Perception

and
Decision Making
“The Eyes see only what the mind is
prepared to comprehend”

ROBERTSON DAVIES, quoted in The Wordsworth

Dictionary of Quotes
What Is Perception and Why Is It Important?

Perception
• People’s behavior is
A process by which
based on their
individuals organize
perception of what
and interpret their
reality is, not on
sensory impressions
reality itself.
in order to give
meaning to their • The world as it is
environment. perceived is the world
that is behaviorally
important.
 We don’t see things as they are,
we see things as we are”
 It involves deciding which information
to notice, how to categorise this
information and how to interpret it
within the framework of existing
knowledge.
 It is important to the study of OB
because people’s behaviours are based
on their perception of what reality is,
not on reality itself
 Perception involves observing data,
selecting and organizing the data based on
sensory reflects and interpreting the same
as per personality attributes of the
perceiver.
Factors That
Influence
Perception
ATTRIBUTION THEORY
 Our perceptions of people differ from our
perceptions of inanimate objects.
 Our perception and judgment of a person’s
actions are influenced by these
assumptions.
 Attribution theory suggests that when we
observe an individual’s behaviour, we
attempt to determine whether it was
internally or externally caused.
 Theory that states that we all have a basic
need to understand and explain the causes
of other people's behaviour
 People make sense of their surroundings on
the basis of what they consider is the cause
and what is the effect of a phenomenon.
 It suggests that individuals observe their
own behavior or experience, try to figure out
what caused it, and then (whether or not
their conclusion is in fact correct) shape
their future behavior accordingly.
for example, If a consumer has had bad
experience with a locally-made product (and
good experience with an imported one) he
or she may conclude that the bad product is
bad because it is locally made.
 The purpose behind making attributions is to achieve
COGNITIVE CONTROL over one's environment by
explaining and understanding the causes behind
behaviors and environmental occurrences.
  Making attributions gives order and predictability to
our lives; helps us to cope. Imagine what it would be
like if you felt that you had no control over the world.
 When you make attributions you analyze the
situation by making inferences (going beyond the
information given) about the dispositions of others
and yourself as well as inferences about the
environment and how it may be causing a person to
behave.
Internal Vs External
 Attribution theory proposes that the attributions
people make about events and behavior can be
classed as either internal or external.
• INTERNAL - dispositional
• EXTERNAL - situational
 In an internal, or dispositional, attribution, people
infer that an event or a person’s behavior is due
to personal factors such as traits, abilities, or
feelings.- individual has full control
 In an external, or situational, attribution, people
infer that a person’s behavior is due to situational
factors. – individual had no control
CAR BREAK DOWN??
 Person’s 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.
Attribution Theory
 Stable vs Unstable
 Researchers also distinguish between stable and
unstable attributions.
 When people make a stable attribution, they infer that
an event or behavior is due to stable, unchanging
factors.
 When making an unstable attribution, they infer that an
event or behavior is due to unstable, temporary
factors.
Example: Mr X gets a D on his sociology term paper.
 If he attributes the grade to the fact that he always has
bad luck, he is making a stable attribution.
 If he attributes the grade to the fact that he didn’t have
much time to study that week, he is making an
unstable attribution.
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.
Errors and Biases in Attributions (cont’d)

Self-Serving Bias
The tendency for
individuals to attribute
Thought: When student
their own successes to gets an “A” on an exam,
internal factors while they often say they
putting the blame for studied hard. But when
they don’t do well, how
failures on external does the self serving
factors. 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.
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
Frequently Used Shortcuts in Judging Others

Projection
Attributing one’s own characteristics(own
traits) to other people.
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
– Appraisals are often the subjective (judgmental)
perceptions of appraisers of another employee’s job
performance.
Perception and Decision making
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
Decisions maker
Choices made from among
alternatives developed from
data perceived as relevant.

Outcomes
Assumptions of the Rational Decision-Making
Model

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

Source: T.M. Amabile, “Motivating Creativity in Organizations,” California Management Review, Fall 1997, p. 43.
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.
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. (decide and pursue minimum requirements necessary
to achieve goal)
– 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
 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.

Source: A.J. Rowe and J.D. Boulgarides, Managerial Decision

Making, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29.
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.