

 Intuition
– A non-conscious process created from distilled
experience that results in quick decisions
• Relies on holistic associations
• Affectively charged – engaging the emotions
Common
Common Biases
Biases and
and Errors
Errors in
in Decision-Making
Decision-Making 5-22

• Overconfidence Bias
– Believing too much in our own ability to make good
decisions – especially when outside of own expertise
• Anchoring Bias
– Using early, first received information as the basis for
making subsequent judgments
• Confirmation Bias
– Selecting and using only facts that support our decision
• Availability Bias
– Emphasizing information that is most readily at hand
• Recent
• Vivid
More
More Common
Common Decision-Making
Decision-Making Errors
Errors 5-23

 Escalation of Commitment
– Increasing commitment to a decision in spite of
evidence that it is wrong – especially if responsible
for the decision!
 Randomness Error
– Creating meaning out of random events -
superstitions
 Risk Aversion
– Tendency to prefer a sure thing over a risky one
 Hindsight Bias
– After an outcome is already known, believing it
could have been accurately predicted beforehand
Individual
Individual Differences
Differences in
in Decision-Making
Decision-Making 5-24

 Personality
– Conscientiousness may effect escalation of
commitment
• Achievement strivers are likely to increase
commitment
• Dutiful people are less likely to have this bias
– Self-Esteem
• High self-esteem people are susceptible to self-
serving bias

 Gender
Women analyze decisions more than men –
rumination
Women are twice as likely to develop
depression
Differences develop early
Organizational
Organizational Constraints
Constraints 5-25

• Performance Evaluation
– Managerial evaluation criteria influence actions
• Reward Systems
– Managers will make the decision with the greatest
personal payoff for them
• Formal Regulations
– Limit the alternative choices of decision makers
• System-imposed Time Constraints
– Restrict ability to gather or evaluate information
• Historical Precedents
– Past decisions influence current decisions
Ethics
Ethics in
in Decision
Decision Making
Making 5-26

• Ethical Decision Criteria

– Utilitarianism
• Decisions made based solely on the outcome
• Seeking the greatest good for the greatest number
• Dominant method for businesspeople
– Rights
• Decisions consistent with fundamental liberties and
privileges
• Respecting and protecting basic rights of individuals such
as whistleblowers
– Justice
• Imposing and enforcing rules fairly and impartially
• Equitable distribution of benefits and costs
• Deonance- ought to behave according laws and rules
Ethical
Ethical Decision-Making
Decision-Making Criteria
Criteria Assessed
Assessed 5-27

 Utilitarianism
– Pro: Promotes efficiency and productivity
– Con: Can ignore individual rights, especially
minorities
 Rights
– Pro: Protects individuals from harm, preserves
rights
– Con: Creates an overly legalistic work environment
 Justice
– Pro: Protects the interests of weaker members
– Con: Encourages a sense of entitlement
 Behavioral ethics
– An area of study that analyzes how people behave
when confronted with ethical dilemmas

• Environmental aspects like status, money, wealth,

cleanliness can effect the ethical behavior

• Encourage the conversations on ethical issues

• Overcome the “blind spots”

– Lying
• One of the top unethical activities
• We lie to ourselves and others
• Eye contact, body language, facial expressions and
verbal cues
5–28
Creativity,
Creativity, Creative
Creative Decision
Decision Making
Making && 5-29

Innovation
Innovation inin Org
Org
 Creativity

– The ability to produce novel and useful ideas

 Who has the greatest creative potential?

– Those who score high in Openness to Experience
– People who are intelligent, independent, self-
confident, risk-taking, have an internal locus-of-
control, tolerant of ambiguity, low need for
structure, and who persevere in the face of
frustration
Creativity
Creativity model
model

5–30
 Creative behavior
1. Problem formulation
2. Information gathering
3. Idea generation
4. Idea evaluation

5–31
Causes
Causes of
of Creative
Creative Behavior
Behavior 5-32

Creative Potential
Some of the characteristics are shared by exceptionally creative people
 Intelligence and Creativity

 Personality and Creativity

 Expertise and Creativity

 Ethics and Creativity

Creative Environment
 Global
Global Implications
Implications 5-33

• Attributions
– There are cultural differences in the ways people
attribute cause to observed behavior
• Decision-Making
– No research on the topic: assumption of “no difference”
– Based on our awareness of cultural differences in traits
that affect decision making, this assumption is suspect
• Ethics
– No global ethical standards exist
– Asian countries tend not to see ethical issues in “black
and white” but as shades of gray
– Global companies need global standards for managers
Summary
Summary and
and Managerial
Managerial Implications
Implications 5-34

• Perception:
– People act based on how they view their world
– What exists is not as important as what is believed
– Managers must also manage perception

• Individual Decision Making

– Most use bounded rationality: they satisfice
– Combine traditional methods with intuition and
creativity for better decisions
• Analyze the situation and adjust to culture and
organizational reward criteria
• Be aware of, and minimize, biases
 Decision-Style
Decision-Style Model
Model

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

E X H I B I T 5–5
Making, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29. E X H I B I T 5–5

5–35