TOPIC 4 Perception Individual Decision Making

Organizational
Behavior
Topic 4
Perception and
Individual Decision-Making
6-1
Learning Objectives
After studying this chapter you should be able to:

1. Define perception and explain the factors that influence it.
2. Explain attribution theory and list the three determinants of attribution.
3. Explain the link between perception and decision-making.
4. Apply the rational model of decision-making and contrast it with bounded rationality and
intuition.
5. Explain how individual differences and organizational constraints affect decision-making.
6. Contrast the three ethical decision-criteria.
6-2
Define perception
 Perception is a process by which individuals

organize and interpret their sensory impressions
in order to give meaning to their environment.
 It is important to the study of OB because
peoples’ behaviors are based on their perception
of what reality is, not on reality itself.
6-3
Explain
the factors that influence perception
6-4
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Explain
 Factors that shape and can distort perception include the

perceiver, the target, or the situation.
Perceiver
 When an individual looks at a target and attempts to
interpret what he or she sees, that interpretation is
heavily influenced by personal characteristics of the
individual perceiver.
 The more relevant personal characteristics affecting
perception of the perceiver are attitudes, motives,
interests, past experiences, and expectations.
1-5
Explain
Target
 The characteristics of the observed target can affect
what we perceive.
 Loud people are more likely to be noticed in a group than
quiet ones.
 Some characteristics of the target include motion,
sounds, size, background, proximity and similarity.
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 1-6

Explain
Situation
 The context or situation is also important.
 The actual time of day or night at which we see the

object or event can influence our attention, as can
location, light, heat or any number of situational factors.

Person perception:
making judgments about others
 Attribution theory suggests that when we observe

an individual’s behavior, we attempt to determine
whether it was internally or externally caused.
 Determination depends on three factors:
 Distinctiveness
 Consensus
 Consistency
6-8
Explain attribution theory and list the three
determinants of attribution
 Clarification of the differences between

internal and external causation:
 Internally caused - those that are
believed to be under the personal control
of the individual.
 Externally caused - resulting from
outside causes. That is, the person is
seen as having been forced into the
behavior by the situation.
6-9
6-10
 The three determinants in Attribution Theory.
 These include Distinctiveness, which refers to whether

an individual displays different behaviors in different
situations.
 Consensus occurs if everyone who is faced with a
similar situation responds in the same way.
 Consistency in a person’s actions.

 There are a couple of confounding concepts that
impose on Attribute Theory
 Fundamental Attribution Error
 We have a tendency to underestimate the
influence of external factors and overestimate the
influence of internal or personal factors.
 Self-serving Bias
 is a tendency for individuals to attribute their own
successes to internal factors such as ability or effort while
putting the blame for failure on external factors such as
luck.
6-12
Explain the link between perception
and decision-making
 Individuals in organizations constantly make decisions. They

make choices from among two or more options many times
during the day and at different levels of important or intensity.
 Top managers determine goals, products to offer, how to
finance operations, or locate a new plant.
 Middle- and lower-level managers determine production
schedules, select employees, and decide about pay raises.
 Non-managerial employees make decisions to come to work
on any given day, the effort to put forward at work, and to
comply with requests made by the boss.
6-13
Explain the link between perception
and decision-making
 A number of organizations in recent years have been
empowering their non-managerial employees with job-
related decision-making authority that historically was
reserved for managers.
 Decision-making occurs as a reaction to a problem.
 There is a discrepancy between some current state of affairs
and some desired state, requiring consideration of alternative
courses of action.
 One person’s problem is another’s satisfactory state of affairs.
 Every decision requires interpretation and evaluation of
information. The perceptions of the decision maker will
address these two issues:
 Data are typically received from multiple sources.
 Which data are relevant to the decision and which are not?
 Alternatives will be developed, and the strengths and
weaknesses of each will need to be evaluated.
Apply the rational model of decision-making
and contrast it with bounded rationality
and intuition
6-15
and intuition
Step 1 : Defining the problem.
 A problem is a discrepancy between an existing and a
desired state of affairs. Many poor decisions can be
traced to the decision maker overlooking a problem or
defining the wrong problem.
Step 2: Identify the decision criteria important to solving the
problem.
 The decision maker determines what is relevant in
making the decision. Any factors not identified in this
step are considered irrelevant. This brings in the decision
maker’s interests, values, and similar personal
preferences.
and intuition
Step 3:Allocate weight to the criteria

 Weight the previously identified criteria in order to give
them the correct priority in the decision.
Step 4: Develop alternatives

 Generate possible options that could succeed in
resolving the problem.

and intuition
Step 5: Evaluate alternatives
 Rate each option on each criterion.
 Critically analyze and evaluate each option.
 The strengths and weaknesses of each option become

evident as they are compared with the criteria and weights
established in the second and third steps.
Step 6: Select the best alternative
 Compute the optimal decision. Evaluate each option against
the weighted criteria and select the alternative with the
highest total score.
and intuition
 Assumptions of the Model

 The decision maker has complete information,
 And is able to identify all the relevant options in an
unbiased manner, and
 Chooses the option with the highest utility.
6-19
and intuition
 Most decisions in the real world don’t follow the rational

model.
 People are usually content to find an acceptable or

reasonable solution to a problem rather than an optimal one.
 Choices tend to be limited to the neighborhood of the problem

symptom and the current alternative.
 As one expert in decision making put it, “Most significant

decisions are made by judgment, rather than by a defined
prescriptive model.” People are remarkably unaware of
making suboptimal decisions.
and intuition
 Perhaps a better definition of how a majority of decision are made is

Bounded Rationality.
 Bounded Rationality
 Most people respond to a complex problem by reducing the problem
to a level at which it can be readily understood.
 This is because the limited information-processing capability of
human beings makes it impossible to assimilate and understand all
the information necessary to optimize.
 People satisfice, that is they seek solutions that are satisfactory and
sufficient
 Individuals operate within the confines of bounded rationality. They
construct simplified models that extract the essential features.
6-21
and intuition
 How does bounded rationality work?
 Once a problem is identified, the search for criteria and
options begins.
 The decision maker will Identify a limited list made up of

the more conspicuous choices, which are easy to find,
tend to be highly visible, and they will represent familiar
criteria and previously tried-and-true solutions.
6-22
and intuition
 Once this limited set of options is identified, the

decision maker will begin reviewing it.
 The decision maker will begin with options that differ

only in a relatively small degree from the choice
currently in effect. The first option that meets the
“good enough” criterion ends the search. Satisficing is
not always a bad idea. It is a simple process may
frequently be more sensible than the traditional
rational decision-making model.

and intuition
 To use the rational model in the real world, you

need to gather a great deal of information about all
the options, compute applicable weights, and then
calculate values across a huge number of criteria.
 All these processes can cost time, energy, and
money. If there are many unknown weights and
preferences, the fully rational model may not be
any more accurate than a best guess. Sometimes a
fast-and-frugal process of solving problems might
be your best option.
6-24
and intuition
 Another important decision-making technique is Intuition,

Perhaps the least rational way of making decisions is
intuitive decision making
 Intuition
 Intuition 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.
 The key is neither to abandon nor rely solely on
intuition but to supplement it with evidence and good
judgment.
6-25
and intuition
 While intuition isn’t rational, it isn’t necessarily wrong.
Nor does it always contradict rational analysis; rather,
the two can complement each other.
 For most of the twentieth century, experts believed
decision makers’ use of intuition was irrational or
ineffective.
 We now recognize that rational analysis has been
overemphasized and, in certain instances, relying on
intuition can improve decision-making.
 Because it is so unquantifiable, it’s hard to know when
our guesses are right or wrong.
Explain how individual differences
and organizational constraints
affect decision-making
 Personality - little research so far conducted on
personality and decision-making suggests personality
does influence our decisions
 Conscientiousness - Specific facets of conscientiousness
—rather than the broad trait itself—may affect escalation
of commitment
 Dutifulness - Dutiful people, however, are more inclined to
do what they see as best for the organization. People with
high self-esteem are strongly motivated to maintain it, so
they use the self-serving bias to preserve it. They blame
others for their failures while taking credit for successes.
6-27
 Achievement–Striving - Achievement-striving people

were more likely to escalate their commitment, whereas
dutiful people were less likely. Achievement-oriented
people hate to fail, so they escalate their commitment,
hoping to forestall failure. Achievement-striving
individuals appear more susceptible to the hindsight
bias, perhaps because they have a greater need to
justify their action

 Gender - Evidence indicates that women analyze decisions
more than men. Rumination refers to reflecting at length. In
decision making it means over thinking about problems.
Women, in general, are more likely than men to engage in
rumination. Rumination tendency appears to be moderated
by age. Differences are largest during young adulthood and
smallest after age 65.
 Mental Ability - We know people with higher levels of mental
ability are able to process information more quickly, solve
problems more accurately, and learn faster, so you might
expect them also to be less susceptible to common decision
errors.
6-29
Organizational constraints that impinge on decision

making
 Performance Evaluations - Managers are strongly
influenced in their decision making by the criteria by
which they are evaluated. Their performance in
decision-making will reflect expectation
 Reward Systems - Reward Systems influences
decision makers by suggesting to them what choices
are preferable in terms of personal payoff
6-30
 Formal Regulations - Organizations create rules, policies,
procedures, and other formalized regulations to standardize
the behavior of their members.
 System Imposed Time Constraints - Organizations impose
deadlines on decisions. Decisions must be made quickly in
order to stay ahead of the competition and keep customers
satisfied. Almost all important decisions come with explicit
deadlines
 Historical Precedents - Decisions have a context. Individual
decisions are more accurately characterized as points in a
stream of decisions. Decisions made in the past are ghosts,
which continually haunt current choices. It is common
knowledge that the largest determining factor of the size of
any given year’s budget is last year’s budget.
Contrast the three
ethical decision-criteria
 Utilitarian criterion — decisions are made solely on the

basis of their outcomes or consequences.
 Focus on rights —calls on individuals to make decisions
consistent with fundamental liberties and privileges as
set forth in documents such as the Bill of Rights.
 Impose and enforce rules fairly and impartially to ensure
or an equitable distribution of benefits and costs.
6-32
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means, electronic, mechanical, photocopying, recording, or otherwise,
without the prior written permission of the publisher. Printed in the
United States of America.
Copyright © 2013 Pearson Education, Inc.

publishing as Prentice Hall

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Organizational

After studying this chapter you should be able to:

2. Explain attribution theory and list the three determinants of attribution.

3. Explain the link between perception and decision-making.

5. Explain how individual differences and organizational constraints affect decision-making.

6. Contrast the three ethical decision-criteria.

 Perception is a process by which individuals

 Factors that shape and can distort perception include the

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 1-6

 The actual time of day or night at which we see the

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 1-7

 Attribution theory suggests that when we observe

 Clarification of the differences between

 The three determinants in Attribution Theory.

 These include Distinctiveness, which refers to whether

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 1-11

 Individuals in organizations constantly make decisions. They

Step 3:Allocate weight to the criteria

Step 4: Develop alternatives

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 1-17

 Critically analyze and evaluate each option.

 The strengths and weaknesses of each option become

 Assumptions of the Model

 Most decisions in the real world don’t follow the rational

 People are usually content to find an acceptable or

 Choices tend to be limited to the neighborhood of the problem

 As one expert in decision making put it, “Most significant

 Perhaps a better definition of how a majority of decision are made is

 The decision maker will Identify a limited list made up of

 Once this limited set of options is identified, the

 The decision maker will begin with options that differ

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 1-23

 To use the rational model in the real world, you

 Another important decision-making technique is Intuition,

 Achievement–Striving - Achievement-striving people

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 1-28

Organizational constraints that impinge on decision

 Utilitarian criterion — decisions are made solely on the

Copyright © 2013 Pearson Education, Inc.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 6-33

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