Chapter 5 Individual Perception and Decision Making

Individual Perception and
Decision Making
CHAPTER 5
IAN JADE E. LOZADA, MBA

COLLEGE OF BUSINESS AND ACCOUNTANCY
CENTRAL PHILIPPINE UNIVERSITY 1
01 Define perception and explain the factors that
influence it.
Chapter 02 Explain attribution theory.
Objectives 03 Explain the link between perception and

decision making.
04 Contrast the decision making models.
05 List and explain the common decision errors.
06 Contrast the three ethical decision criteria.
Discuss creativity in decision

07 making.

COLLEGE OF BUSINESS AND ACCOUNTANCY 2
CENTRAL PHILIPPINE UNIVERSITY
Discussion Question/s:
• What is Perception?

01 Perceptions
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
theirperception
perceptionof
ofwhat
whatreality
reality
is,
is,not
noton
onreality
realityitself.
itself.
••The
Theworld
worldasasititisisperceived
perceivedisisthe
theworld
worldthat
thatisisbehaviorally
behaviorally
important.
important.

Significance of Perception to the study
of OB:
• 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.
• Perception is culturally determined. Based on our
cultural backgrounds, we tend to perceived things in
certain ways

Factors that Influence Perception
1. Perceiver – the personal characteristics of the individual perceiver that

affects his interpretation of what he/she sees.
2. Target - characteristics of the target can also affect what is being
perceived
3. Situation – The context in which we see objects or events also
influences our attention. This could include time, heat, light, or other
situational factors.

Factors that Influence Perception

02 Attribution Theory
• Person Perception: Making Judgment about Others
• Attribution theory – a theory that explains how individuals

judge people differently, depending on the meaning we attributed
to a behavior.
• This theory suggests that when we observe an individual’s

behavior, we attempt to determine whether it was internally or
externally caused. This determination depends largely on three
factors: 1) distinctiveness, 2) consensus, and 3) consistency.

Internal vs External Causation
• Internally caused behaviors – are those that an
observer believes to be under the personal behavioral
control of another individual. For example: If an
employee is late for work, you might attribute that to
his overnight partying and oversleeping. This is an
internal attribution.
• Externally caused behaviors – are what we imagine

the situation forced the individual to do. For example:
if you attribute the employee’s lateness to a traffic
jam, you are making an external attribution.

Determining Factors
• Distinctiveness – refers to whether an individual displays
different behaviors in different situations (if high, external, if
low, internal). If the employee’s behavior is unusual, we are
likely to give it an external attribution, if it’s not, we will
probably judge the behavior to be internal.
• Consensus – occurs if everyone who faces a similar situation
behave in the same way. If consensus is high, you would be
expected to given an external attribution to the employee’s
tardiness, whereas if other employees who took the same
route made it to work on time, your conclusion as to
causation would be internal.
• Consistency – the frequency of behavior over time. The more
consistent the behavior, the more the observer is inclined to
attribute it to internal causes
02 Attribution Theory

Errors and Biases in Attributions
• Fundamental attribution error
• The tendency to make attributions to internal causes when focusing
on someone else’s behavior. We have the tendency to underestimate
the influence of external factors and overestimate the influence of
internal or personal factors.
• In general, we tend to blame the person first, not the situation.
• Self-serving bias
• The tendency of individuals to attribute their own successes to
internal factors, such as ability or effort, and put the blame for
failures on external factors.
• If students gets “A” they studied hard, if not, how does the self
serving bias gets into play?
Common Shortcuts in Judging Others
1. Selective  The tendency to selectively interpret what one sees on the
perception basis of one’s interests, background, experience, and attitudes
 Any characteristic that makes a person, object, or event stand
out will increase the probability that it will be perceived.
2. Halo Effect  The tendency to a general impression about an individual on
the basis of a single characteristic
3. Contrast  Evaluation of a person’s characteristics that is affected by
Effect comparisons with other people recently encountered who rank
higher or lower on the same characteristics
 We do not evaluate a person in isolation
 Our reaction to one person is influenced by other persons we
have recently encountered.
4. Stereotyping  Judging someone on the basis of our perception of the group
to which that person belongs.
5. Profiling (a  A group of individuals is singled out—typically on the basis of
form of race or ethnicity—for intensive scrutiny or investigation
stereotyping)
Specific Applications of Shortcuts in
Organizations
1. Employment Interview – interviewers make perceptual judgments that
are often inaccurate.
2. Performance Expectations - Evidence demonstrates that people will
attempt to validate their perceptions of reality, even when those
perceptions are faulty.
• Self-fulfilling prophecy, or the Pygmalion effect, describes how an
individual’s behavior is determined by other’s expectation
• Ethnic Profiling- A form of stereotyping in which a group of
individuals is singled out
3. Performance Evaluation – many jobs are evaluated in subjective terms.

03 The Link Between Perceptions and
Individual Decision Making
Problem
A perceived discrepancy between
the current state of affairs and a
desired state. Perception
Perceptionofofthe
the
decision
decisionmaker
maker
Decisions
Choices made from among
alternatives developed from data
perceived as relevant.
Outcomes
How does Perception affect Individual
Decision Making?
• Individuals make decisions – choosing from two or more
alternatives. Individual decision making is an important factor of
behavior at all levels of an organization. Decision occurs as a
reaction to a problem.
• A problem – is a discrepancy or deviation between some current
state of affairs and some desired state, requiring consideration of
alternative courses of action.
• Every decision require us to interpret and evaluate information.
The perceptions of the decision maker will address these two
issues:
• Data are typically received from multiple sources.
• Which data are relevant to the decision and which are not?

04 Decision Making in Organizations
• The Rational Model – a decision making model
that describes how individuals should behave in
order to maximize some outcome.
Model
ModelAssumptions
Assumptions
• • Problem
Problemclarity
clarity
• • Known
Knownoptions
options
• • Clear
Clearpreferences
preferences
• • Constant
Constantpreferences
preferences
• • No
Notime
timeor
orcost
cost
constraints
constraints
• • Maximum
Maximumpayoff
payoff

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

• Bounded Rationality Model – a process of making decisions
by constructing simplified models that extract the essential
features from problems without capturing all their complexity.
• Individuals cannot always make optimal decisions, the best

choice where decisions made maximize objectives, have
complete knowledge about all possible alternatives and their
potential results or outcomes (Hitt, et al, 2013).
• People tend to make satisficing decisions. Satisficing

decisions – seeking solutions that are satisfactory and
sufficient. These individuals operate within the confines of
bounded rationality.
• Intuitive Decision Making – is an unconscious process
created out of distilled experience. It occurs outside conscious
thought; it relies on holistic associations, or links between
disparate pieces of information, is fast, and is affectively
charged (usually engages the emotions).
• Intuition – the ability to know when a problem or opportunity
exists and select the best course of action without conscious
reasoning.
• While intuition is not rational, it is not necessary wrong. Nor
does it contradict rational analysis; rather the two can
complement each other.
• • The key is neither to abandon nor rely solely on
intuition, but to supplement it with evidence and good
judgment.
05 Common Biases and Errors in Decision
Making
Overconfidence  Individuals whose intellectual and interpersonal abilities are weakest are most
Bias likely to overestimate their performance and ability.
Anchoring Bias  Fixating on initial information as a starting point and failing to adequately adjust
for subsequent information.
Confirmation Bias  Seek out information that reaffirms choices, and discounts information that
contradicts past judgments.
Availability Bias  Tendency for people to base judgments on information that is readily available.
Escalation of  Staying with a decision even when there is clear evidence that it’s wrong.
Commitment  Likely to occur when individuals view themselves as responsible for the
outcome.
Randomness Error  Our tendency to believe we can predict the outcome of random events.
 Decision making becomes impaired when we try to create meaning out of
random events.
Risk Aversion  The tendency to prefer a sure thing instead of a risky outcome.
 Ambitious people with power that can be taken away appear to be
especially risk averse.
Hindsight Bias  The tendency to believe falsely that one has accurately predicted the outcome of
an event, after that outcome is actually known.
How to Reduce Biases and Errors
• Focus on goals
• Look for information that disconfirms your beliefs
• Don’t try to create meaning out of random events.
• Increase your options

Influences in Decision Making: Individual
Differences and Organizational Constraints
A. Individual Differences
• Personality
• Gender
• Mental Ability
• Cultural Differences
• Nudging
B. Organizational Constraints
• Performance Evaluation Systems
• Reward Systems
• Formal Regulations
• System-Imposed Time Constraints
• Historical Precedents
06 Three Ethical Decision Criteria
1. Utilitarian  Utilitarianism – a system which decisions are made to provide

criterion the greatest good for the greatest number
 Decision are made solely on the basis of their outcomes or
consequences
2. Rights  Decisions are made consistent with fundamental liberties and
privileges respecting the right of individual (privacy, speech,
due process)
 Protects whistle blowers – individual who report unethical
practices by their employer to outsiders.
3. Justice  Imposing and enforcing rules fairly and impartially for equitable
distribution of benefits and costs.

Ethics in Decision making
• Behavioral ethics – a study that analyzes how people actually
behave when confronted with ethical dilemmas.
• Individuals do not always follow ethical standards
promulgated by their organizations, and we sometimes violate
our own standards.
• There are ways to increase ethical decision making in
organizations.
• Consider cultural differences.
• Lying
• One of the top unethical activities we may indulge in daily.
• It undermines all efforts toward sound decision making.
• Managers—and organizations—simply cannot make good
decisions when facts are misrepresented and people give false
motives for their behaviors.
• Lying is a big ethical problem as well.

Rationalizations people use to justify
unethical actions
• Actions was taken with a view of best interests of
the organization.
• It does not matter as long as action is not objected
to.
• It appears that action demonstrates loyalty to the
superiors or to the organization.
• Individuals feel that a particular behavior is not
really illegal and hence can be considered as moral.

07 Creative Decision Making and
Innovations in Organizations
• Creativity is the ability to produce novel and useful ideas.
• These are ideas that are different from what has been done before, but
that are also appropriate to the problem.
• Three-stage model of creativity:
• Causes of creative behavior – includes creative potential in the
following facets: intelligence, personality, expertise, and ethics. 2)
Creative environment
• Creative behavior – occurs in four steps:
1) Problems formulation
2) Information gathering
3) Idea generation
4) Idea evaluation
• Creative Outcomes (Innovation) – ideas or solutions judged to be
novel and useful by relevant stakeholders.
Implications for Managers
• To influence behavior at work, managers should assess how
people perceive their work.
• Make better decisions by recognizing perceptual biases and
decision-making errors we tend to commit.
• Consider the national culture of a country and your
organizational culture in decision making. Adjust your decision
approach to ensure compatibility with the organizational culture.
• Combine rational analysis with intuition. By using both, you can
actually improve your decision making effectiveness.
• Develop or enhance your own creativity. Try new solutions to
problems and hire creative talent.

SUMMARY
• Perception Individuals base their behavior not on the way
their external
• Whether a manager successfully plans and organizes the
work of employees and actually helps them to structure
their work more efficiently and effectively is far less
important than how employees perceive the manager’s
efforts.
• Employees judge issues such as fair pay, performance
appraisals, and working conditions in very individual ways.
To influence productivity, we need to assess how workers
perceive their jobs.

SUMMARY
• Absenteeism, turnover, and job satisfaction are also
reactions to an individual’s perceptions. Dissatisfaction with
working conditions and the belief that an organization lacks
promotion opportunities are judgments based on attempts
to create meaning in the job.
• The employee’s conclusion that a job is good or bad is an
interpretation. 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..

THANK YOU


Chapter 5 Individual Perception and Decision Making

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 5 Individual Perception and Decision Making

Uploaded by

Copyright:

Available Formats

Individual Perception and

IAN JADE E. LOZADA, MBA

Chapter 02 Explain attribution theory.

Objectives 03 Explain the link between perception and

04 Contrast the decision making models.

05 List and explain the common decision errors.

06 Contrast the three ethical decision criteria.

Discuss creativity in decision

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

A process by which individuals organize and interpret their sensory

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

1. Perceiver – the personal characteristics of the individual perceiver that

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

• Attribution theory – a theory that explains how individuals

• This theory suggests that when we observe an individual’s

IAN JADE E. LOZADA, MBA

• Externally caused behaviors – are what we imagine

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

1. Define the problem

IAN JADE E. LOZADA, MBA

• Individuals cannot always make optimal decisions, the best

• People tend to make satisficing decisions. Satisficing

IAN JADE E. LOZADA, MBA

1. Utilitarian  Utilitarianism – a system which decisions are made to provide

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

IAN JADE E. LOZADA, MBA

You might also like