Updated by Tiruneh Legesse, Asst.

Professor
 What Is Perception, and Why Is It Important?

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

Updated by Tiruneh Legesse, Asst. Professor

 Factors that Influence Perception

Updated by Tiruneh Legesse, Asst. Professor

 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
(the situation forced the individual to do) caused.

Case: Employee under your supervision came

late. Why?

Updated by Tiruneh Legesse, Asst. Professor

 If one of your employees is late for work,
you might attribute that to his partying into
the week hours and then oversleeping. This
is an internal attribution. But if you
attribute lateness to an automobile accident
that tied up traffic, you are making an
external attribution.

Updated by Tiruneh Legesse, Asst. Professor

 Person Perception: …
Three Determining Factors:
DISTINCTIVENESS: shows different behaviors in different
situations.
What we want to know is whether this behavior is
unusual. If it is, we are likely to give it an external
attribution. If it’s not, we will probably judge the behavior
to be internal.
CONSENSUS: response is the same as others to same
situation.
The behavior of our tardy employee meets this
criterion if all employees who took the same route were also
late.
CONSISTENCY: responds in the same way over time.
The more consistent the behavior, the more we are inclined
to attribute it to internal causes.

Updated by Tiruneh Legesse, Asst. Professor

 Attribution Theory

Updated by Tiruneh Legesse, Asst. Professor

 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.

Example: This fundamental attribution error can

explain why a sales manager is prone to attribute the
poor performance of her sales agents to laziness
rather than to the innovative product line introduced
by a competitor.

Updated by Tiruneh Legesse, Asst. Professor

 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.

Updated by Tiruneh Legesse, Asst. Professor

 Frequently Used Shortcuts in Judging Others

Selective Perception
People selectively interpret what they see on the
basis of their interests, background,
experience, and attitudes.

We can take in only certain stimuli.

Updated by Tiruneh Legesse, Asst. Professor

 Frequently Used Shortcuts in Judging Others

Halo Effect
Drawing a general impression about an individual on the basis
of a single characteristic. Example: If you’re a critic of
President Obama, try listing 10 things you admire about him.

Case: Reflect on how are we impacted by this

bias?

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.
Updated by Tiruneh Legesse, Asst. Professor
 Frequently Used Shortcuts in Judging Others

Example 1 – In a series of job interviews, for

instance, interviewers can make distortions in any
given candidate’s evaluation as a result of his or her
place in the interview schedule.
We don’t evaluate a person in isolation.

Example 2 – An old adage among entertainers is

“Never follow an act that has kids or animals in it.”
Why? Audiences love children and animals so much
that you’ll look bad in comparison. This example
demonstrates how a contrast effect can distort
perceptions.

Updated by Tiruneh Legesse, Asst. Professor

 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. Stereotypes
based on gender, age, race, religion, ethnicity, and
even weight.

Examples: “Men aren’t interested in child care,” “Older

workers can’t learn new skills,” “Asian immigrants are
hardworking and conscientious.”
Updated by Tiruneh Legesse, Asst. Professor
 Specific Applications in 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.

Updated by Tiruneh Legesse, Asst. Professor

 Specific Applications in Organizations (cont’d)
 Performance Evaluations
– Appraisals are often the subjective (judgmental)
perceptions of appraisers of another employee’s job
performance.
 Employee Effort
– Assessment of individual effort is a subjective
judgment subject to perceptual distortion and bias.

Updated by Tiruneh Legesse, Asst. Professor

 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
Decisions
Choices made from among
alternatives developed from data
perceived as relevant.
Decision is a reaction to a Outcomes
problem.
Updated by Tiruneh Legesse, Asst. Professor
 Example
Our perception about 5% decline in sales.
1.Recognize it as a serious problem that need quick fix –
Decisions and Actions follow
2.Take it acceptable phenomenon and relax
Our perception about prevalence of conflict in an
organization:
1.As a problem that needs to be addressed quickly.
2.As an inevitable phenomenon that need to be accepted
as fact of life.
3.Something that needs to be induced.

Updated by Tiruneh Legesse, Asst. Professor

 Assumptions of the Rational Decision-Making
Model

Rational Decision-
Making Model Model Assumptions
• Problem clarity
Describes how
individuals should • Known options
behave in order to • Clear preferences
maximize some
outcome. • Constant preferences

Making consistent, • No time or cost

value-maximizing constraints
choices within specified • Maximum payoff
constraints.
Updated by Tiruneh Legesse, Asst. Professor
 Rational Decision Making Model - Steps

Updated by Tiruneh Legesse, Asst. Professor

 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.

Individuals make decisions by constructing simplified

models that extract the essential features from problems
without capturing all their complexity – Eg. Citrus
paribus.

Updated by Tiruneh Legesse, Asst. Professor

Common Biases and Errors in Decision Making
 Overconfidence Bias
 Believing too much in our own decision competencies.
 It’s been said that “no problem in judgment and
decision making is more prevalent and more potentially
catastrophic than overconfidence.”
 Anchoring Bias or Focalism - bias by first
impression
 Fixating on early, first received information.
 Any time a negotiation takes place, so does anchoring.
When a prospective employer asks how much you
made in your prior job, your answer typically anchors
the employer’s offer. Eg. the initial price offered
for a used car sets the standard for the rest of
the negotiation, regardless of the legitimacy of
theLegesse,
Updated by Tiruneh initial price
Asst. Professor
 Common Biases…

 Confirmation Bias
 Using only the facts that support our decision.
 represents a specific case of selective perception: we
seek out information that reaffirms our past choices, and
we discount information that contradicts them.
 we give too much weight to supporting information and
too little to contradictory.
 Availability Bias
 is our tendency to base judgments on information readily
available.
 The availability bias can also explain why
managers doing performance appraisals give more
weight to recent employee behaviors than to
behaviors of 6 or 9 months earlier,
Updated by Tiruneh Legesse, Asst. Professor
 Common Biases…
 Representative Bias
– Assessing the likelihood of an occurrence by trying to
match it with a preexisting category.

Updated by Tiruneh Legesse, Asst. Professor

 Common Biases…

 Escalation of Commitment
– refers to staying with a decision even when there is
clear evidence it is wrong.
– Individuals escalate commitment to a failing course of
action when they view themselves as responsible for
the failure.
 Randomness Error
– Our tendency to believe we can predict the outcome of
random events. Eg. I never make important decisions
on Friday
– Trying to create meaning out of random events by
falling prey to a false sense of control or superstitions.
 Risk Aversion
– to prefer a sure thing over a risky outcome
Updated by Tiruneh Legesse, Asst. Professor
 Common Biases…
 Hindsight Bias
- is the tendency to believe falsely, after the outcome is
known, that we’d have accurately predicted it.
- The hindsight bias reduces our ability to learn from
the past. It lets us think we’re better predictors than
we are and can make us falsely confident.

Updated by Tiruneh Legesse, Asst. Professor

 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

Updated by Tiruneh Legesse, Asst. Professor

 Organizational Constraints on Decision Makers
 Performance Evaluation
– Managers evaluation criteria influence the choice of
actions.
 Reward Systems
– Decision makers make action choices that are favored by
the organization/give them more personal payoffs.
 Formal Regulations
– Organizational rules and policies limit the alternative
choices of decision makers./Limited freedom of choice.
 System-Imposed Time Constraints
– Organizations require decisions by specific deadlines.
 Historical Precedents
– Past decisions influence current decisions.
Updated by Tiruneh Legesse, Asst. Professor
 Ethics in Decision Making
 Ethical Decision Criteria
– Utilitarianism
• Seeking the greatest good for the greatest number.
• Proposes making decisions solely on the basis of their
outcomes
– Rights
• Respecting and protecting basic rights of individuals
such as whistleblowers.
– Justice
• Imposing and enforcing rules fairly and impartially.
• Example: It justifies paying people the same wage for a
given job regardless of performance differences and
using seniority as the primary determination in layoff
decisions.
Updated by Tiruneh Legesse, Asst. Professor
 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.

Updated by Tiruneh Legesse, Asst. Professor

 Ways to Improve Decision 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.

Updated by Tiruneh Legesse, Asst. Professor