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Chapter 5

Perception and Individual Decision Making

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.

Factors Influencing Perception

Person Perception: Making Judgments about others

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

Errors and Biases in Attribution

Errors and Biases in Attribution (Contd)

Frequently Used Shortcuts in Judging Others

Frequently Used Shortcuts in Judging Others (Contd)

Frequently Used Shortcuts in Judging Others (Contd)

Shortcuts Applications in Organizations

Employment Interview

Perceptual biases affect the accuracy of interviewers judgments of applicants. Self-fulfilling prophecy (Pygmalion effect): The lower or higher performance of employees reflects preconceived leader expectations about employee capabilities. Profiling: A form of stereotyping in which a group of individuals are singled out for intensive inquiry, scrutinizing, or investigation. Appraisals are subjective perceptions of performance.

Performance Expectations

Ethnic Profiling

Performance Evaluations

The link Between Perception and Individual Decision Making

Perceptions of the decision maker


Rational Decision-making Model

Rational Decision-making Model (Contd)

Assumptions Problem clarity Known options Clear preferences Constant preferences No time or cost constraints Maximum payoff

The Three Creativity Components

How Decisions Are Actually Made in Organizations

How Decisions Are Actually Made in Organizations (Contd)

8 conditions for using intuition:

1. 2. 3. 4. 5. 6. 7.


With a high level of uncertainty. With a little precedents to draw on. When variables are less scientifically predictable. When facts are limited. When facts do not clearly point the way. When analytical data are of little use. When there are several plausible solutions from which to choose, with good arguments for each. When time is limited and there is pressure to come up with the right decision.

How Decisions Are Actually Made in Organizations (Contd)

How/Why problems are identified

Visibility over importance of problem Attention-catching, high profile problems Desire to solve problems Self-interest (if problem concerns decision maker) 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.

Alternative Development

How Decisions Are Actually Made in Organizations (Contd)

Making Choice

Common Biases and Errors

overconfidence bias
It was found that those individuals whose intellectual and interpersonal abilities are weakest are more likely to overestimate their performance and ability.

confirmation bias
The tendency to seek out information that reaffirms past choices and to discount information that contradicts past judgments.

anchoring bias
A tendency to fixate on initial information, from which we then fail to adequately adjust for subsequent information.

availability bias
The tendency for people to base their judgments on information that is readily available to them.

Common Biases and Errors (Contd)

representative bias
Assessing the likelihood of an occurrence by inappropriately considering the current situation as identical to ones in the past.

randomness error
The tendency of individuals to believe that they can predict the outcome of random events.

escalation of commitment
An increased commitment to a previous decision in spite of negative information.

Common Biases and Errors (Contd)

winners curse
A decision making dictum that argues that the winning participants in an action typically pay too much for the winning item.

hindsight bias
The tendency for us to believe falsely that weve have accurately predicted the outcome of an event, even after the outcome is actually known.

Individual Differences



Achievement-striving people are more likely to escalate their commitment. Also, they are more susceptible to the hindsight bias. Dutiful people are less likely to escalate. High self-esteem people highly use the self-serving bias to maintain their self-esteem.



Women analyze decisions more than men do. Women engage more in rumination (problem overthinking).

Organizational Constraints

Performance Evaluation

Evaluation criteria influence the choice of actions. Decision makers make action choices that are favored by the organization. Organizational rules and policies limit the alternative choices of decision makers.

Reward Systems

Formal Regulations

System-imposed Time Constraints

Organizations require decisions by specific deadlines.

Past decisions influence current decisions.

Historical Precedents

Cultural Differences

Problems selected Time orientation Importance of logic and rationality Belief in the ability of people to solve problems Preference for collective decision making

Ethics in Decision Making

Ethical Decision Criteria

Utilitarianism Rights Justice

Seeking the greatest good for the greatest number.

Respecting and protecting basic rights of individuals.

Imposing and enforcing rules fairly and impartially.

Ethics in Decision Making (Contd)

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.