LEARNING OBJECTIVES: After studying this chapter, you should be able to:

1. Explain the factors that influence perception.

2. Describe attribution theory.
3. Explain the link between perception and decision making.
4. Contrast the rational model of decision making with bounded rationality and intuition.
5. Explain how individual differences and organizational constraints affect decision making.
6. Contrast the three ethical decision criteria.
7. Describe the three-stage model of creativity.

Summary:
Individuals base their behavior not on the way their external environment actually is, but
rather on the way they see it or believe it to be. An understanding of the way people make
decisions can help us explain and predict behavior, but few important decisions are simple or
unambiguous enough for the rational model’s assumptions to apply. We find individuals looking
for solutions that satisfy rather than optimize, injecting biases and prejudices into the decision
process, and relying on intuition. Managers should encourage creativity in employees and
teams to create a route to innovative decision making.

LO1) Explain the Factors That Influence Perception

● Perception​ is a process by which individuals organize and interpret their sensory
impressions in order to give meaning to their environment.
○ Goal: Align perception with reality
○ It is important to the study of OB because people’s behaviors are based on their
perception of what reality is, not on reality itself.
○ Perception is a combination of a number of factors.
● Factors that influence perception:
○ Factors in the perceiver
■ Attitudes
■ Motives
■ Interests
■ Experience
■ Expectations
○ Factors in the situation:
■ Time
■ Work setting
■ Social setting
○ Factors in the target
■ Novelty
■ Motion
■ Sounds
■ Size
■ Background
■ Proximity
 ■ Similarity

LO2) Explain Attribution Theory

● Attribution theory​ suggests that when we observe an individual’s behavior, we attempt
to ​determine​ whether it was internally or externally caused.
○ Internally caused​ – those that are believed to be under the personal control of
the individual.
○ Externally caused​ – resulting from outside causes.

● Determination depends on three factors:

○ Distinctiveness: How distinctive the action was
■ Shows different behaviors in different situations
○ Consensus: Responds the same as others to same situation
○ Consistency: Responds in the same way over time
● 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 general impression on the basis of a
single characteristic.
● Contrast effects
○ Occurs when we do not evaluate a person in isolation.
 ○ Our reaction to one person is influenced by other people we have recently
encountered.
■ Ex: We compare one person to another. The second looks better or
worse in light of the first.
● Stereotyping
○ Judging someone on the basis of our perception of the group to which he or she
belongs.
■ We have to monitor ourselves to make sure we’re not unfairly applying a
stereotype in our evaluations and decisions.
● Self-fulfilling prophecy: ​The Pygmalio effect suggests that people’s expectations
determine their behavior.
● Applications of Shortcuts in Organizations
○ Employment Interview Expectations
■ 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 selective
perception, contrast effects, halo effects, and so on.

LO3) 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.

LO5) Individual Differences, Organizational Constraints, and Decision Making

● Individual Differences
○ Personality
■ Conscientiousness
 ■ High self-esteem
○ Gender
■ Rumination
○ Mental Ability
○ Cultural Differences
○ Nudging
● Organizational Constraints
○ Performance Evaluation Systems
○ Reward Systems
○ Formal Regulations
○ System-Imposed Time Constraints
○ Historical Precedents

Implications for Managers

● Behavior follows perception, so to influence behavior at work, assess how people
perceive their work.
○ Often behaviors we find puzzling can be explained by understanding the initiating
perceptions.
● Make better decisions by recognizing perceptual biases and decision-making errors we
tend to commit.
○ Learning about these problems doesn’t always prevent us from making mistakes,
but it does help.
● Adjust your decision-making approach to the national culture you’re operating in and to
the criteria your organization values.
○ If you’re in a country that doesn’t value rationality, don’t 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.
● Combine rational analysis with intuition.
○ These are not conflicting approaches to decision making.
○ By using both, you can actually improve your decision making effectiveness.
● 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.

QUESTIONS FOR REVIEW

1. What are the factors that influence our perception?
○ The process used for organizing and interpreting the impression of senses so
that the environment is given importance is known as perception.
■ What one perceives may be different in reality
 ■ This can be described as an employee feels that the firm he is working
with has favorable working conditions, good job assignments, good pay
scale, excellent benefits, understanding and responsible management;
but in reality, it is very difficult to find such agreements.
■ Perception is given more importance as people trust on their perception
rather than what reality is.
○ The factors that influence perception are the perceiver, the target, and the
situation.
■ Perceiver factors include attitudes, motives, interests, experiences and
expectations.
■ Target factors include novelty, motion, sound, size, background,
proximity, and similarity.
■ Situation factors include time, work setting, and social settings.
2. What is attribution theory?
○ Attribution theory ​tries to explain the ways we judge people differently,
depending on the meaning we attribute to a behavior.
○ Attribution theory suggests that when we observe an individual’s behavior, we
attempt to determine whether it was internally or externally caused.
■ That determination depends largely on three factors: (1) distinctiveness,
(2) consensus, and (3) consistency.
■ It attempts to understand the people’s behaviour to interpret the behavior
of others.
3. What is the link between perception and decision making?
○ Perception is the process of interpreting the behavior of the individual.
■ It may be different from reality.
■ It is the interpretation of the individual’s sensory impression which is used
to provide meaning to the situation
○ Decision-making is the process of choosing the best among the alternatives.
○ The decision and choices of a person depends on his/her perception regarding
the alternatives.
■ Every decision requires the interpretation and evaluation of the
information or choices that is available to an individual.
■ Perception allows the user to evaluate the information related to a
person’s choice.
○ Perception is the base for decision-making
■ The person will choose based on his/her perception.
4. How do individual differences and organizational constraints influence decision making?
○ Individual differences influence decision making, because every person is
different from another person.
■ So decision making is also different from person to person, on the basis
of their personality, gender, mental ability, cultural differences and many
more.
○ Personality includes thinking of a person, self-respect, ego, dedication to work
and many more.
■ Decision making is also influenced by an individual’s gender.
1. Before making any decisions, women think a lot more than men,
2. Women carefully analyze the decision once made
■ Sometimes it is good to think and analyze the decision once made, but
sometimes it can create problems
○ Decision making is very quick and accurate, if a person is intelligent and has a
high mental ability.
○ Cultural differences also affect the decision making, especially in the selection of
problems and depth of analysis of a problem,
■ Different cultures have different beliefs and those beliefs play a role in
decision making.
○ Organization constraints influence decision making by the system imposed time
constraints, performance evaluation, reward system, formal regulations, and
historical precedents.
○ Reward systems also affect decision making.
■ In reward systems, manager makes a decision has a great personal
payoff.
■ In historical precedent, past decisions affect current decision making.
■ Formal regulations include rules and regulations which constraints that
make a freedom decisions and choices from limited alternative