Perception and Individual

Decision Making
CHAPTER 5
Perception A process by which individuals
organize and interpret their sensory impressions in
order to give meaning to their environment.

Why is perception important in the study of OB?

Simply because people’s behavior is based on
their perception of what reality is, not on reality
itself.
The world as it is perceived is the world that is
behaviorally important.

Factors That Influence Perception

 Factors That Influence Perception

Factors in the perceiver

• Attitudes • Motives
• Interests • Experience
• Expectations

Factors in the situation

• Time Perception
• Work setting
• Social setting

Factors in the target

• Novelty • Motion
• Sounds • Size
• Background • Proximity •
Similarity
Person Perception, or The Perceptions People Form
About Each Other.
Attribution Theory
Attribution theory tries to explain the ways in which we judge people
differently, depending on the meaning we attribute to a given behavior.
Internally caused behaviors are those we believe to be under the personal
control of the individual.
Externally caused behavior is what we imagine the situation forced the
individual to do
The Three Determining Factors.
Distinctiveness refers to whether an individual displays different behaviors in
different situations.
Consensus. If everyone who faces a similar situation responds in the same way,
we can say the behavior shows consensus.
Consistency The more consistent the behavior, the more we are inclined to
attribute it to internal causes.
Internal

External
Fundamental Attribution Error

When we make judgments about the behavior of other people, we

tend to underestimate the influence of external factors and
overestimate the influence of internal or personal factors.

Self-serving Bias

Individuals and organizations also tend to attribute their own successes

to internal factors such as ability or effort, while blaming failure on
external factors such as bad luck or unproductive co-workers. People
Also tend to attribute ambiguous information as relatively flattering and
accept positive feedback while rejecting negative feedback.

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

Selective Perception Halo Effect

The tendency to selectively interpret The tendency to draw a general

what one sees on the basis of one’s impression about an individual on the
interests, background, experience, and basis of a single characteristic.
attitudes.
Common Shortcuts in Judging Others (contn’d)

Contrast Effect Stereotyping

Evaluation of a person’s characteristics Judging someone on the basis of one’s

that is affected by comparisons with perception of the group to which that
other people recently encountered who person belongs.
rank higher or lower on the same
characteristics.
 Specific Applications of Shortcuts in Organizations
People in organizations are always judging each other. Managers must appraise their
employees’ performances. We evaluate how much effort our co-workers are putting into their
jobs. Team members immediately “size up” a new person. In many cases, our judgments have
important consequences for the organization.
Consequences For The Organization.
Employment Interview
Research shows we form impressions of others within a tenth of a second, based on our first
glance. If these first impressions are negative, they tend to be more heavily weighted in the
interview than if that same information came out later. Most interviewers’ decisions change
very little after the first 4 or 5 minutes of an interview.
Performance Expectations People attempt to validate their perceptions of reality even
when these are faulty. The terms Self-fulfilling Prophecy and Pygmalion Effect
describe how an individual’s behavior is determined by others’ expectations.
 Performance Evaluation
An employee’s future is closely tied to the appraisal—promotion, pay raises, and continuation of
employment are among the most obvious outcomes. Although the appraisal can be but Subjective
evaluations, though often necessary, are problematic because all the errors we’ve discussed
thus far— selective perception, contrast effects, halo effects, and so on—affect them. Ironically,
sometimes performance ratings say as much about the evaluator as they do about the employee
The Rational Model, Bounded Rationality, and Intuition
Rational Decision Making
We often think the best decision maker is rational and makes consistent, value-maximizing
choices within specified constraints. These decisions follow a six-step rational decision-making
model
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.
Bounded Rationality A process of making decisions by constructing simplified
models that extract the essential features from problems without capturing all their
complexity. An unconscious process created out of distilled experience.
Satisfice; they seek solutions that are satisfactory and sufficient.

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.

Hindsight Bias The tendency to believe falsely, after an outcome of an event is

actually known, that one would have accurately predicted that outcome. The hindsight bias
reduces our ability to learn from the past. It lets us think we’re better predictors than we are
and can make us falsely confident.
Risk Aversion The tendency to prefer a sure gain of a moderate amount over a riskier
outcome, even if the riskier outcome might have a higher expected payoff.
REDUCING BIASES AND ERRORS

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