1. Essentials of Organizational Behavior
Fourteenth Edition
Chapter 6
Perception and Individual Decision Making
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.

2. After studying this chapter you should be able to:
Explain the factors that influence perception.
Describe attribution theory.
Explain the link between perception and decision making.
Contrast the rational model of decision making with bounded rationality and intuition.
Explain how individual differences and organizational constraints affect decision making.
Contrast the three ethical decision criteria.
Describe the three-stage model of creativity.

3. Perception
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 upon their perception of reality is
Our perception becomes the reality from which we act.
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.

4. Factors Influencing Perception
Situation
Perceiver
Target
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.

5. Factors that influence perception
North
West East
South

6. perceiver perceptions

7. Real world perception situations
Sexual Harassment Hostile environment Favoritism Discrimination

8. Target perceptions
The characteristics of the target also affect what we perceive
Racial Political preferences
Gender Age
Education Religion
Alcoholism/drug abuse Recovering addict
Rehabilitated criminal Individualist
One of the crowd Handicap

9. Context perceptions
Work Play Home Social Job interview Weather Employee make-up Office layout Location

10. Person Perception: Attribution Theory
Attribution Theory: Suggests that perceivers try to “attribute” the observed behavior to a type of cause:
Internal – behavior is believed to be under the personal control of the individual, e.g. personal biases
External – the person is forced into the behavior by outside events/causes, e.g. group norms
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, than it is under the person’s control, whereas external causes are not under the individual’s control.

11. Determinants of Attribution
Distinctiveness – whether an individual displays different behaviors in different situations (the uniqueness of the act)
Consensus – does everyone who faces a similar situation respond in the same way as the individual did?
Consistency – does the person respond the same way over time?
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.

12. 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.

13. Attribution Errors and Biases
Fundamental attribution error:
Tendency to underestimate the influence of external factors and overestimate that of internal factors
Self-serving bias: Occurs when individuals overestimate their own (internal) influence on successes and overestimate the external influences on their failures
The basic process of attribution applies across cultures, but Western cultures tend to be more individualist, while Asian cultures are more group oriented
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 have success.
Culture plays a role in the attributions people make. Western cultures tend to focus on the individual, while Asian cultures are more group oriented.

14. Common Shortcuts Used in Judging Others
Selective Perception: A perceptual filtering process based on interests, background, and attitude
Halo Effect: Drawing a general impression based on a single characteristic
Contrast Effects: Our reaction is influenced by others we have recently encountered (the context of the observation)
Stereotyping: Judging someone on the basis of the perception of the group to which they belong
There are some frequently used shortcuts in judging others. People will utilize past experience, their attitudes, and their interests to interpret information on their own biases, often misperceiving the situation.
Judgment can also utilize the halo effect, where individuals draw generally favorable impressions about an individual using a single characteristic.
Contrast effects occur when we are making judgments about an individual and comparing them to other individuals we have recently encountered.
Stereotyping is when we judge someone on the basis of perception of the group to which he or she belongs.

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

16. Rational Decision-Making Model, i.e. the book solution
Define the problem
Identify the decision criteria
Allocate weights to the criteria
Develop the alternatives
Evaluate the alternatives
Select the best alternative
This model is seldom actually used: it’s more of a goal than a practical method
Use this model at the racetrack next summer and see what your results are
Decision making is done by individuals but occurs in organizations. There are some models that can help us in thinking through decision making in organizations. The first is the rational decision-making model.
The steps are outlined in this slide. Although this is a good model, it is more of a goal than a practical method.

17. Bounded Rationality
Bounded rationality is constructing simplified models that extract the essential features from problems without capturing all their complexity
The limited information-processing capability of human beings makes it impossible to assimilate and understand all the information necessary to optimize
People seek solutions that are satisfactory and sufficient, rather than optimal (they “satisfice”)
The human preference =
simplify – simplify - simplify
The second model, bounded reality, represents more of the real world where it seeks solutions that are the best given the information that is available. Basically, bounded rationality constructs simplified models that identify the essential features from problems without getting into all their complexity.

18. Decision Making in Bounded Rationality
Decision making under bounded rationality is composed of three steps:
Limited search for criteria and alternatives – familiar criteria and easily found alternatives
Limited review of alternatives – focus on alternatives, similar to those already in effect
Satisficing – selecting the first alternative that is “good enough”
This slide details the three key steps in bounded rationality decision making which makes it a much more simple process than the rational decision-making model.

19. Intuitive Decision Making
Intuitive decision making: A non-conscious process created out of distilled experience
Increases with experience
Can be a powerful complement to rational analysis in decision making
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.

20. 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
Availability Bias
Basing judgments on readily available information
There are many biases and errors that occur in the decision-making process. The overconfidence bias is when an individual believes too much in his own ability to make good decisions. The anchoring bias is when an individual makes decisions based on the information received first and not on the new information received. The next error often made is with the confirmation bias where, during the decision-making process, the individual uses only facts that support his decision. Availability bias involves emphasizing information that is more readily at hand, information that is recent and vivid.

21. More Biases and Errors
Randomness Error Our tendency to believe we can predict the outcome of random events Escalation of Commitment Staying with a decision even when there is clear evidence that it is wrong (e.g. VietNam) Risk Aversion Preferring a sure thing over a risky outcome Hindsight Bias Believing falsely that we could have predicted the outcome of an event after that outcome is already known
Some additional decision-making errors include the escalation of commitment error which occurs when there is an increasing commitment to a decision in spite of evidence that it is the wrong decision. Randomness error refers to our tendency to think we have some control over our world.
Risk aversion is when the decision maker has a tendency to prefer a sure thing over a risky outcome. The hindsight bias occurs after an outcome is already known and then believing it could have been accurately predicted beforehand.

22. Individual Differences on Decision Making
Personality
Gender
General mental ability
Cultural differences
Nudging
There are many individual differences, including those based on personality, gender, general mental ability, cultural differences, and nudging that influence decision making and create deviations from the rational model defined earlier.

23. Organizational Constraints on Decision Making
Performance evaluations
Reward systems
Formal regulations
System-imposed time constraints
Historical precedents
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.

24. Ethical Frameworks for Decision Making
Utilitarianism
Provide the greatest good for the greatest number
Rights
Make decisions consistent with fundamental liberties and privileges
Justice
Impose and enforce rules fairly and impartially so that there is equal 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.

25. Behavioral Ethics Behavioral ethics
Analyzing how people actually behave when confronted with ethical dilemmas
Researchers have been exploring the field of behavioral ethics which looks at how people behave when they are confronted with ethical dilemmas. Studies show that we don’t always follow the ethical standards promoted by our organizations and sometimes also violate our own standards.

26. Creativity in Organizations
Creativity: The ability to produce novel and useful ideas
Helps people:
See problems others can’t see
Better understand the problem
Identify all viable alternatives
Identify alternatives that aren’t readily apparent
Better decisions are those that incorporate novel and useful ideas, or 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.

27. Three-Stage Model of Creativity
The core of the model is creative behavior, which has both causes and effects.

28. Creative Behavior Steps:
Problem formulation: identify a problem or opportunity that requires a solution as yet unknown
Information gathering: possible solutions incubate in an individual’s mind
Idea generation: develop possible solutions from relevant information and knowledge
Idea evaluation: evaluate potential solutions and identify the best one
Creative behavior occurs in four steps, each of which leads to the next. Problem formulation, information gathering, idea generation, and idea evaluation.

29. Causes of Creative Behavior
Cause of creative behavior:
Intelligence
Personality
Expertise
Ethics
Creative environment
Motivation
Rewards and recognition
Smart people tend to be more creative because they are better at solving problems. Creative people also tend to be open to experience, have proactive personalities, self-confidence, a tolerance for ambiguity, and a willingness to take risks. Expertise is the single most important predictor of creativity. Ethics and creativity are not correlated – in fact, people who cheat may actually be more creative. If you aren’t motivated to be creative, it is unlikely you will be. Organizations need to foster the free flow of ideas. Freedom from excessive rules encourages creativity.

30. Creative Outcomes
Creative outcomes: ideas or solutions judged to be novel and useful by relevant stakeholders
Off-the-wall solutions are creative only if they help solve the problem.
Creative ideas do not implement themselves; translating them into creative outcomes is a social process that requires utilizing other concepts addressed in the text.

31. Implications for Managers
Behavior follows perception, so to influence employee behavior at work, assess how employees perceive their work.
Make better decisions by recognizing perceptual biases and decision-making errors we tend to commit.
Adjust your decision-making approach to the national culture you’re operating in and to the criteria your organization values.
Combine rational analysis with intuition.
Try to enhance your creativity.