6

Perception and
Individual
Decision Making
Dr. Ong Lin Dar
Copyright 2017 Pearson Education, Inc.

What is Perception?
Perception is a process by which individuals organize
and interpret their sensory impressions in order to give
meaning to their environment.

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Each person experiences and interprets

the world differently from others.

Peoples behaviors are based on their perception of what reality is

(what they see or believe it to be), not on reality itself.
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Factors That Influence

Perception

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Attribution Theory
Attribution theory suggests that when we observe an individuals
behavior, we attempt to determine whether it was internally or externally
caused.

Internal
Attributio
n that
Perception

External
Attributio
Perception
n that

behavior is caused
by persons own
motivation or ability

behavior is caused by
situation or fate -beyond persons
control

Determination depends on three factors:

Distinctiveness -- the persons behavior in other situations

Consensus how others would behave in same situation
Consistency -- the persons behavior in the past
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Attribution Theory

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Internal attribution or
external attribution?
Suppose an employee is making poor-quality products one
day on a particular machine.
_____________ attributions are made when.
The employee also makes poor-quality products on
other machines

Distinctiven
ess:
High/Low

Other employees produce good-quality products on

this machine

Consensus:
High/Low

The employee usually makes poor-quality products

on this machine

Consistency:
High/Low

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Internal attribution or
external attribution?
Suppose an employee is making poor-quality products one
day on a particular machine.
_____________ attributions are made when.
The employee makes good-quality products on
other machines

Distinctivenes
s:
High/Low

Other employees have recently had quality

problems on this machine

Consensus:
High/Low

The employee makes good quality products on

this machine in the past

Consistency:
High/Low

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Attribution Errors
Fundamental attribution error
occurs when we ignore the influence of external factors and
overemphasize the influence of internal or personal factors.
We are more likely to think coworkers arrive late for work because
they arent motivated than because of environmental constraints
(such as traffic congestion).

Explanation:
Observers cant easily see the external factors.
People like to think that human beings (not the situation) are the
prime sources of their behaviour.
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Attribution Errors
Self-serving bias
Attributing our successes to internal factors and our failures to external
factors (such as bad luck)
We take credit for our success but blame others or situations for
failure.

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Common Biases
Selective Perception
Halo effect
Contrast Effects
Stereotype

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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 cant observe everything going on around
us, we engage in selective perception.

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Common Shortcuts in
Judging Others
Halo effect
Occurs when our general impression of a person,
usually based on a single characteristic, distorts our
perceptions of the person.
If a colleague doesnt complete tasks on time, we
tend to view his other traits unfavorably.

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Common Shortcuts in
Judging Others
Contrast effects
We do not evaluate a person in isolation.
Our reaction to one person is influenced by other
persons we have recently encountered.
For example, a 6 7 (229cm) basketball player will
make an average man of 5 9 (175 cm) look short.

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Common Shortcuts in
Judging Others

Stereotyping
Judging someone on the basis of our
perception of the group to which he or she
belongs.

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Applications of Shortcuts in
Organizations
Employment Interview
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.

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Applications of Shortcuts in
Organizations
Performance Expectations
Self-fulfilling prophecy
Expectations about another person cause that
person to act in a way that is consistent with those
expectations

Expectations become reality.

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Self-Fulfilling Prophecy
Cycle
Supervisor
forms
expectations

Employees
behavior matches
expectations

Expectations
affect supervisors
behavior

Supervisors
behavior affects
employee
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Applications of Shortcuts in
Organizations
Performance Evaluation
An employees performance appraisal is very much
dependent upon the perceptual process.
Many jobs are evaluated in subjective terms.
Subjective measures are problematic because of
selective perception, contrast effects, halo effects,
and so on.

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Decision Making
Individuals make decisions choosing from
two or more alternatives.
Decision making occurs as a reaction to a
problem.
Problem: deviation between what is and
what ought to be

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Rational Model of Decision

Making

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Rational Model of Decision

Making
Define how a decision maker should make decisions

Most decisions in the real world dont follow the rational model.

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Decision Making Models

Most decisions in the real world dont follow the rational
model.
Managers make decisions rationally but are limited (or
bounded) by their ability to process information.

https://www.youtube.com/watch?v=rP4P1zuwDiw
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Bounded Rationality
Describes how managers actually make decisions in complex situations

Due to time limitations, managers can use and process only a limited amount of
information for decision-making and therefore must satisfice
Satisficing --choose the first solution that can solve the problem even though
better solutions may exist
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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.

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Common Biases and Errors

in Decision Making
Overconfidence Bias: People think they
know more than they do, and it costs them!

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Common Biases and Errors

in Decision Making
Anchoring Bias: fixating on initial information as a starting
point and failing to adequately adjust for subsequent
information.
Tendency to rely too heavily, or "anchor," on one trait or piece of
information when making decisions.

For example, a person looking to buy a used car - they may

focus excessively on the odometer reading and the year of the
car, and use those criteria as a basis for evaluating the value of
the car, rather than
considering how well the engine or the
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transmission is maintained.

Common Biases and Errors

in Decision Making
Confirmation Bias:
type of selective perception.

Seek out information that reaffirms past choices, and ignore

information that contradicts past judgments.
For example, suppose an investor hears a rumor that a company is
on the verge of declaring bankruptcy. Based on that information, the
investor is considering selling the stock.
When he goes online to read the latest news about the company, he
tends to read only the stories that confirm the likely bankruptcy scenario
and he misses a story about the new product the company just
launched that is expected to perform extremely well.
Instead of holding the stock, he sells it at a substantial loss just before it
turns around and climbs to an all-time high.
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Common Biases and Errors

in Decision Making
Availability Bias: tendency for people to base
judgments on information that is readily available.
For example, since lottery organisers heavily
promote the jackpot winners, people are continually
hearing about those whove won big.
On the other hand they hear almost nothing about
the vast majority of people who havent won a bean.
So people assume they are much more likely to win
the lottery than they really are.
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Common Biases and Errors

in Decision Making
Escalation of Commitment: staying with a
decision even when there is clear evidence that
its wrong.

Randomness Error: our tendency to believe we

can predict the outcome of random events.
We turn our imaginary into superstitious.
Tiger woods often wears a red shirt during final round because he
won many tournaments wearing red shirts.

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Common Biases and Errors

in Decision Making
Risk Aversion: the tendency to prefer a sure thing
instead of a risky outcome.
Most managers appear to be especially risk averse,
perhaps because they dont want to lose
everything theyve worked so hard to achieve.

Hindsight Bias: the tendency to believe falsely that

one has accurately predicted the outcome of an event,
after that outcome is actually known.
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Individual Differences
Personality
Achievement-oriented people hate to fail, so they escalate their
commitment, hoping to forestall failure.
Dutiful people, by contrast, are more inclined to do what they see as best
for the organization.
Gender
Evidence indicates that women analyze decisions more than men.
Mental Ability

people with higher levels of mental ability are less susceptible to common
decision errors

Cultural Differences
While rationality is valued in North America, thats not true elsewhere in the
world.
Decision making by Japanese managers is much more group-oriented than in
the United States.
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Organizational Constraints
Performance Evaluation Systems
Reward Systems
Formal Regulations
System-Imposed Time Constraints (deadlines on
decisions)
Historical Precedents
Decisions made in the past are ghosts, which
continually haunt current choices.
For example, it is common knowledge that the
largest determining factor of the size of any given
years budget is last years budget.

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Describe the ThreeStage

Model of Creativity

Creativity is the ability to produce novel and

useful ideas.

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Describe the ThreeStage

Model of Creativity

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Implications for
Managers
Behavior follows perception, so to influence
behavior at work, assess how people perceive
their work.
Make better decisions by recognizing
perceptual biases and decision-making errors
we tend to commit.
Learning about these problems doesnt always
prevent us from making mistakes, but it does
help.
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Implications for
Managers

Adjust your decision-making approach to the

national culture youre operating in and to the
criteria your organization values.
If youre in a country that doesnt value
rationality, dont feel compelled to follow the
rational decision-making model or to try to
make your decisions appear rational.
Adjust your decision approach to ensure
compatibility with the organizational culture.

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Implications for
Managers
Combine rational analysis with intuition. These are not
conflicting approaches to decision making.
By using both, you can actually improve your decision
making effectiveness.

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Implications for
Managers
Try to enhance your creativity.
Actively look for novel solutions to problems, attempt to see
problems in new ways, use analogies, and hire creative
talent.
Try to remove work and organizational barriers that might
impede your creativity.

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