chapter 5 perception and individual decision making
TRANSCRIPT
Perception
and Individual
Decision Making
Chapter FIVE
Learning Objectives
Explain how two people can see the same thing and
interpret it differently
List the three determinants of attribution
Describe how shortcuts can assist in or distort our
judgment of others
Explain how perception affects the decision making
process
Outline the six steps in the rational decision making model
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
What Is Perception, and Why Is It Important?
•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
A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment.
Factors That
Influence
Perception
E X H I B I T 5–1
Internal vs. External
Internally - caused behaviors are those that are
believed to be under the personal control of the
individual.
Externally - caused behavior seen as resulting
from outside causes i.e., the person is seen as
having been forced into the behavior by the
situation.
Example – If one of your employee is late for
work, how will you perceive his lateness, as a
manager?
Person Perception: Making Judgments About
Others
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.
Attribution Theory
When individuals observe behavior, they attempt to determine whether it is internally or externally caused. Determination, however, depends on three factors:
Distinctiveness : what we want to know is whether this behavior is unusual. If it is, the observer is likely to give the behavior an external attribution. If this action is not unusual, it will be judged as internal.
Consensus : if everyone who is faced with a similar situation responds in the same way, we can say the behavior shows consensus. From an attribution point of view, if consensus is high, you would be expected to give an external attribution to the employee’s tardiness.
Consistency : the more consistent the behavior, the more the observer is inclined to attribute it to internal causes.
Attribution TheoryE X H I B I T 5–2
Errors and Biases in Attributions
Fundamental Attribution Error
One of the more interesting findings from the attribution theory is that there are errors or biases that distort attributions.
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.
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 student
gets 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”?
Frequently Used Shortcuts in Judging Others
Selective Perception
People selectively interpret what they see on the basis of their interests, background, experience, and attitudes.
Selective perception allows us to “speed-read” others, but not without the risk of drawing an inaccurate picture.
Dearborn & Simon’s perceptual study – 23 business executives,06 from sales, 05 from production, 04 from accounting & 08 from miscellaneous functions.
Frequently Used Shortcuts in Judging Others
Halo Effect
Drawing a general impression about an individual on the basis of a single characteristic-appearance,
intelligence etc.
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
Frequently Used Shortcuts in Judging Others
Projection
Attributing one’s own characteristics to other people- can distort
perceptions made about others. It is easy to judge others if we assume that they are similar to us.
Stereotyping
Judging someone on the basis of one’s perception of the group to which that person belongs.
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.
Specific Applications in Organizations (cont’d)
Performance Evaluations
– An employee’s performance appraisal is very much dependent on the perceptual process.
– Appraisals are often the subjective (judgmental) perceptions of appraisers of another employee’s job performance.
– What happens when performance appraisals are subjective as compared to objective ?
– Subjective measures are easier to implement, they provide managers with greater discretion, and many jobs do not readily lend themselves to objective measures.
The Link Between Perceptions and Individual
Decision Making
Perception of the
decision maker
Outcomes
Problem
A perceived discrepancy between the current state of affairs and a desired state.
Decisions
Choices made from among alternatives developed from data perceived as relevant.
Assumptions of the Rational Decision-Making
Model
Model Assumptions
• Problem clarity
• Known options
• Clear preferences
• Constant preferences
• No time or cost constraints
• Maximum payoff
Rational Decision-
Making Model
Describes how individuals should behave in order to maximize some outcome.
Rational Decision Making Assumptions
Problem Clarity – there is no ambiguity. Complete
information about the dimensions of the problem are
available to the decision maker.
Known Options – decision maker is able to identify all the
viable alternative, also is aware of all the possible
consequences of each alternative.
Clear Preferences – rationality assumes that the criteria &
alternatives can be ranked & weighted to reflect their
importance.
Constant Preferences – specific decision criteria are
constant & the weights assigned to them are stable over
time.
No Time or Cost Constraint -
Maximum Payoff – rational decision maker will choose the
alternative with highest perceived value.
Steps in the Rational Decision-Making Model
1. Define the problem.
2. Identify the decision criteria.
3. Allocate weights to the criteria.
4. Develop the alternatives.
5. Evaluate the alternatives.
6. Select the best alternative.
E X H I B I T 5–3
The Three Components of Creativity
Creativity
Rational decision maker needs 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 5–4Source: T.M. Amabile, “Motivating Creativity in Organizations,” California Management Review, Fall 1997, p. 43.
How Are Decisions Actually Made in
Organizations?
When faced with a complex problem, most people
respond by reducing the problem to a level at
which it can be readily understood.
This is because the limited information-
processing capability of human beings make it
impossible to assimilate & understand all the
information necessary to optimize.
So, people SATISFICE, i.e., they seek solutions
that are satisfactory & sufficient.
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.
Because the capacity of human mind for
formulating & solving complex
problems is far too small to meet the
requirements for full rationality,
individuals operate within the confines of
bounded rationality.
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.
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.
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.
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
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
Decision-Style Model – Individual Differences
E X H I B I T 5–5Source: A.J. Rowe and J.D. Boulgarides, Managerial Decision
Making, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29.
Decision-Style Model…..continued
The basic foundation of the model is the
recognition that people differ along two
dimensions.
First is their way of thinking.
Some people are logical & rational.
They process information serially.
In contrast some people are intuitive & creative.
They perceive things as a whole.
Second dimension addresses a person’s
tolerance for ambiguity.
Some people have a high need to structure
information in ways that minimize ambiguity.
Decision-Style Model…..continued
While others are able to process many thoughts
at the same time.
Directive Style – have a low tolerance for
ambiguity & seek rationality. They are efficient &
logical. They make decisions fast & they focus on
the short run.
Analytical Type – has a much greater tolerance
for ambiguity. This leads to the desire for more
information & consideration for more alternatives
than is true for directives. They are careful
decision makers with the ability to adapt to or
cope with novel & unexpected situations.
Decision-Style Model…..continued
Conceptual Style – tend to use data from multiple
sources & consider many alternatives. Their
focus is long range, and they are very good at
finding creative solutions to problems.
Behavioral Style – are decision makers who have
a strong concern for the people in the org. & their
development. They’re concerned with the well
being of their subordinates & are receptive to
suggestions from others. They tend to focus on
the short term & to downplay the use of data in
their decision making. This type of manager tries
to avoid conflict & seeks acceptance.
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.
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
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.
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.
Ways to Improve Decision Making
1. Analyze the situation and adjust your decision
making style to fit the situation.
2. Be aware of biases and try to limit their impact.
3. Combine rational analysis with intuition to
increase decision-making effectiveness.
4. Don’t assume that your specific decision style is
appropriate to every situation.
5. Enhance personal creativity by looking for novel
solutions or seeing problems in new ways, and
using analogies.
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 increases the chance of finding an outstanding one.
E X H I B I T 5–5Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control
of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164–68.
It’s your little sister’s senior Prom night, and
she notices that everyone is wearing the
same dress she has on! Which perceptual
shortcut may be occurring?
• Escalation of commitment
• Representative bias
• Availability Bias
• Hindsight Bias
Chapter Check-Up: Perception
It’s your little sister’s senior Prom night, and she notices that
everyone is wearing the same dress she has on! Which
perceptual shortcut may be occurring?
Chapter Check-Up: Perception
• Escalation of commitment
• Representative bias
• Availability Bias
• Hindsight Bias
Discuss with your neighbor what the answer would be if your
sister came home and said “I just knew that everyone would buy
that dress!”
If all of these perceptual shortcuts
happen unconsciously, how can we
keep the stereotypes we have from
interfering with the way we work in
group projects? Identify two specific
things you could do to help prevent
stereotypes from inhibiting effective
group relationships. Discuss with a
neighbor.
Chapter Check-Up: Perception
Michael has just discovered he is double registered for two
classes at the same time and must make a decision about
which one to take this semester. He considers the professor
teaching this semester, the time of the class, and the classes
his friends are taking. He then considers his options for when
he can take each class again, as well as the costs and benefits
for taking each this semester versus later next year. He then
makes his decision. Michael has just engaged in what?
Chapter Check-Up: Decision
Making
In making his decision, Michael forgot
to consider the implications of the
color of paint in the room where each
class was being offered. Given that
room color can influence mood, which
can influence performance, why didn’t
Michael consider it?
Chapter Check-Up: Decision
Making
Michael engaged in the
rational decision making model,
and didn’t consider the paint color
of the rooms because he operates
under the confines of
bounded rationality.
Chapter Check-Up: Decision
Making
Chapter Checkup: What biases
might have affected Martha
Stewart’s judgment? Discuss with a
classmate.