This document summarizes key concepts around perception, decision making, and judgment from organizational behavior. It covers how perception influences behavior, factors that influence perception, attribution theory, biases in judgment of others, shortcuts used to evaluate people, applications in employment and performance evaluation, rational and bounded rational models of decision making, intuition, decision styles, and ways to improve decision making.

1. Chapter 5
Perception and
Individual Decision
Making

2. 5–2
After studying this chapter,
you should be able to:
1. Explain how two people can see the same
thing and interpret it differently.
2. List three determinants of attribution.
3. Describe how shortcuts can assist in or distort
our judgment of others.
4. Explain how perception affects the decision-
making process.
5. Outline the six steps in the rational decision-
making model.
LEARNINGOBJECTIVES

3. 5–3
After studying this chapter,
you should be able to:
6. Describe the actions of a boundedly rational
decision maker.
7. Identify the conditions in which individuals are
most likely to use intuition in decision making.
8. Describe four styles of decision making.
9. Define heuristics and explain how they bias
decisions.
10.Contrast the three ethical decision criteria.
LEARNINGOBJECTIVES(cont’d)

4. 5–4
What Is Perception, and Why Is It Important?What Is Perception, and Why Is It Important?
• People’s behavior isPeople’s behavior is
based on theirbased on their
perception of whatperception of what
reality is, not onreality is, not on
reality itself.reality itself.
• The world as it isThe world as it is
perceived is the worldperceived is the world
that is behaviorallythat is behaviorally
important.important.
• People’s behavior isPeople’s behavior is
based on theirbased on their
perception of whatperception of what
reality is, not onreality is, not on
reality itself.reality itself.
• The world as it isThe world as it is
perceived is the worldperceived is the world
that is behaviorallythat is behaviorally
important.important.
Perception
A process by which
individuals organize and
interpret their sensory
impressions in order to
give meaning to their
environment.

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

6. 5–6
Person Perception: Making Judgments About
Others
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.
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.

7. 5–7
Attribution TheoryAttribution Theory
E X H I B I T 5–2
E X H I B I T 5–2

8. 5–8
Errors and Biases in AttributionsErrors 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.

9. 5–9
Errors and Biases in Attributions (cont’d)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.

10. 5–
10
Frequently Used Shortcuts in Judging OthersFrequently Used Shortcuts in Judging Others
Selective Perception
People selectively interpret what they see on the
basis of their interests, background, experience,
and attitudes.

11. 5–
11
Frequently Used Shortcuts in Judging OthersFrequently 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.

12. 5–
12
Frequently Used Shortcuts in Judging OthersFrequently 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.

13. 5–
13
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.

14. 5–
14
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.
 Employee Effort
– Assessment of individual effort is a subjective
judgment subject to perceptual distortion and bias.

15. 5–
15
The Link Between Perceptions and Individual
Decision Making
The Link Between Perceptions and Individual
Decision Making
Perception
of the
decision
maker
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.

16. 5–
16
Assumptions of the Rational Decision-Making
Model
Assumptions of the Rational Decision-Making
Model
Model Assumptions
• Problem clarity
• Known options
• Clear preferences
• Constant
preferences
• No time or cost
constraints
• Maximum payoff
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.

17. 5–
17
Steps in the Rational Decision-Making ModelSteps 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
E X H I B I T 5–3

18. 5–
18
The Three Components of CreativityThe 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 5–4
E X H I B I T 5–4
Source: T.M. Amabile, “Motivating Creativity in Organizations,” California Management Review, Fall 1997, p. 43.

19. 5–
19
How Are Decisions Actually Made in
Organizations
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.

20. 5–
20
How Are Decisions Actually Made in
Organizations (cont’d)
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.

21. 5–
21
Common Biases and ErrorsCommon Biases and Errors
 Overconfidence Bias
– Believing too much in our own decision competencies.
 Anchoring Bias
– Fixating on early, first received information.
 Confirmation Bias
– Using only the facts that support our decision.
 Availability Bias
– Using information that is most readily at hand.
 Representative Bias
– Assessing the likelihood of an occurrence by trying to
match it with a preexisting category.

22. 5–
22
Common Biases and ErrorsCommon Biases and Errors
 Escalation of Commitment
– Increasing commitment to a previous decision in spite
of negative information.
 Randomness Error
– Trying to create meaning out of random events by
falling prey to a false sense of control or superstitions.
 Hindsight Bias
– Falsely believing to have accurately predicted the
outcome of an event, after that outcome is actually
known.

23. 5–
23
IntuitionIntuition
 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

24. 5–
24
Decision-Style ModelDecision-Style Model
E X H I B I T 5–5
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.

25. 5–
25
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.

26. 5–
26
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 collect decision making

27. 5–
27
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.

28. 5–
28
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.

29. 5–
29
Ways to Improve Decision MakingWays 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.

30. 5–
30
Toward Reducing Bias and ErrorsToward 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 5–6
E X H I B I T 5–6Source: 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.