Chapter

SIX

Perception and
Individual Decision Making

What is the perceptual process?

Perception.
The process by which people select, organize,

interpret, retrieve, and respond to information.

Perceptual information is gathered from:

Sight.
Hearing.
Touch.
Taste.
Smell.

Person Perception: Making

Judgments About Others

Distinctiveness:
Distinctiveness:shows
showsdifferent
differentbehaviors
behaviorsinindifferent
differentsituations.
situations.
Consensus:
Consensus:response
responseisisthe
thesame
sameasasothers
otherstotosame
samesituation.
situation.
Consistency:
Consistency:responds
respondsininthe
thesame
sameway
wayover
overtime.
time.

Errors and Biases in Attributions

Errors and Biases in Attributions

(contd)

Common shortcuts in
judging others
Selective Perception
Halo effect
Stereo typing
Contrast effect

Common Shortcuts
in Judging Others

Common Shortcuts
in Judging Others

Common Shortcuts
in Judging Others

Specific Applications of shortcuts

in Organizations
Employment Interview
Perceptual biases affect the accuracy of interviewers judgments of
applicants.

Performance Expectations
Self-fulfilling prediction (Pygmalion effect): The lower or higher
performance of employees reflects preconceived leader
expectations about employee capabilities.

Performance Evaluations
Appraisals are subjective perceptions of performance.

The Link Between Perceptions and

Individual Decision Making

Perceptions
Perceptionsofof
the
thedecision
decision
maker
maker

Outcomes

Decision Making in Organizatations

Rational DecisionMaking Model
Describes how
individuals should
behave in order to
maximize some
outcome.

Model
ModelAssumptions
Assumptions
Problem
Problemclarity
clarity

Known
Knownoptions
options
Clear
Clearpreferences
preferences

Constant
Constantpreferences
preferences
No
Notime
timeor
orcost
cost
constraints
constraints
Maximum
Maximumpayoff
payoff

Common Bias and Errors in

Decision Making
Overconfidence Bias
Believing too much in our own decision competencies.

Anchoring Bias
Fixating on early, first received information.

Confirmation Bias
Using only the facts that support our decision.

Availability Bias
Using information that is most readily at hand.

Representative Bias
Assessing the likelihood of an occurrence by trying to match it
with a preexisting category.

Common Bias and Errors in

Decision Making
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

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.

Hindsight Bias
The tendency to believe falsely, after an outcome of an event is
actually known, that one would have accurately predicted that outcome

Individual Differences
on Decision Making

Personality
Gender
Mental Ability
Cultural Differences

Organizational Constraints on
Decision Makers

Performance Evaluation
Evaluation criteria influence the choice of actions.
Reward Systems
Decision makers make action choices that are favored by the
organization.
Formal Regulations
Organizational rules and policies limit the alternative choices of
decision makers.
System-imposed Time Constraints
Organizations require decisions by specific deadlines.
Historical Precedents
Past decisions influence current decisions.

20

Ethics in Decision Making

Ethical Decision Criteria
Utilitarianism
Decisions made based solely on the outcome
Seeking the greatest good for the greatest number
Dominant method for businesspeople

Rights
Decisions consistent with fundamental liberties and privileges
Respecting and protecting basic rights of individuals such as
whistleblowers

Justice
Imposing and enforcing rules fairly and impartially
Equitable distribution of benefits and costs

21

Improving Creativity in Decision

Making

Creativity

The ability to produce

novel and useful
ideas.
Three-Component
Model of Creativity
Proposition that
individual creativity
requires expertise,
creative-thinking skills,
and intrinsic task
motivation.
Source: T.M. Amabile, Motivating Creativity in Organizations, California Management Review, Fall 1997, p. 43.

22