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  • 1. Chapter FIVE Perception and Individual Decision Making
  • 2. What Is Perception, and Why Is It Important?What Is Perception, and Why Is It Important?PerceptionA process by which ••People’s behavior is People’s behavior isindividuals organize and based on their based on theirinterpret their sensory perception of what perception of whatimpressions in order to reality is, not on reality is, not ongive meaning to their reality itself. reality itself.environment. ••The world as it is The world as it is perceived is the world perceived is the world that is behaviorally that is behaviorally important. important.
  • 3. Factors ThatFactors That Influence Influence Perception PerceptionE X H I B I T 5–1 E X H I B I T 5–1
  • 4. Person Perception: Making Judgments AboutPerson Perception: Making Judgments AboutOthersOthersAttribution TheoryWhen individuals observebehavior, they attempt todetermine whether it isinternally or externallycaused.Distinctiveness: shows different behaviors in different situations. Distinctiveness: shows different behaviors in different situations.Consensus: response is the same as others to same situation. Consensus: response is the same as others to same situation.Consistency: responds in the same way over time. Consistency: responds in the same way over time.
  • 5. Attribution TheoryAttribution Theory E X H I B I T 5–2 E X H I B I T 5–2
  • 6. Errors and Biases in AttributionsErrors and Biases in AttributionsFundamental Attribution ErrorThe tendency to underestimatethe influence of external factorsand overestimate the influenceof internal factors when makingjudgments about the behavior ofothers. In general, we tend to blame the person first, not the situation.
  • 7. Errors and Biases in Attributions (cont’d)Errors and Biases in Attributions (cont’d)Self-Serving BiasThe tendency for individuals toattribute their own successesto internal factors while putting Thought: When studentthe blame for failures on gets an “A” on an exam,external factors. 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 OthersFrequently Used Shortcuts in Judging OthersSelective PerceptionPeople selectively interpret what they see on thebasis of their interests, background, experience,and attitudes.
  • 9. Frequently Used Shortcuts in Judging OthersFrequently Used Shortcuts in Judging OthersHalo EffectDrawing a general impressionabout an individual on thebasis of a single characteristicContrast EffectsEvaluation of a person’s characteristics thatare affected by comparisons with otherpeople recently encountered who rank higheror lower on the same characteristics
  • 10. Frequently Used Shortcuts in Judging Others Frequently Used Shortcuts in Judging OthersProjectionAttributing one’s owncharacteristics to otherpeople. Stereotyping Judging someone on the basis of one’s perception of the group to which that person belongs.
  • 11. Specific Applications in OrganizationsSpecific 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)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 IndividualThe Link Between Perceptions and IndividualDecision MakingDecision Making Problem A perceived discrepancy between the current state of affairs and a desired state. Perception Perception of the of the decision decisionDecisions maker makerChoices made from amongalternatives developed fromdata perceived as relevant. Outcomes
  • 14. Assumptions of the Rational Decision-MakingAssumptions of the Rational Decision-MakingModelModelRational Decision- Model Assumptions Model AssumptionsMaking Model •• Problem clarity Problem clarityDescribes how •• Known options Known optionsindividuals shouldbehave in order to •• Clear preferences Clear preferencesmaximize some •• Constantoutcome. Constant preferences preferences •• No time or cost No time or cost constraints constraints •• Maximum payoff Maximum payoff
  • 15. Steps in the Rational Decision-Making ModelSteps in the Rational Decision-Making Model1. 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 E X H I B I T 5–3
  • 16. The Three Components of Creativity 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. E X H I B I T 5–4Source: T.M. Amabile, “Motivating Creativity in Organizations,” California Management Review, Fall 1997, p. 43. E X H I B I T 5–4
  • 17. How Are Decisions Actually Made inHow Are Decisions Actually Made inOrganizations?Organizations?Bounded RationalityIndividuals make decisions by constructingsimplified models that extract the essentialfeatures from problems without capturing alltheir complexity.
  • 18. How Are Decisions Actually Made inHow Are Decisions Actually Made inOrganizations? (cont’d)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 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 ErrorsCommon 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 ErrorsCommon 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 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 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 DecisionMaking, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29.
  • 24. Organizational Constraints on Decision MakersOrganizational 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 MakingCultural 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 MakingEthics 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 MakingEthics 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 MakingWays to Improve Decision Making1. 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.
  • 29. Toward Reducing Bias and Errors 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.Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control E X H I B I T 5–5of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164–68. E X H I B I T 5–5
  • 30. Chapter Check-Up: PerceptionIt’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
  • 31. Chapter Check-Up: PerceptionIt’s your little sister’s senior Prom night, and she notices thateveryone is wearing the same dress she has on! Whichperceptual shortcut may be occurring? • 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!”
  • 32. Chapter Check-Up: Perception 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.
  • 33. Chapter Check-Up: Decision MakingMichael has just discovered he is double registered for twoclasses at the same time and must make a decision aboutwhich one to take this semester. He considers the professorteaching this semester, the time of the class, and the classeshis friends are taking. He then considers his options for whenhe can take each class again, as well as the costs and benefitsfor taking each this semester versus later next year. He thenmakes his decision. Michael has just engaged in what?
  • 34. Chapter Check-Up: Decision MakingIn making his decision, Michael forgotto consider the implications of thecolor of paint in the room where eachclass was being offered. Given thatroom color can influence mood, whichcan influence performance, why didn’tMichael consider it?
  • 35. 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.
  • 36. Chapter Checkup: What biases might have affected MarthaStewart’s judgment? Discuss with a classmate.