1. and Individual Decision Making
Perception
and Individual Decision Making

2. What Is Perception, and Why Is It Important?
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.

3. Factors that Influence Perception
E X H I B I T 5–1

4. Person Perception: Making Judgments About Others
Attribution Theory
When individuals observe behavior, they attempt to determine whether it is internally or externally caused.
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.

5. Attribution Theory
E X H I B I T 5–2

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
In general, we tend to blame the person first, not the situation.

7. Errors and Biases in Attributions (cont’d)
Self-Serving Bias
The tendency for individuals to attribute their own successes to internal factors while putting the blame for failures on external factors
Thought: When students get an “A” on an exam, they often say they studied hard. But when they don’t do well, how does the self-serving bias come into play?
Hint: Whose fault is it usually when an exam is “tough”?

8. Frequently Used Shortcuts in Judging Others
Selective Perception
People selectively interpret what they see on the basis of their interests, background, experience, and attitudes.

9. Frequently Used Shortcuts in Judging Others
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

10. Frequently Used Shortcuts in Judging Others
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

11. Specific Applications in Organizations
Employment Interview
Perceptual biases of raters affect the accuracy of interviewers’ judgments of applicants
Performance Expectations
Self-fulfilling prophecy (Pygmalion effect): The lower or higher performance of employees reflects preconceived leader expectations about employee capabilities.
Ethnic Profiling
A form of stereotyping in which a group of individuals is singled out—typically on the basis of race or ethnicity—for intensive inquiry, scrutinizing, or investigation

12. Specific Applications in Organizations (cont’d)
Performance Evaluations
Appraisals are often the subjective (judgmental) perceptions of appraisers of another employee’s job performance.

13. The Link Between Perceptions and Individual Decision Making
Problem A perceived discrepancy between the current state of affairs and a desired state
Perception of the Decision Maker
Decisions Choices made from among alternatives developed from data perceived as relevant
Outcomes

14. Assumptions of the Rational Decision-making Model
Describes how individuals should behave in order to maximize some outcome
Model Assumptions
Problem clarity
Known options
Clear preferences
Constant preferences
No time or cost constraints
Maximum payoff

15. 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.
E X H I B I T 5–3

16. The Three Components of Creativity
The ability to produce novel and useful ideas
Three-Component Model of Creativity
Proposition that individual creativity requires expertise, creative-thinking skills, and intrinsic task motivation
E X H I B I T 5–4

17. 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.

18. How Are Decisions Actually Made in Organizations? (cont’d)
How/Why problems are Identified
Visibility over importance of problem
Attention-catching, high profile problems
Desire to “solve problems”
Self-interest (if problem concerns decision maker)
Alternative Development
Satisficing: seeking the first alternative that solves problem
Engaging in incremental rather than unique problem solving through successive limited comparison of alternatives to the current alternative in effect

19. Common Biases and Errors
Overconfidence Bias
Believing too much in our own ability to make good decisions
Anchoring Bias
Using early, first received information as the basis for making subsequent judgments
Confirmation Bias
Using only the facts that support our decision

20. Common Biases and Errors
Availability Bias
Using information that is most readily at hand
Recent
Vivid
Representative Bias
“Mixing apples with oranges”
Assessing the likelihood of an occurrence by trying to match it with a preexisting category using only the facts that support our decision
Winner’s Curse
Highest bidder pays too much
Likelihood of “winner’s curse” increases with the number of people in auction

21. Common Biases and Errors
Escalation of Commitment
In spite of new negative information, commitment actually increases
Randomness Error
Creating meaning out of random events
Hindsight Bias
Looking back, once the outcome has occurred, and believing that you accurately predicted the outcome of an event

22. Intuition Intuitive Decision Making
An unconscious process created out of distilled experience
Conditions Favoring Intuitive Decision Making
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
Several plausible alternative solutions exist
Time is limited and pressing for the right decision

23. Individual Differences in Decision Making
Personality
Aspects of conscientiousness and escalation of commitment
Self Esteem High self serving bias
Gender
Women tend to analyze decisions more than men.

24. Organizational Constraints on Decision Makers
Performance Evaluation
Evaluation criteria influence the choice of actions
Reward Systems
Decision makers make action choices that are favored by the organization
Formal Regulations
Organizational rules and policies limit the alternative choices of decision makers
System-imposed Time Constraints
Organizations require decisions by specific deadlines
Historical Precedents
Past decisions influence current decisions

25. Cultural Differences in Decision Making
Problems selected
Time orientation
Importance of logic and rationality
Belief in the ability of people to solve problems
Preference for collective decision making

26. Ethics in Decision Making
Ethical Decision Criteria
Utilitarianism
Seeking the greatest good for the greatest number
Rights
Respecting and protecting basic rights of individuals such as whistleblowers
Justice
Imposing and enforcing rules fairly and impartially

27. Ethics in Decision Making
Ethics and National Culture
There are no global ethical standards.
The ethical principles of global organizations that reflect and respect local cultural norms are necessary for high standards and consistent practices.

28. Ways to Improve Decision Making
Analyze the situation and adjust your decision making style to fit the situation.
Be aware of biases and try to limit their impact.
Combine rational analysis with intuition to increase decision-making effectiveness.
Don’t assume that your specific decision style is appropriate to every situation.
Enhance personal creativity by looking for novel solutions or seeing problems in new ways, and using analogies.

29. Toward Reducing Bias and Errors
Focus on goals.
Clear goals make decision making easier and help to eliminate options inconsistent with your interests.
Look for information that disconfirms beliefs.
Overtly considering ways we could be wrong challenges our tendencies to think we’re smarter than we actually are.
Don’t try to create meaning out of random events.
Don’t attempt to create meaning out of coincidence.
Increase your options.
The number and diversity of alternatives generated increase the chance of finding an outstanding one.