Perception and Individual Decision Making Essentials of Organizational Behavior, 9/e Stephen P. Robbins/Timothy A. Judge Chapter 4 Perception and Individual Decision Making

After studying this chapter, you should be able to: Explain how two people can see the same thing and interpret it differently. List three determinants of attribution. Describe how shortcuts can assist in or distort our judgment of others. Explain how perception affects the decision-making model. Outline the six steps in the rational decision-making model.

After studying this chapter, you should be able to: Describe the actions of the boundedly rational decision maker. List and explain the common decision biases or errors. Identify the conditions in which individuals are most likely to use intuition in decision making. Contrast the three ethical decision criteria.

Perception A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment. The world as it is perceived is the world that is behaviorally important.

Factors Influencing Perception

Attribution Theory Suggests that when we observe an individual’s behavior, we attempt to determine whether it was internally or externally caused Internally – believed to be under the personal control of the individual Externally – resulting from outside causes

Determinants of Attribution Distinctiveness – whether an individual displays different behaviors in different situations Consensus – if everyone who faces a similar situation responds in the same way Consistency – does the person respond the same way over time

Determination of Attribution

Attribution Errors Fundamental Attribution Error – when we make judgments about the behavior of others, we tend to underestimate external influence and overestimate internal influence Self-serving Bias – we tend to attribute our own success to internal factors and put the blame for failure on external factors

Shortcuts used in Judging Others Selective Perception – a characteristic that makes someone stand out in our mind will increase the probability that it will be perceived Halo Effect – drawing a general impression based on a single characteristic Contrast Effects – our reaction is influenced by others we have recently encountered Projection – the tendency to attribute our own characteristics to other people Stereotyping – judging someone on the basis of our perception of the group to which they belong

Link between Perception and Decision Making Decision making occurs as a reaction to a problem Perception influences: Awareness that a problem exists The interpretation and evaluation of information Bias of analysis and conclusions

Rational Decision-Making Model

Assumptions of the Model The problem is clear and unambiguous Options are known Clear preferences Constant preferences No time or cost constraints Maximum payoff

Creativity in Decision Making The ability to produce novel and useful ideas Importance is: Better understand the problem See problems others can’t see Identify all viable alternatives Identify alternatives that aren’t readily apparent

Three-Component Model of Creativity

Bounded Rationality The limited information-processing capability of human beings makes it impossible to assimilate and understand all the information necessary to optimize So people seek solutions that are satisfactory and sufficient, rather than optimal Bounded rationality is constructing simplified models that extract the essential features from problems without capturing all their complexity

Common Biases and Errors Overconfidence Bias – As managers and employees become more knowledgeable about an issue, the less likely they are to display overconfidence Anchoring Bias – a tendency to fixate on initial information and fail to adequately adjust for subsequent information Confirmation Bias – seeking out information that reaffirms our past choices and discounting information that contradicts past judgments

Common Biases and Errors Availability Bias – the tendency to base judgments on information that is readily available Representative Bias – the tendency to assess the likelihood of an occurrence by inappropriately considering the current situation as identical to past situations Escalation of Commitment – staying with a decision even when there is clear evidence that it is wrong

Common Biases and Errors Randomness Error – the tendency to believe that we can predict the outcome of random events Hindsight Bias – the tendency to believe falsely that we accurately predicted the outcome of an event after that outcome is actually known

Intuitive Decision Making An unconscious process created out of distilled experience Complements rational analysis Can be a powerful force in decision making

When is Intuitive Decision Making Used? 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 There are several plausible alternatives with good arguments for each Time is limited and there is pressure to come up with the right decision

Individual Differences Personality – specific facets of conscientiousness affect escalation of commitment Gender – Females are more likely to carefully consider problems and choices but also overanalyze and rehash the decision once it is made

Organizational Constraints Performance Evaluation Reward Systems Formal Regulations System-Imposed Time Constraints Historical Precedents

Cultural Differences Culture of decision maker influences: Time orientation Importance of rationality Belief in the ability of people to solve problems Preference for collective decision making

Criteria used in making ethical choices Utilitarian – provide the greatest good for the greatest number Rights focus – make decisions consistent with fundamental liberties and privileges Justice focus – impose and enforce rules fairly and impartially so that there is equal distribution of benefits and costs

Implications for Managers To influence productivity, assess workers perceptions of their jobs To improve decision making: Analyze the situation Be aware of biases and minimize their impact Combine rational analysis with intuition Try to enhance your creativity

Summary Explained how two people can see the same thing and interpret it differently. Listed three determinants of attribution. Described how shortcuts can assist in or distort our judgment of others. Explained how perception affects the decision-making model. Outlined the six steps in the rational decision-making model.

Summary Described the actions of the boundedly rational decision maker. Listed and explained the common decision biases or errors. Identified the conditions in which individuals are most likely to use intuition in decision making. Contrasted the three ethical decision criteria.