OB Chapter 5

Chapter Perception and Individual Decision
5 Making
5-1
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.
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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.
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Factors that Influence Perception
See
SeeEEXXHHIIBBIITT 5-1
5-1
5-4
Person Perception: Making Judgments About Others
Attribution Theory
When individuals observe behavior, they
attempt to determine whether it is
internally or externally caused.
 Distinctiveness:
Distinctiveness:shows
showsdifferent
differentbehaviors
behaviorsinindifferent
differentsituations.
situations.
 Consensus:
Consensus:response
responseisisthe
thesame
sameasasothers
otherstotosame
samesituation.
situation.
 Consistency:
Consistency:responds
respondsininthe
thesame
sameway
wayover
overtime.
time.
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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
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Errors and Biases in Attributions
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
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Common Shortcuts in Judging Others
Selective Perception Halo Effect
People selectively interpret what they see Drawing a general impression about an
on the basis of their interests, individual on the basis of a single
background, experience, and attitudes characteristic
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Common Shortcuts in Judging Others
Contrast Effects Projection
Evaluation of a person’s characteristics that Attributing one’s own characteristics to

are affected by comparisons with other people other people
recently encountered who rank higher or lower
on the same characteristics
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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.
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Applications Shortcut 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
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Applications Shortcut in Organizations
 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
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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
1. Define the problem

2. Identify the decision criteria
3. Allocation weights to the criteria
4. Develop the criteria
5. Evaluate the alternatives
6. Select the best alternative
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Decision-Making Models in Organizations
 Rationality
 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
5-14
Common Biases and Errors in Decision-Making
Overconfidence Believing too much in our own ability On as the basis for Selecting and Confirmation
to make good decisions – especially using only facts that support our
Bias when outside of own expertise decision
Bias
Using early, first received Emphasizing information

Anchoring that is most readily at hand Availability
information as the basis for
Bias making subsequent judgments -Recent -Vivid Bias
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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
Risk aversion
 The tendency to prepare a sue gain of moderate amount over risker outcome,
even if the risker outcome might have a higher expected payoff.
Hindsight Bias
 After an outcome is already known, believing it could have been
accurately predicted beforehand
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Individual Differences in Decision-Making
Personality Gender
Conscientiousness may effect escalation of  Women analyze decisions more than

commitment men – rumination
 Achievement-strivers are likely to increase  Women are twice as likely to develop
commitment depression
 Dutiful people are less like to have this bias  Differences develop early
Self-Esteem
 High self-esteem people are susceptible to
self-serving bias
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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
5-18

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Chapter Perception and Individual Decision

After studying this chapter, you should be able to:

• Define perception and explain the factors that influence it.

A process by which individuals organize and interpret their

Fundamental Attribution Error

The tendency to underestimate the influence of external factors and

We blame people first, not the situation

 It is “our” success but “their” failure

Selective Perception Halo Effect

Contrast Effects Projection

Evaluation of a person’s characteristics that Attributing one’s own characteristics to

Judging someone on the basis of one’s perception of the group to which

Six step decision-making process

1. Define the problem

Using early, first received Emphasizing information

Conscientiousness may effect escalation of  Women analyze decisions more than

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