Perception and Individual

Decision Making
 Learning Outcomes
◉ After studying this chapter, you should be able to:
◉ Explain the factors that influence perception.
◉ Describe attribution theory.
◉ Explain the link between perception and decision making.
◉ Explain how individual differences and organizational
constraints affect decision making.
◉ Contrast the three ethical decision criteria

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 Define perception and explain the factors
. that influence it.

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 What is Perception ?

Perception is a process by which individuals organize and interpret

their sensory impressions in order to give meaning to their
environment.
Why is perception important in the study of OB?
 People’s behavior is based on their perception of what reality is,
not on reality itself.
 The world as it is perceived is the world that is behaviorally
important.
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 Explain attribution theory and list the three
.
determinants of attribution

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 Attribution Theory

Attribution theory tries to explain the ways in which we judge people differently,
depending on the meaning we attribute to a given behavior
It suggests that when we observe an individual’s behavior, we attempt to determine
whether it was internally or externally caused.
• Internal causes are under that person’s control
• External causes are not under person’s control
Causation judged through:
1) Distinctiveness : displays different behaviors in different situations
2) Consensus : same response as others to same situation
3) Consistency: respond in the same way over time
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Kelley hypothesized that people attribute behavior to
internal forces or personal factors when they perceive low
distinctiveness, low consensus and high consistency.
Behavior is attributed to external forces or environmental
factors when people perceive high distinctiveness, high
consensus and low consistency

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 Errors and biases in Attribution

Fundamental Attribution Error

◉ The tendency to underestimate the influence of external factors and
overestimate the influence of internal factors when making judgments about
the behaviors of others.
 We blame people first, not the situation
Self Serving Bias
The tendency for individual to attribute their own successes to internal factors
while putting the blame for failures on external factors
It is “our” success but “their” failures
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 Common Shortcuts in Judging Others

◉ Selective Perception
◉ Halo Effect
◉ Contrast Effects
◉ Stereotyping

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 Common Shortcuts in Judging Others

Selective Perception The tendency to selectively interpret what one sees on the basis
of one’s interest, background, experience, and attitude

Halo Effect The tendency to draw a general impression about an individual

on the basis of a single characteristic

Contrast Effect Evaluation of a person characteristic that is affected by

comparison with other people recently encountered who rank
higher or lower on the same characteristics

Stereotyping Judging someone on the basis of one’s perception of the group

to which that person belongs

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 Implications of Common Shortcuts in Judging
Others

◉ Employment Interview
◉ Performance Expectations
◉ Performance Evaluation

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. The Link Between Perception and
Individual Decision Making

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 Decision Making Models in Organizations
Rational decision-making model
A decision-making model that describes how individuals should behave in order to
maximize some outcome.
The “perfect world” Model
Assumes:
• Complete information, all options known, and maximum payoff

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 Decision Making Models in Organizations
Bounded Rationality
The “real world” model: seek satisfactory and sufficient solutions from limited
data and alternative.
Why limited data?
People respond to a complex problem by reducing it to a level at which they can
readily understand it
We construct “simplified” model—extract the essential features from problem
without capturing all their complexity.

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 Decision Making Models in Organizations

Intuition
A non conscious process created from distilled experience that result in
quick decision
◉ It occurs outside conscious thoughts.
◉ It relies on holistic associations, or links between disparate pieces of
information.
◉ It’s fast.
◉ It’s affectively charged, meaning it usually engages the emotions

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 Common Biases and Errors in Decision Making
Overconfidence Bias
Believing too much in our own ability to make good decisions.
Anchoring Bias
A tendency to fixate on initial information and fail to adequately adjust for subsequent
information
Confirmation Bias
Selecting and using those facts that support our decision.
Availability Bias
The availability bias is our tendency to base judgments on information readily available

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 Common Biases and Errors in Decision Making
Escalation of commitment refers to staying with a decision even when there is clear
evidence it’s wrong.
• Invested too much time, resources and energy.
• Determined to prove they were right
Randomness Error
Our tendency to believe we can predict the outcome of random events is the
randomness error.
• To create meaning in random events, particularly when we turn imaginary
patterns into superstitions

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 Influences on Decision Making: Individual Differences

• Personality
• Gender
• Mental Ability
• Cultural Differences

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 Influences on Decision Making: Organizational
Constraints

• Performance Evaluation
• Reward System
• Formal Regulations
• System Imposed Time Constraints
• Historical Precedents

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 Ethics in Decision Making

Ethical Decision Criteria

1. Utilitarianism
Decision made based solely on outcomes
Seeking the greatest good for the greatest number
2. Rights
Decisions consistent with fundamental liberties and privileges
Respecting and protecting the rights of individual such as whistle blowers
3. Justice
Imposing and forcing rules fairly and impartially
Equitable distribution of benefits and costs
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 Implications for Mangers

◉ An understanding of how people make decisions can be

helpful for explaining and predicting their behavior
◉ Managers must spend time understanding how each
individual interprets reality and, when there is a significant
difference between what someone sees and what exists, try
to eliminate the distortions

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