0. Perception and Individual Decision Making6
Perception and Individual Decision Making
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

1. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall .

2. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
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3. 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.
See E X H I B I T 6-1
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4. 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 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.
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5. 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.
See E X H I B I T 6-2
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6. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

7. 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 Effects
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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

8. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

9. Specific Shortcut Applications in Organizations
Employment Interview
Perceptual biases of raters affect the accuracy of interviewers’ judgments of applicants
Formed in a single glance – 1/10 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

10. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

11. 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
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(c) 2008 Prentice-Hall, All rights reserved.

12. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

13. 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
Winner’s Curse
Highest bidder pays too much due to value overestimation
Likelihood increases with the number of people in auction
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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

14. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

15. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

16. Ethics in Decision Making
Ethical Decision Criteria
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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall .
(c) 2008 Prentice-Hall, All rights reserved.

17. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall .
(c) 2008 Prentice-Hall, All rights reserved.

18. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

19. 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 5-4
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

20. 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.
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(c) 2008 Prentice-Hall, All rights reserved.

21. 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.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall
(c) 2008 Prentice-Hall, All rights reserved.

22. Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
Copyright ©2011 Pearson Education, Inc.  Publishing as Prentice Hall
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall