Perception and individual decision making are influenced by various factors. Perception depends on the perceiver's characteristics and attitudes, the target being perceived, and the situation. Decision making involves identifying problems, developing alternatives, and making choices that can be biased by perceptual distortions. Common biases include overconfidence, anchoring, confirmation bias, availability bias, and escalation of commitment. Managers must consider how perception and biases can influence evaluation, rewards, regulations, precedents, and decision making.

1. Perception and Individual Decision
Making

2. If everyone perceived everything the same
way, things would be a lot simpler
5-1
The process by which an
individual organize, select and
interpret the stimuli to produce a
meaningful picture of the
environment

3. Experiment of perception

4. 5-3

5.  Perception.
– The process by which people select, organize,
interpret, retrieve, and respond to
information.
– Perceptual information is gathered from:
• 5 senses
What is Perceptual Process ?

6. Perception is Influenced by
The perception of a individual depends on three factors,
namely
Perceiver-These are the most common characteristics that
affect the perception of an individual like attitudes,
motives, interests, past experiences and expectations.
Target-Characteristics of the perceiver also affect what is
being perceived. These characteristics include
attractiveness, gregariousness (sociability) and tendency to
group similar things together.
Situation-The situation in which objects or events are seen
by individuals also affect their attention. This includes time,
heat or light
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7. Factors that Influence Perception

8. Figure Ground Relationship
Our first perceptual
decision is what is the
image is the figure and
what is the background.

9. Gestalt Psychology
• Gestalt psychologists focused on
how we GROUP objects together.
• We innately look at things in
groups and not as isolated
elements.
• Proximity (group objects that are
close together as being part of
same group)
• Similarity (objects similar in
appearance are perceived as being
part of same group)
• Continuity (objects that form a
continuous form are perceived as
same group)
• Closure (like top-down
processing…we fill gaps in if we
can recognize it)

10. Signal Detection theory
 Absolute thresholds
are not really
absolute.
 Things like
motivation or
physical state can
effect what we
sense.
My wife could sleep through a war, but if one of our sons even whimpers,
she is up!!!

11. Poggendorff Illusion

12. Figure ground illusion

13. Size constancy

14. Attribution Theory
 It was proposed by Kelly in 1972.
 It suggests that when we observe an individual’s
behavior, we try to find whether it was caused
internally or externally.
 Internally caused behaviors are under the personal
control of an individual whereas externally caused
behavior is due to some outside causes or situation.
 The three factors in this regard are
– Distinctiveness
– Consensus
– Consistency
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15. Contd.
 Distinctiveness is whether an individual displays
different behaviors in different situations. The
behaviors are observed. If the behavior is unusual, it
is due to an external factor. If it is usual, it is
internal.
 Consensus occurs, if, everyone responds in the same
way to a particular situation.
 Consistency is the regularity in a person’s actions.
Highly consistent behavior is due to internal causes.
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16. Attribution Theory: Judging Others
– Under conditions
– High distinctiveness, consensus, – the perceiver will tend to
perceive the cause to external
– When distinctiveness and consensus are low- will perceive
as internal

17. Elements of Attribution Theory
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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.

18. 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
 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
5-17

19. Frequently Used Shortcuts in Judging Others
 Selective Perception
– People selectively interpret what they see
on the basis of their interests,
background, experience, and attitudes
 Halo Effect
– Drawing a general impression about an
individual on the basis of a single
characteristic (eg- communication-
evaluate message based on source)
 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 5-18

20. 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 (age, sex,
race, occupation)
Profiling
– A form of stereotyping in which members of a group are
singled out for intense scrutiny based on a single, often
racial, trait.

21. Specific Shortcut Applications 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): peoples expectations
or beliefs determine their behaviour and performance, thus serving
to make their expectations come true
– Can have either positive or negative outcomes.
– 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

22. Perceptions and Individual Decision Making
 Problem
– A perceived discrepancy between the
current state of affairs and a desired state
– To consider alternative course of action
– One’ problem may be another’s salvation
 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.
• Perceptual distortions often surface that bias
analysis and conclusions

23. Common Biases and Errors in Decision-Making
 Overconfidence Bias
– Believing too much in our own ability to make good
decisions – especially when outside of own expertise
 Anchoring Bias
– Using early, first received information as the basis for
making subsequent judgments
– calculating “real value” is complex, and it’s generally a range rather than a number in all these
examples- value for the maid, value of a new employee, effort required to do a project.
However, it’s easier for human minds to work around a benchmark or an anchor.
 Confirmation Bias
– Selecting and using only facts that support our decision
– Tendency to reaffirm past choices and discount information that contradicts past judgement
 Availability Bias
– Emphasizing information that is most readily at hand
• Recent
• Vivid (fear flying than driving in a car)

24. 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
– (no good things on Friday 13)
 Hindsight Bias
– Tendency to believe falsely after out come actually known,
that we would have actually predicted that event (9/11)

25. 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

26. Summary and Managerial Implications
 Perception:
– People act based on how they view their world
– What exists is not as important as what is believed
– Managers must also manage perception
 Individual Decision Making
– Most use bounded rationality: they satisfice
– Combine traditional methods with intuition and creativity for
better decisions
• Analyze the situation and adjust to culture and organizational
reward criteria
• Be aware of, and minimize, biases