Perception and Individual Decision Making

Organizational Behavior
Nineteenth Edition
Chapter 6
Perception and Individual
Decision Making
Copyright © 2023, 2019, 2017 Pearson Education, Inc. All Rights Reserved
Learning Objectives
6.1 Explain the factors that influence perception.
6.2 Describe attribution theory.
6.3 Explain the link between perception and decision
making.
6.4 Contrast the rational model of decision making with
bounded rationality and intuition.
6.5 Explain how individual differences and organizational
constraints affect decision making.
6.6 Contrast the three ethical decision criteria.
6.7 Describe the three-stage model of creativity.
Explain the Factors That Influence
Perception (1 of 2)
• Perception is a process by which individuals organize and
interpret their sensory impressions to give meaning to their
environment.
• It is important to the study of O B because people’s
behaviors are based on their perception of what reality is,
not on reality itself.
Explain the Factors That Influence
Perception (2 of 2)
Exhibit 6.1 Factors That Influence Perception
Explain Attribution Theory (1 of 11)
• 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
• 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.
Exhibit 6.2 Attribution 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
– Individuals attribute their own successes to internal
factors.
• Common Shortcuts in Judging Others
– Selective perception
 Any characteristic that makes a person, object, or
event stand out will increase the probability that it
will be perceived.
 Since we can’t observe everything going on around
us, we engage in selective perception.
• Halo effect
– The halo effect occurs when we draw a positive
general impression based on a single characteristic.
• Horns effect
– The tendency to draw a negative general impression
about an individual based on a single characteristic.
• Contrast effects
– We do not evaluate a person in isolation.
– Our reaction to one person is influenced by other
persons we have recently encountered.
• Stereotyping
– Judging someone based on one’s perception of the
group to which that person belongs.
 We have to monitor ourselves to make sure we’re
not unfairly applying a stereotype in our evaluations
and decisions.
• Applications of Shortcuts in Organizations
– Employment Interview
 Evidence indicates that interviewers make
perceptual judgments that are often inaccurate.
– Interviewers generally draw early impressions
that become very quickly entrenched.
– Studies indicate that most interviewers’ decisions
change very little after the first four or five
minutes of the interview.
• Performance Expectations
– Evidence demonstrates that people will attempt to
validate their perceptions of reality, even when those
perceptions are faulty.
 Self-fulfilling prophecy, or the Pygmalion effect,
characterizes the fact that people’s expectations
determine their behavior.
– Expectations become reality.
• Performance Evaluation
– An employee’s performance appraisal is very much
dependent upon the perceptual process.
 Many jobs are evaluated in subjective terms.
 Subjective measures are problematic because of
the errors we have discussed.
• Social Media
– About four in ten organizations use social media or
online searches to screen applicants for jobs.
– Research supports the social media decision-making
bias link.
• Potential Remedies
– AI-assisted performance assessments
– Other decision-support systems
Explain the Link Between Perception
and Decision Making
• Individuals make decisions—choosing from two or more
alternatives.
• 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.
Rational Model of Decision Making
Versus Bounded Rationality and
Intuition (1 of 11)
Exhibit 6.3 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.
Intuition (2 of 11)
• Assumptions of the Rational Model
– The decision maker…
 Has complete information.
 Is able to identify all the relevant options in an
unbiased manner.
 Chooses the option with the highest utility.
• Most decisions in the real world don’t follow the rational
model.
Intuition (3 of 11)
• Bounded Rationality
– Most people respond to a complex problem by
reducing it to a level at which it can be readily
understood.
 People satisfice—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.
Intuition (4 of 11)
• Intractable problem—a problem that may change entirely
or become irrelevant before we finish the process of
organizing our thoughts, gathering information, analyzing
the information, and making judgments or decisions.
Intuition (5 of 11)
• Intuition
– Intuitive decision making occurs outside conscious
thought; it relies on holistic associations, or links
between disparate pieces of information, is fast, and is
affectively charged, meaning it usually engages the
emotions.
– While intuition is not rational, it is not inherently bad or
necessarily wrong, nor does it always contradict
rational analysis.
Intuition (6 of 11)
Exhibit 6.4 Reducing Biases and Errors
Focus on Goals. Without goals, you cannot be rational, you do not
know what information you need, you do not know which information is
relevant and which is irrelevant, you will find it difficult to choose between
alternatives, and you are 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 are smarter
than we actually are.
Intuition (7 of 11)
Exhibit 6.4 Reducing Biases and Errors
Do Not 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 cannot 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. Do not attempt to create meaning out of coincidence.
Increase Your Options. No matter how many options you have identified, your
final choice can be no better than the best of the option set you have 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.
Source: Based on S. P. Robbins, Decide & Conquer: Making Winning Decisions and Taking
Control of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), 164–68.
Intuition (8 of 11)
• Common Biases and Errors in Decision Making
– Overconfidence Bias: individuals whose intellectual
and interpersonal abilities are weakest are most likely
to overestimate their performance and ability.
– Anchoring Bias: fixating on initial information as a
starting point and failing to adequately adjust for
subsequent information.
Intuition (9 of 11)
• Confirmation Bias: type of selective perception.
– Seek out information that reaffirms past choices, and
discount information that contradicts past judgments.
• Availability Bias: tendency for people to base judgments
on information that is readily available.
Intuition (10 of 11)
• Escalation of Commitment: staying with a decision even
when there is clear evidence that it’s wrong.
– Likely to occur when individuals view themselves as
responsible for the outcome.
• Randomness Error: our tendency to believe we can
predict the outcome of random events.
– Decision making becomes impaired when we try to
create meaning out of random events.
Intuition (11 of 11)
• Risk Aversion: the tendency to prefer a sure thing instead
of a risky outcome.
– Ambitious people with power that can be taken away
appear to be especially risk averse.
– People will more likely engage in risk-seeking
behavior for negative outcomes, and risk-averse
behavior for positive outcomes, when under stress.
• Hindsight Bias: the tendency to believe falsely that one
has accurately predicted the outcome of an event, after
that outcome is actually known.
Individual Differences, Organizational
Constraints, and Decision Making (1 of 2)
• Individual Differences
– Personality
 Intuition
 Self-esteem
 Narcissism
– Gender
– Mental Ability
– Cultural Differences
Individual Differences, Organizational
Constraints, and Decision Making (2 of 2)
• Organizational Constraints
– Performance Evaluation Systems
– Reward Systems
– Formal Regulations
– Time Constraints
– Historical Precedents
– Decision-Making in Times of Crisis
Contrast the Three Ethical Decision
Criteria (1 of 3)
• Utilitarianism: 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.
– Protects whistleblowers.
• Impose and enforce rules fairly and impartially to ensure
justice or an equitable distribution of benefits and costs.
Criteria (2 of 3)
• Behavioral ethics: an area of study that analyzes how
people behave when confronted with ethical dilemmas.
– Individuals do not always follow ethical standards
promulgated by their organizations, and we sometimes
violate our own standards.
 Why good people can still do bad things.
– Consider cultural differences.
Criteria (3 of 3)
• Lying
– Lying and dishonest behavior are very common.
– It undermines all efforts toward sound decision making.
• Managers—and organizations—simply cannot make good
decisions when facts are misrepresented and people give
false motives for their behaviors.
• Lying is a big ethical problem as well.
Describe the Three-Stage Model of
Creativity (1 of 2)
• Creativity is the ability to produce novel and useful ideas.
– These are ideas that are different from what has been
done before, but that are also appropriate to the
problem.
Describe the Three-Stage Model of
Creativity (2 of 2)
Exhibit 6.5 Three-Stage Model of Creativity in Organizations
Implications for Managers (1 of 4)
• Behavior follows perception. To influence behavior at work,
assess how people perceive their work, understand how
the environment affects their perceptions, and examine
how you perceive other people. Often behaviors we find
puzzling can be explained by understanding the initiating
perceptions.
• When judging others’ (e.g., clients, coworkers) behavior,
be wary of jumping to conclusions about why they behave
the way they do (or why certain things happen to them).
Recognize that your perception of what causes their
behavior, such as internal or external forces, can cause
you to come to flawed conclusions about them.
• Make better decisions in recruitment, selection, and
performance appraisal by recognizing perceptual errors,
heuristics, and biases in decision making. Learning about
these problems does not always prevent us from making
mistakes, but it does help. You can also leverage
technology as an aid to reduce perceptual errors.
• Adjust your decision-making approach by recognizing
constraints on your decision making and understanding
whether some other factor might be affecting your
perception at the moment. For instance, your personality
traits and other individual differences, as well as the
organizational context, may be influencing how you see
the problem.
• Be flexible in your approach to solving problems. Know the
situations in which rational analysis is preferable and which
situations may require quick, intuitive decisions.
Understand that forces beyond our control bound our
rationality. It is our responsibility to navigate the problem
space to select the right strategy given the problem.
• Use a common language of consequences,
responsibilities, duties, and rights when considering ethical
dilemmas you may face. Ask yourself questions about
whether your behavior would result in the greatest good for
the greatest number of people or infringes upon others’
rights or if you have a responsibility or duty to behave in a
certain way.
• Try to enhance your creative process and foster an
environment where creativity is encouraged. To solve a
problem creatively, formulate the problem, gather
information on it, generate ideas on how to solve the
problem, and evaluate those ideas. Try to remove work
and organizational barriers that might impede creativity,
and nurture an atmosphere that rewards creativity and
innovation. Consider employees’ and coworkers’ creative
potential when delegating creative tasks.
Discussion Questions
1. Reflect of the challenges of decision making during times
of crisis, and specifically decisions your university made
on how to manage the CO VI D-19 crisis in the spring of
2020, the fall of 2020, and in the fall of 2021. How did
decision-making change over time? What does your
response tell you about decision making in a crisis?
2. In addition to product features, many consumers are now
making CS R initiatives a part of the buying decision.
How is public pressure forcing companies to behave
more responsibly? Would you make a company’s record
on CS R a factor in a buying or employment decision?
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