Individual & Group Decision Making af chelte mcja 602-95

Perception & Decision Making How individuals make decisions & the quality of final choices are largely influenced by their perceptions. Requires interpretation and evaluation of information Most importantly, it requires a focus on the right problem.

How Should Decisions be Made? Rational Decision Making Process define the problem identify the decision criteria weight the identified decision making criteria generate possible alternatives rate each alternative against the dm criteria compute the optimal decision

Assumptions Assumes the decision maker is rational Assumes the problem is clear and unambiguous assumes the dm has complete information no time or cost constraints choice will be one with the maximum payoff

How decisions are actually made... most decisions don’t result from the rational dm model. Issues: bounded rationality intuition problem identification making choices

Bounded Rationality limited capability of information processing simplify complex problems choose first solution that is good enough (I.e. satisfactory and sufficient).

Making Choices Sources of bias: heuristics (judgmental shortcuts) availability (information readily available) representatives (analogies between a current issue and a previous one).

Organizational Constraints People constrain their decisions to reflect: performance evaluation system reward system programmed routines time constraints historical precedent

Cultural Differences Americans time orientation time is a resource creation of deadlines creation of timelines

Perception and Individual Decision Making 4/9/2017 Perception and Individual Decision Making LEARNING OBJECTIVES Explain how two people can see the same thing and interpret it differently. List the three determinants of attribution. Describe how shortcuts can assist in or distort our judgment of others. Explain how perception affects the decision-making process. Outline the six steps in the rational decision-making model. Describe the actions of the boundedly rational decision maker. Identify the conditions in which individuals are most likely to use intuition in decision making. Describe four styles of decision making. Define heuristics and explain how they bias decisions. Explain the factors that influence ethical decision-making behavior. This material is found at the beginning of the chapter.

Person Perception: Making Judgments About Others 4/9/2017 Person Perception: Making Judgments About Others Attribution Theory When individuals observe behavior, they attempt to determine whether it is internally or externally caused. 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. Self-Serving Bias The tendency for individuals to attribute their own successes to internal factors while putting the blame for failures on external factors. Material pertinent to this illustration is found on pages 94-96.

Exhibit 3 - 2 Factors that Influence Perception 4/9/2017 Exhibit 3 - 2 Factors that Influence Perception Factors in the Perceiver Attitudes Motives Interests Experience Expectations Factors in the situation Time Work setting Social setting Factors in the target Novelty Motion Sounds Size Background Proximity Perception Material pertinent to this illustration is found on pages 91-94.

Factors Influencing Perception 4/9/2017 Factors Influencing Perception The Perceiver The Target The Situation This material is found on pages 91-94.

Perception What is Perception? 4/9/2017 Perception What is Perception? A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment. Why Is it Important? Because people’s behavior is based on their perception of what reality is, not on reality itself. The world that is perceived is the world that is behaviorally important. This material is found on page 90.

Frequently Used Shortcuts in Judging Others 4/9/2017 Frequently Used Shortcuts in Judging Others Selective Perception People selectively interpret what they see on the basis of their interest, background, experience, and attitudes. Halo Effect Drawing a general impression about an individual on the basis of a single characteristic. Contrast Effects Evaluations of a person’s characteristics that are affected by comparisons with other people recently encountered who rank higher or lower on the same characteristics. 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. Material pertinent to this illustration is found on pages 96-100.

Exhibit 3 - 3 Attribution Theory 4/9/2017 Exhibit 3 - 3 Attribution Theory Observation Interpretation Attribution of cause Individual behavior Distinctiveness Consensus Consistency External Internal High Low Material pertinent to this illustration is found on page 96.

Assumptions of the Rational Decision-Making Model 4/9/2017 Assumptions of the Rational Decision-Making Model Problem Clarity- The problem is clear and unambiguous. Known Options- The decision-maker can identify all relevant criteria and viable alternatives. Clear Preferences- Rationality assumes that the criteria and alternatives can be ranked and weighted. Constant Preferences- Specific decision criteria are constant and that the weights assigned to them are stable over time. No Time or Cost Constraints- Full information is available because there are no time or cost constraints. Maximum Payoff- The choice alternative will yield the highest perceived value. Material pertinent to this illustration is found on pages 105.

Exhibit 3 - 5 Steps in the Rational Decision-Making Model 4/9/2017 Exhibit 3 - 5 Steps in the Rational Decision-Making Model Define the Problem. Identify the Decision Criteria. Allocate Weights to the Criteria. Develop the Alternatives. Evaluate the Alternatives. Select the Best Alternative. Material pertinent to this illustration is found on pages 104-106.

How Do Decision-Makers Identify & Select Problems 4/9/2017 How Do Decision-Makers Identify & Select Problems Problems that are visible tend to have a higher probability of being selected than ones that are important. Why? It is easier to recognize visible problems. Decision-Makers want to appear competent and “on-top of problems.” Decision-Makers self-interest affects problem selection because it is usually in the Decision-Maker’s best interest to address problems of high visibility and high payoff. This demonstrates an ability to perceive and attack problems. Material pertinent to this illustration is found on pages 110-111.

How Are Decisions Actually Made in Organizations? 4/9/2017 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. Intuitive Decision Making An unconscious process created out of detailed experience. Material pertinent to this illustration is found on pages 107-110.

Alternative Development 4/9/2017 Alternative Development Decision makers rarely seek optimum solutions but satisficing ones. Efforts made are simple and confined to the familiar. Efforts are incremental rather than comprehensive. Many successive limited comparisons rather than calculating value for each alternative. This approach makes it unnecessary for the decision maker to thoroughly examine an alternative and its consequences. Thus the decision makers steps are small and limited to comparisons of the current or familiar options. Material pertinent to this illustration is found on pages 111.

4/9/2017 Making Choices Many decision makers rely on heuristics or judgmental shortcuts in decision making. There are two common categories of heuristics -- Availability Heuristic --or the tendency of people to base their judgments on information readily available to them. Representative Heuristic -- The tendency to assess the likelihood of an occurrence by trying to match it with a preexisting category. Escalation of Commitment --an increased commitment to a previous decision in spite of negative information, all too often creeps into decision making. Material pertinent to this illustration is found on pages 111-113.

Decision-Making Styles 4/9/2017 Decision-Making Styles Research on decision styles has identified four different individual approaches to making decisions. Directive Style -- people using this style have a low tolerance for ambiguity and seek rationality. Analytic Style -- people using this style have a much greater tolerance for ambiguity than do directive decision makers. Conceptual Style -- people tend to be very broad in their outlook and consider many alternatives Behavioral Style -- people who tend to work well with others. Material pertinent to this illustration is found on pages 113-114.

Exhibit 3-6 Decision-Style Model 4/9/2017 Exhibit 3-6 Decision-Style Model Analytical Behavioral Directive Conceptual Low High Rational Intuitive Way of Thinking Tolerance for Ambiguity Material pertinent to this illustration is found on pages 113-114.

Organizational Constraints 4/9/2017 Organizational Constraints Performance Evaluations Reward Systems Programmed Routines System-Imposed Time Constraints Historical Precedents Material pertinent to this illustration is found on pages 114-116.

Ethics in Decision Making 4/9/2017 Ethics in Decision Making An individual can use three different criteria in framing or making ethical choices. Utilitarian criterion -- Decisions are made solely on the basis of their outcomes or consequences. Rights criterion -- Decisions consistent with fundamental liberties and privileges as set forth in documents like the Bill of Rights. Justice criterion -- Decisions that impose and enforce rules fairly and impartially so there is an equitable distribution of benefits and costs. Material pertinent to this illustration is found on pages 117-118.

Exhibit 3-7 Factors Affecting Ethical Decision-Making Behavior 4/9/2017 Exhibit 3-7 Factors Affecting Ethical Decision-Making Behavior Stage of moral development Ethical decision-making behavior Organizational environment Locus of control Material pertinent to this illustration is found on page 119.

Summary and Implications for Managers 4/9/2017 Summary and Implications for Managers Perception Individuals behave based not on the way their external environment actually is but, rather, on what they see or believe it to be. Evidence suggests that what individuals perceive from their work situation will influence their productivity more than will the situation itself. Absenteeism, turnover, and job satisfaction are also reactions to the individual’s perceptions. Individual Decision Making Individuals think and reason before they act. Under some decision situations, people follow the rational decision-making model. What can managers do to improve their decision making? Analyze the situation. Be aware of biases. Combine rational analysis with intuition. Don’t assume that your specific decision style is appropriate for every job. Use creativity-stimulation techniques. Material pertinent to this illustration is found on pages 120-121.