Perception and Individual Decision Making 6 Perception and Individual Decision Making

Chapter Learning Objectives After studying this chapter, you should be able to: Define perception and explain the factors that influence it. Explain attribute theory and list the three determinants of attribution. Identify the shortcuts individuals use in making judgments about others. Explain the link between perception and decision making. Apply the rational model of decision making and contrast it with bounded rationality and intuition. List and explain the common decision biases or errors. Explain how individual differences and organizational constraints affect decision making. Contrast the three ethical decision criteria. Define creativity and discuss the three-component model of creativity.

What Is Perception? A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment. 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. Perception is the way people organize the massive amounts of information they receive into patterns that give it meaning. People will use their perceptions of reality, not reality itself, to decide how to behave. (c) 2008 Prentice-Hall, All rights reserved.

Factors That Influence Perception There are many factors that influence people’s perceptions. The factors are either in the perceiver such as attitudes and experience; in the situation such as social setting and time; or in the target such as sounds, size, or background. E X H I B I T 6-1 (c) 2008 Prentice-Hall, All rights reserved.

Attribution Theory: Judging Others Our perception and judgment of others is significantly influenced by our assumptions of the other person’s internal state. When individuals observe behavior, they attempt to determine whether it is internally or externally caused. Internal causes are under that person’s control External causes are not under the person’s control Causation judged through: Distinctiveness: Shows different behaviors in different situations Consensus: Response is the same as others to the same situation Consistency: Responds in the same way over time The attribution theory helps us to understand our perceptions about others. Research has shown that our perceptions about others are based upon the assumptions we make about them. The attribution theory says that when we observe behavior we try to determine if it is internally or externally driven. If it is internally driven it is under the person’s control whereas external causes are not under the individual’s control. We can use three factors to help us decide if behavior is internally or externally controlled: distinctiveness, consensus, consistency. Distinctiveness shows different behaviors in different situations. Consensus looks at the response and compares it to others in the same situation to see if it is consistent with the behaviors of others. Consistency looks to see if the response is the same over time. (c) 2008 Prentice-Hall, All rights reserved.

Elements of Attribution Theory This chart looks at the elements of the attribution theory and helps us to make the connection between external or internal driven factors. For example if consensus is high then it is most likely externally driven whereas if consensus is low it tends to be more internally driven. E X H I B I T 6-2 (c) 2008 Prentice-Hall, All rights reserved.

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 We blame people first, not the situation Self-Serving Bias The tendency for individuals to attribute their own successes to internal factors while putting the blame for failures on external factors It is “our” success but “their” failure There are errors and biases in the attributions we make. First, we often tend to underestimate the influence of external factors and overestimate the influence of internal factors. This is called the fundamental attribution error. The next common error is the self-serving bias. This bias exists when individuals attribute their own successes to internal factors and blame external factors when they don’t experience success. (c) 2008 Prentice-Hall, All rights reserved.

Frequently Used Shortcuts in Judging Others Selective Perception People selectively interpret what they see on the basis of their interests, background, experience, and attitudes Halo Effect Drawing a general impression about an individual on the basis of a single characteristic Contrast Effect 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 There are some frequently used shortcuts we use when judging others. People will often utilize past experience, their attitudes, and their interests to interpret information about others and reinforce their own biases. Relying on these shortcuts can lead to misperceiving the situation. The halo effect is another common shortcut where generally favorable impressions are drawn about an individual when a single characteristic is positive. The opposite is true when unfavorable impressions are drawn about an individual based on a single negative characteristic; this is called the horn effect. Contrast effects occur when we are making judgments about an individual and comparing them to other individuals we have recently encountered and using the comparison to draw conclusions. (c) 2008 Prentice-Hall, All rights reserved.

Another Shortcut: Stereotyping 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. Stereotyping is a typical shortcut we utilize in the perception process. It is making generalizations about an individual based on the group to which that person belongs. This generalization can be useful in making decisions, however, it can also be inaccurate and cause us to mistakenly develop a perception about an individual that is not representative of who they are. Profiling is an application of stereotyping where members of a group are singled out for scrutiny based on a single trait. (c) 2008 Prentice-Hall, All rights reserved.

Specific Shortcut Applications in Organizations Employment Interview Perceptual biases of raters affect the accuracy of interviewers’ judgments of applicants Formed at a single glance: 1/10th of a second! 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 Organizations use these shortcuts often to make decisions. The employment interview is a prime example of this. Many perceptions formed by the interviewers impact their judgments of the applicants. These perceptions are formed very rapidly, some researchers even say within one tenth of a second. Performance expectations often incorporate perception shortcuts as well. When expectations are set, there is a self-fulfilling prophecy that works itself out. The higher the expectations, the better people tend to perform and vice versa. Performance evaluations are often a very subjective process and incorporate many of the shortcuts discussed previously. This particular application has significant impact on employees and their wages. (c) 2008 Prentice-Hall, All rights reserved.

Perceptions and Individual Decision Making 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. In organizational behavior we are concerned with how decisions are made and perceptions play a significant role in that process. Often decision making occurs as a reaction to a problem or a perceived discrepancy between the way things are and the way we would like them to be. A decision is then made based on various alternatives that have been developed from the data collected. Perception influences this entire process from problem recognition to data selection to alternative chosen. (c) 2008 Prentice-Hall, All rights reserved.

Decision-Making Models in Organizations 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 Decision making is done by individuals but occurs in organizations. There are some models that can help us think through decision making in organizations. The first is the Rational Decision-Making model. This model assumes a perfect world in order to make decisions. It assumes that there is complete information, that every option has been identified and that there is a maximum payoff. The second, Bounded Reality, represents more of the real world where it seeks solutions that are the best, given the information that is available. The third model is based on intuition. This is the non-conscious process that occurs as a result of experiences that result in quick decisions. See E X H I B I T 6-3 (c) 2008 Prentice-Hall, All rights reserved.

Common Biases and Errors in Decision Making 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 There are many biases and errors that occur in the decision-making process. The overconfidence bias is when you believe too much in your own ability to make good decisions. Individuals will make decisions outside of their area of expertise instead of getting other, more knowledgeable, colleagues involved. The anchoring bias is when you make your decisions based on the information you received first and not on the new information received, causing you to jump to a decision before you have the right information. The next error often made is with the confirmation bias where during the decision-making process, one only uses facts that support your decision. Ignoring facts that go against your decision can limit the success of the solution. Additionally, the availability bias emphasizes information that is more readily at hand, information that is recent and vivid. Again, not having all the information you need creates a decision-making process that is incomplete. (c) 2008 Prentice-Hall, All rights reserved.

More Common Decision-Making Errors 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 The tendency to prefer a sure gain of a moderate amount over a riskier outcome, even if the riskier outcome might have a higher expected payoff Hindsight Bias After an outcome is already known, believing it could have been accurately predicted beforehand Some additional decision-making errors include escalation of commitment. This error occurs when there is an increasing commitment to a decision in spite of evidence that it is the wrong decision. Another error is when the decision maker creates meaning out of random events. The winner’s curse is when the value of something is overestimated and the winner pays too much. The hindsight bias occurs after an outcome is already known and then believing it could have been accurately predicted beforehand. (c) 2008 Prentice-Hall, All rights reserved.

Individual Differences in Decision Making 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 Women analyze decisions more than men – rumination Differences develop early Mental Ability Gender Individuals incorporate not only their own biases, but also their own characteristics in their decision making. Personality, such as characteristics outlined in the Big Five dimensions, can influence decision making such as conscientiousness and self-esteem. Gender also plays a role in decision making. Women tend to analyze decisions more than men and this can cause them to ruminate over their decisions. The reasons for this are undetermined. Some psychologists speculate that parents encourage their daughters to express their feelings more readily than sons and another theory is that women are more worried about what others think about them and this causes them to worry more about their decisions. Women tend to be more empathetic and this can also cause them to think about how their decisions impact others. Mental ability also influences decision making. People with higher levels of mental ability make decisions more quickly as well as make better decisions because they are able to process information more effectively. (c) 2008 Prentice-Hall, All rights reserved.

Organizational Constraints 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 There are many organizational constraints to good decision making that create deviations from the rational model defined earlier. Managers shape their decisions on performance evaluations, reward systems, and formal regulations. They also base decisions on system-imposed time constraints and historical precedents. All these factors may influence the decisions that are made. (c) 2008 Prentice-Hall, All rights reserved.

Ethics in Decision Making Ethical Decision Criteria Outcomes (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 Ethics should play a role in decision making. There are three ethical criteria that influence decisions. The first is utilitarianism, where the decisions are based on the outcome of the solution. The outcome is analyzed based on seeking the greatest good for the greatest number of people and is the dominant method for businesspeople. The second criterion is rights, where decisions are based on fundamental liberties and privileges in an attempt to protect the basic rights of individuals. The final criterion is justice, where the decision imposes rules in a fair and impartial manner and equitably distributes benefits and costs. (c) 2008 Prentice-Hall, All rights reserved.

Ethical Decision-Making Criteria Assessed 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 All the criteria have with them pros and cons to that method of decision making. Utilitarianism promotes efficiency and productivity but can ignore individual rights, whereas the rights method protects the rights of individuals but can create an overly legalistic work environment. The final criterion, justice, protects the interests of the weaker members but it can encourage a sense of entitlement. (c) 2008 Prentice-Hall, All rights reserved.

Improving Creativity in Decision Making 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 Better decisions are those that incorporate novel and useful ideas, better known as creativity. An organization will tend to make better decisions when creative people are involved in the process. So it is important to identify people who have that creative potential. Some of the methods and theories identified in earlier chapters can help in this process. For example, those who score high in openness to experience tend to be more creative. (c) 2008 Prentice-Hall, All rights reserved.

The Three-Component Model of Creativity Proposition that individual creativity results from a mixture of three components Expertise is the foundation Creative-Thinking Skills are the personality characteristics associated with creativity Intrinsic Task Motivation is the desire to do the job because of its characteristics Expertise Creative-Thinking Skills Intrinsic Task Motivation The three component model of creativity proposes that individual creativity results from a mixture of three components – expertise, creative-thinking skills and intrinsic task motivation. Expertise is the foundation and is based on the knowledge and experience of the individual. Creative-thinking skills are the personality characteristics associated with creativity, such as the ability to use analogies and the talent to see things differently. Intrinsic task motivation is the desire to do the job because of the characteristics associated with the job. See E X H I B I T 6-4 (c) 2008 Prentice-Hall, All rights reserved.

Global Implications Attributions Decision Making Ethics 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 There are many global implications to the things discussed in this chapter. There are cultural differences in the way people interpret behavior in others. For example, aggression in the United States may be viewed as hard work and determination, while in Asian cultures it may be viewed as rude and pushy. There has not been much research on the topic of cross-cultural decision making. Based on our understanding of cultural differences, we would anticipate that this would translate to decision making as well. Global ethics standards have not presented themselves. Some cultures do tend to see things in gray and others in black and white, but this has not been studied systematically. Companies that interact on a global basis need to set up global standards for managers. (c) 2008 Prentice-Hall, All rights reserved.

Summary and Managerial Implications 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 Perceptions play a critical role in how people view the situation and how they act. Managers must work on managing perceptions and incorporate them into their understanding of the workplace. Individual decision making is also an important aspect in the workplace. In decision making most people use bounded rationality or satisfice. Managers should incorporate traditional methods with intuition and creativity to make better decisions. (c) 2008 Prentice-Hall, All rights reserved.

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