Perception

and Individual
Decision Making
Chapter FIVE
What Is Perception, and Why Is It Important?
Peoples 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.
Perception
A process by which
individuals organize and
interpret their sensory
impressions in order to
give meaning to their
environment.
HOW DO WE EXPLAIN THAT
INDIVIDUALS MAY LOOK AT
THE SAME THING, YET
PERCEIVE IT DIFFERENTLY?
Factors That
Influence
Perception
E X H I B I T 51
Perceiver Target
Target interpretation is
heavily influenced by the
personal characteristics of
the individual perceiver.
Personal Characteristics:
Persons attitude
Personality
Motives
Interests
Past experiences and
Expectations
E.g. we expect POLICE to be
authoritative
Airhostess and CCR to be kind
Characteristics of
Target being
observed can also
effect what is
perceived e.g.
Loud people are
more likely to be
observed than quiet
ones
Extremely attractive
or unattractive
Context / Situation
Context in which we see objects or events is also
important.
Time
Location
Light
Heat
E.g. Wedding party vs Management class (dressing)
where neither perceiver nor target changed but situation
is different

Person Perception: Making Judgments About
Others
Determination depends largely on three factors:
Distinctiveness: shows different behaviors in different situations.
Consensus: response is the same as others to same situation.
Consistency: responds in the same way over time.
Attribution Theory
When individuals observe
behavior, they attempt to
determine whether it is
internally or externally
caused.
Errors and Biases in Attributions
Fundamental Attribution Error
The tendency to underestimate
the influence of external factors
and overestimate the influence
of internal factors when making
judgments about the behavior
of others.
In general, we
tend to blame the
person first, not
the situation.
Errors and Biases in Attributions (contd)
Self-Serving Bias
The tendency for individuals to
attribute their own successes to
internal factors while putting the
blame for failures on external
factors.
Thought: When student
gets an A on an exam,
they often say they
studied hard. But when
they dont do well, how
does the self serving
bias come into play?

Hint: Whose fault is it
usually when an exam is
tough?
Frequently Used Shortcuts in Judging Others
Selective Perception
People selectively interpret what they see on the
basis of their interests, background, experience,
and attitudes.
Frequently Used Shortcuts in Judging Others
Halo Effect
Drawing a general impression
about an individual on the
basis of a single characteristic
Contrast Effects
Evaluation of a persons characteristics that
are affected by comparisons with other
people recently encountered who rank higher
or lower on the same characteristics
Frequently Used Shortcuts in Judging Others
Projection
Attributing ones own
characteristics to other
people.
Stereotyping
Judging someone on the
basis of ones perception of
the group to which that
person belongs.
Specific Applications of shortcuts in
Organizations
Employment Interview
Perceptual biases of raters affect the accuracy of
interviewers judgments of applicants.
Performance Expectations
Self-fulfilling prophecy (Pygmalion effect): The lower or
higher performance of employees reflects preconceived
leader expectations about employee capabilities.
Ethnic Profiling
A form of stereotyping in which a group of individuals
is singled outtypically on the basis of race or
ethnicityfor intensive inquiry, scrutinizing, or
investigation.
Specific Applications in Organizations (contd)
Performance Evaluations
Appraisals are often the subjective (judgmental)
perceptions of appraisers of another employees job
performance.
The Link Between Perceptions and Individual
Decision Making
Decision Making occurs as a reaction to Problem
Perception
of the
decision
maker
Outcomes
Problem
A perceived discrepancy
between the current state of
affairs and a desired state.
Decisions
Choices made from among
alternatives developed from
data perceived as relevant.
Decision maker
aware that a problem
exists and decision
needs to be made
2% decrease in sales
How decision should be made?
Assumptions of the Rational Decision-Making
Model
Model Assumptions
pg157
Problem clarity
Known options
Clear preferences
Constant
preferences
No time or cost
constraints
Maximum payoff
Rational Decision-
Making Model
Describes how
individuals should
behave in order to
maximize some
outcome.
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.
E X H I B I T 53
2007 Prentice Hall, Inc. All rights reserved.
618
Exhibit 66 Assumptions of Rationality
619
Exhibit 61
The Decision-Making
Process
2007 Prentice Hall, Inc. All rights reserved.
620
Exhibit 63 Assessed Values of Laptop Computers Using
Decision Criteria
2007 Prentice Hall, Inc. All rights reserved.
621
Exhibit 64 Evaluation of Laptop Alternatives Against
Weighted Criteria
The Three Components of Creativity
Creativity
The ability to produce
innovative & useful ideas.
Three-Component
Model of Creativity
Proposition that individual
creativity requires expertise,
creative-thinking skills, and
intrinsic task motivation.
E X H I B I T 54
Source: T.M. Amabile, Motivating Creativity in Organizations, California Management Review, Fall 1997, p. 43.
Intrinsic
Creative Thinking
Skills
Creative thinking,,,,,,,, thinking outside the box
Draw no more than 4 lines through all nine dots
Perceptual
Constraining
The solution?
Dont place artificial
constraints
Most people place constraints
unconsciously

Another solution3 lines
Another solution1 line
How Are Decisions Actually Made in
Organizations? (contd)
How/Why problems are Identified
Visibility over importance of problem
Attention-catching, high profile problems
Self-interest (if problem concerns decision maker)
Desire to solve problems

Alternative Development
Satisficing: seeking the first alternative that solves
problem.
Engaging in incremental rather than unique problem
solving through successive limited comparison of
alternatives to the current alternative in effect.
How Are Decisions Actually Made in
Organizations?
Bounded Rationality
Individuals make decisions by constructing
simplified models that extract the essential
features from problems without capturing
all their complexity.
Common Biases and Errors
Overconfidence Bias
Believing too much in our own ability to make good
decisions.

Anchoring Bias
Using early, first received information as the basis for
making subsequent judgments.

Confirmation Bias
Using only the facts that support our decision.
Common Biases and Errors
Availability Bias
Using information that is most readily at hand.
Recent

Representative Bias
Mixing apples with oranges (City boys with Village boys)
Assessing the likelihood of an occurrence by trying to match
it with a preexisting category using only the facts that
support our decision.

Winners Curse
Highest bidder pays too much (one eyed is Kind amongst
blinds)
Likelihood of winners curse increases with the number of
people in auction.

Common Biases and Errors
Escalation of Commitment
In spite of new negative information, commitment
actually increases! (sympathy or soft corner or loyalty)

Randomness Error
Creating meaning out of random events (matching and
recalling different events and using them in favor with
interpreting different meanings)

Hindsight Bias
Looking back, once the outcome has occurred, and
believing that you accurately predicted the outcome of
an event
Intuition
Intuitive Decision Making
An unconscious process created out of distilled
experience.
Conditions Favoring Intuitive Decision Making
A high level of uncertainty exists
There is little precedent to draw on
Variables are less scientifically predictable
Facts are limited
Facts dont clearly point the way
Analytical data are of little use
Several plausible alternative solutions exist
Time is limited and pressing for the right decision
Individual Differences in Decision Making
Source: A.J. Rowe and J.D. Boulgarides, Managerial Decision
Making, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29.
Personality
Aspects of conscientiousness (responsible, organized)
and escalation of commitment.

Gender
Women tend to analyze decisions more than men.
THATS IT FOR TODAY
Organizational Constraints on Decision Makers
Performance Evaluation
Evaluation criteria influence the choice of actions.(fail <10%)
Reward Systems
Decision makers make action choices that are favored by the
organization. (General Motor managers avoid controversy)
Formal Regulations
Organizational rules and policies limit the alternative choices
of decision makers. No freedom of choice
System-imposed Time Constraints
Organizations require decisions by specific deadlines.
Historical Precedents
Past decisions influence current decisions.
Cultural Differences in Decision Making
Time orientation
Egyptian managers would take slow time v American
Importance of logic and rationality
North American Manager decision on Intuition but knows
its important to appear in rational fashion vs Iran where
rationality is not defied or challenged.
Belief in the ability of people to solve problems
Solving problems vs accepting situations (USA vs Thailand)
Preference for collective decision making
Japan Collective decision making vs Americans
Ethics in Decision Making
Ethical Decision Criteria
Utilitarianism
Seeking the greatest good for the greatest number.
Rights
Respecting and protecting basic rights of individuals
such as whistleblowers.
Justice
Imposing and enforcing rules fairly and impartially.
Ethics in Decision Making
Ethics and National Culture
There are no global ethical standards.
The ethical principles of global organizations that
reflect and respect local cultural norms are necessary
for high standards and consistent practices.
Ways to Improve Decision Making
1. Analyze the situation and adjust your decision
making style to fit the situation.
2. Be aware of biases and try to limit their impact.
3. Combine rational analysis with intuition to
increase decision-making effectiveness.
4. Dont assume that your specific decision style is
appropriate to every situation.
5. Enhance personal creativity by looking for novel
solutions or seeing problems in new ways, and
using analogies.
Toward Reducing Bias and Errors
Focus on goals.
Clear goals make decision making easier and help to
eliminate options inconsistent with your interests.
Look for information that disconfirms beliefs.
Overtly considering ways we could be wrong
challenges our tendencies to think were smarter than
we actually are.
Dont try to create meaning out of random events.
Dont attempt to create meaning out of coincidence.
Increase your options.
The number and diversity of alternatives generated
increases the chance of finding an outstanding one.
E X H I B I T 55 Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control
of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 16468.
Its your little sisters senior Prom night, and
she notices that everyone is wearing the
same dress she has on! Which perceptual
shortcut may be occurring?


Escalation of commitment
Representative bias
Availability Bias
Hindsight Bias

Chapter Check-Up: Perception
Its your little sisters senior Prom night, and she notices that
everyone is wearing the same dress she has on! Which
perceptual shortcut may be occurring?


Chapter Check-Up: Perception
Escalation of commitment
Representative bias
Availability Bias
Hindsight Bias

Discuss with your neighbor what the answer would be if your
sister came home and said I just knew that everyone would buy
that dress!
If all of these perceptual shortcuts
happen unconsciously, how can we
keep the stereotypes we have from
interfering with the way we work in
group projects? Identify two specific
things you could do to help prevent
stereotypes from inhibiting effective
group relationships. Discuss with a
neighbor.
Chapter Check-Up: Perception
Michael has just discovered he is double registered for two
classes at the same time and must make a decision about
which one to take this semester. He considers the professor
teaching this semester, the time of the class, and the classes
his friends are taking. He then considers his options for when
he can take each class again, as well as the costs and benefits
for taking each this semester versus later next year. He then
makes his decision. Michael has just engaged in what?

Chapter Check-Up: Decision
Making
In making his decision, Michael forgot
to consider the implications of the
color of paint in the room where each
class was being offered. Given that
room color can influence mood, which
can influence performance, why didnt
Michael consider it?
Chapter Check-Up: Decision
Making
Michael engaged in the
rational decision making model,
and didnt consider the paint color
of the rooms because he operates
under the confines of
bounded rationality.
Chapter Check-Up: Decision
Making
Chapter Checkup: What biases
might have affected Martha
Stewarts judgment? Discuss with a
classmate.