Perception and Individual Decision Making
Perception and Individual Decision Making
Perception and Individual Decision Making
Decision Making
CHAPTER 5
Perception A process by which individuals
organize and interpret their sensory impressions in
order to give meaning to their environment.
External
Fundamental Attribution Error
Self-serving Bias
The evidence on cultural differences in perception is mixed, but most suggest there are
differences across cultures in the attributions people make.
Common Shortcuts in Judging Others
Intuition Perhaps the least rational way of making decisions is intuitive decision
making, an unconscious process created from distilled experience. It occurs outside
conscious thought; it relies on holistic associations, or links between disparate pieces of
information; it’s fast; and it’s affectively charged, meaning it usually engages the
emotions.
Common Biases and Errors in Decision Making
Decision makers engage in bounded rationality, but they also allow systematic biases
and errors to creep into their judgments. To minimize effort and avoid difficult trade-
offs, people tend to rely too heavily on experience, impulses, gut feelings, and
convenient rules of thumb. These shortcuts can be helpful. However, they can also
distort rationality.
Overconfidence Bias It’s been said that “no problem in judgment and decision
making is more prevalent and more potentially catastrophic than overconfidence.”
Anchoring Bias The anchoring bias is a tendency to fixate on initial information and
fail to adequately adjust for subsequent information. It occurs because our mind appears
to give a disproportionate amount of emphasis to the first information it receives.
Anchors are widely used by people in professions in which persuasion skills are
important—advertising, management, politics, real estate, and law.
Confirmation Bias The rational decision-making process assumes we objectively
gather information. But we don’t. We selectively gather it, we seek out information that
reaffirms our past choices, and we discount information that contradicts them. We also tend
to accept at face value information that confirms our preconceived views, while we are
critical and skeptical of information that challenges them. Therefore, the information we
gather is typically biased toward supporting views we already hold.
Availability Bias The tendency for people to base their judgments on information that is
readily available to them. Events that evoke emotions, are particularly vivid, or are more
recent tend to be more available in our memory, leading us to overestimate the chances of
unlikely events such as an airplane crash. The availability bias can also explain why
managers doing performance appraisals give more weight to recent employee behaviors
than to behaviors of 6 or 9 months earlier.
Escalation Of Commitment An increased commitment to a previous decision in spite
of negative information.
Randomness Error The tendency of individuals to believe that they can predict the
outcome of random events. Superstitious behavior can be debilitating when it affects daily
judgments or biases major decisions.
Focus on Goals. Without goals, you can’t be rational, you don’t know what information you
need, you don’t know which information is relevant and which is irrelevant, you’ll find it
difficult to choose between alternatives, and you’re far more likely to experience regret over
the choices you make. Clear goals make decision making easier and help you eliminate
options that are inconsistent with your interests.
Look for Information That Disconfirms Your Beliefs. One of the most effective means for
counteracting overconfidence and the confirmation and hindsight biases is to actively look for
information that contradicts your beliefs and assumptions. When we overtly consider various
ways we could be wrong, we challenge our tendencies to think we’re smarter than we actually
are.
Don’t Try to Create Meaning out of Random Events. The educated mind has been trained
to look for cause-and-effect relationships. When something happens, we ask why. And when
we can’t find reasons, we often invent them. You have to accept that there are events in life
that are outside your control. Ask yourself if patterns can be meaningfully explained or
whether they are merely coincidence. Don’t attempt to create meaning out of coincidence.
Increase Your Options.
No matter how many options you’ve identified, your final choice can be no better than the
best of the option set you’ve selected. This argues for increasing your decision alternatives
and for using creativity in developing a wide range of diverse choices. The more
alternatives you can generate, and the more diverse those alternatives, the greater your
chance of finding an outstanding one.
INDIVIDUAL DIFFERENCES AND ORGANIZATIONAL CONSTRAINTS.
Individual Constraints
Personality
Gender
Mental Ability
Cultural Differences
Organizational Constraints
Performance Evaluation
Reward Systems
Formal Regulations
System-Imposed Time Constraints
Historical Precedents