OB_UG_2002 GSM1 Perception and Decision Making Hui WANG Guanghua School of Management Peking University Tel: Oct. 2002

OB_UG_2002 GSM2 Issues for Today What is Perception, and Why is it Important? Factors Influencing Perception Person Perception: Making Judgments about Others The Link between Perception and Individual Decision Making How should Decisions be Made? How are Decisions Actually Made in Organizations? How to Improve Quality of Decision?

OB_UG_2002 GSM3 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.

OB_UG_2002 GSM4 Factors Influencing Perception Perceiver: The person trying to interpret some observation that he or she has just made. Target: Whatever the perceiver is trying to make sense of. Situation: The context in which the perception takes place.

OB_UG_2002 GSM5 Factors in the Perceiver Schema Motives Interests Experience Expectations Factors in the Perceiver Schema Motives Interests Experience Expectations Factors in the situation Time Work setting Social setting Factors in the situation Time Work setting Social setting Factors in the target Novelty Motion Sounds Size Background Proximity Factors in the target Novelty Motion Sounds Size Background Proximity Perception

OB_UG_2002 GSM6 Characteristics of the Perceiver That Affect Perception

OB_UG_2002 GSM7 Schemas Schemas: Abstract knowledge structures that are stored in memory and make possible the organization and interpretation of information about targets of perception.

OB_UG_2002 GSM8 Motivational State and Mood Motivational State: The needs, values, and desires of a perceiver at the time of perception. Mood: How a perceiver feels at the time of perception.

OB_UG_2002 GSM9 Interpersonal Perception Emotion and Feeling Behaviors Personality Past Experience Sibling Impression Management First Impression

OB_UG_2002 GSM10 Perceptual Judgment Experiment by P.R.Wilson (1968) InformationAverage Estimated Height 1. A student5 ’ 9.9 ” 2. Demonstrator5 ’ 10.4 ” 3. Lecturer5 ’ 10.9 ” 4. Senior Lecturer5 ’ 11.6 ” 5. Professor Jones6 ’ 0.3 ”

OB_UG_2002 GSM11 Perception Biases and Problems Selective Perception Halo Effect Contrast Effects Projection Stereotyping

OB_UG_2002 GSM12 Selective Perception selectively interpret what see based on own interests, background, experience, and attitudes. Dearborn & Simon (1958)

OB_UG_2002 GSM13 Halo Effect The perceiver ’ s general impression of a target distorts his or her perception of the target on specific dimensions. Dion (1972) ’ s Experiment

OB_UG_2002 GSM14 Contrast Effects The perceiver ’ s perceptions of others distort the perceiver ’ s perception of a target. 深陷的双眼证明内心的仇恨，突出的下巴 证明沿犯罪的道路走到底的决心； 深陷的双眼表明思想的深度，突出的下巴 表明在知识的道路上克服困难的意志力。

OB_UG_2002 GSM15 Projection attribute own characteristics to others. Schiffenbauer (1974)

OB_UG_2002 GSM16 Stereotyping judge someone on the basis of the perception of the group to which they belong instead of their own characteristics.

OB_UG_2002 GSM17 Specific Applications in Organization Employee interview Performance expectation Self-fulfilling prophecy or pygmalion effect: When one person inaccurately perceives a second person and the resulting expectations cause the second person to have in ways consistent with the original perception. Employee evaluation

OB_UG_2002 GSM18 Attribution Theory When individuals observe behavior, they attempt to determine whether it is internally or externally caused. Heider (1957) Weiner (1974) Kelley (1967)

OB_UG_2002 GSM19 Types of Attributions

OB_UG_2002 GSM20 Internal vs. External and Stable vs. unstable InternalExternal StableAbilityTask Difficulty UnstableEffortLuck

OB_UG_2002 GSM21 Attribution of Cause Interpretation Observation Attribution Theory and IndividualBehavior External External External Internal Internal Internal Distinctiveness Consensus Consistency High High High Low High Low

OB_UG_2002 GSM22 Sources of Information Internal attribution if low consensus, low distinctness, high consistency External attribution if high consensus, high distinctness, high consistency

OB_UG_2002 GSM23 Attributional Biases Fundamental attribution error - the tendency to over-attribute behavior to internal rather than external causes. Actor-observer effect - the tendency to attribute the behavior of others to internal causes and to attribute one ’ s own behavior to external causes.

OB_UG_2002 GSM24 Attributional Bias Self-serving attribution - the tendency to: perceive own success as internal and failures as external. perceive others success as external, and failure as internal take credit for successes and avoid blame for failures.

OB_UG_2002 GSM25 Decision Making The process by which members of an organization choose a specific course of action to respond to both problems and opportunities.

OB_UG_2002 GSM26 The Decision-Making Process Rational Model of Decision Making Bounded Rationality Implicit Favorite Model Intuitive Model

OB_UG_2002 GSM27 Rational Model of Decision Making A prescriptive approach based on the assumptions that the decision maker has all the necessary information and will choose the best possible solution or response.

OB_UG_2002 GSM28 Rational Model of Decision Making Problem Identify and Define Problem Develop Alternatives A1A1 A2A2 A3A3 A4A4 AnAn Evaluate Alternatives + A1A1 A1A1 A2A2 A2A2 AnAn AnAn Criteria Weight the Criteria T E C H Set Decision Criteria Choice Make Optimal Decision

OB_UG_2002 GSM29 Assumptions of the Rational Model Problem clarity. Known options. Clear preferences. Constant preferences. No time or cost constraints. People choose maximum payoff. People have very high computational abilities

OB_UG_2002 GSM30 Bounded Rationality Bounded Rationality: People ’ s ability to reason is constrained by the limitations of the human mind itself. If a problem is too complicated people simplify it and use satisficing Satisficing: Searching for and choosing the first acceptable response or solution, not necessarily the best possible one.

OB_UG_2002 GSM31 Implicit Favorite Model Early in the decision process, decision maker implicitly selects a preferred alternative. Then the rest of the decision process is essentially a decision confirmation exercise, where the decision makers makes sure his/her implicit favorite is indeed the “ right ” choice.

OB_UG_2002 GSM32 Intuitive Model an unconscious process created out of distilled experience. intuition is often based on accumulated experiences which allow one to recognize patterns. Main problem: since the criteria are not open to examination, intuition is often strongly influenced by perceptual biases.

OB_UG_2002 GSM33 Intuitive Decision Making most common under conditions of u High uncertainty levels u Little precedent u Hard to predictable variables u Limited facts u Unclear sense of direction u Analytical data is of little use u Several plausible alternatives u Time constraints

OB_UG_2002 GSM34 Exercise(2): Decision Making Introduction Individual Judgment Group Judgment Difference between You and Expert Difference between Your Group and Expert Summary

OB_UG_2002 GSM35 Sources of Error in Decision Making Perceptual Biases Heuristics Availability Representitiveness Anchoring Escalation of Commitment

OB_UG_2002 GSM36 Heuristics: Rules of thumb that simplify decision making.

OB_UG_2002 GSM37 Heuristics and the Biases They May Lead To

OB_UG_2002 GSM38 Availability Heuristic The rule of thumb that says an event that is easy to remember is likely to have occurred more frequently than an event that is difficult to remember. Potential bias is overestimating the frequency of vivid, extreme, or recent events and causes.

OB_UG_2002 GSM39 Availability Biases Vividness and Recency individuals judge events that are easier to remember to be more numerous than events that are difficult to remember

OB_UG_2002 GSM40 Representativeness Heuristic The rule of thumb that says similar kinds of events that happened in the past are a good predictor of the likelihood of an upcoming event. Potential bias is failure to take into account base rates and overestimating the likelihood of rare events.

OB_UG_2002 GSM41 Representativeness Biases Insensitivity to base rates individuals tend to ignore base rates in assessing the likelihood of events when other descriptive information is present, even if that other information is irrelevant

OB_UG_2002 GSM42 Anchoring and Adjustment Heuristic The rule of thumb that says that decisions about how big or small an amount should be/ can be made by making adjustments from some initial amount. Potential bias is inappropriate decisions when initial amounts are too high or too low.

OB_UG_2002 GSM43 Anchoring and Adjustment Biases Insufficient anchor adjustment individuals make estimates for values based on some initial value, even when the initial value is irrelevant Overconfidence individuals tend to be overconfident of the infallibility of their judgements when answering difficult questions

OB_UG_2002 GSM44 One Additional Biases Hindsight Bias after finding out the correct outcome of an event, individuals tend to overestimate the extent to which they would have predicted that outcome

OB_UG_2002 GSM45 Escalation of Commitment Increased commitment to a previous decision in spite of negative information The tendency to invest additional time, money, or effort into what are essentially bad decisions or unproductive courses of action.

OB_UG_2002 GSM46 The Three Components of Creativity Expertise Task Motivation Creativity Skills Creativity

OB_UG_2002 GSM47 AnalyticConceptual BehavioralDirective RationalIntuitive Way of Thinking High Low Tolerance for Ambiguity Decision-Making Styles

OB_UG_2002 GSM48 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. 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.

OB_UG_2002 GSM49 Summary and Implications for Managers 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.