Perception and

Individual Decision Making

ORGANIZATIONAL BEHAVIOR
S T E P H E N P. R O B B I N S
WWW.PRENHALL.COM/ROBBINS
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All rights reserved. by Charlie Cook
 After studying this chapter,
OBJECTIVES

you should be able to:

1. Explain how two people can see the same

thing and interpret it differently.
2. List three determinants of attribution.
LEARNING

3. Describe how shortcuts can assist in or distort

our judgment of others.
4. Explain how perception affects the decision-
making process.
5. Outline the six steps in the rational decision-
making model.

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 After studying this chapter,
O B J E C T I V E S (cont’d)

you should be able to:

6. Describe the actions of a boundedly rational

decision maker.
7. Identify the conditions in which individuals are
most likely to use intuition in decision making.
8. Describe four styles of decision making.
LEARNING

9. Define heuristics and explain how they bias

decisions.
10. Contrast the three ethical decision criteria.

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 What Is Perception, and Why Is It Important?

Perception
A process by which • People’s behavior is
individuals organize and based on their
interpret their sensory perception of what
impressions in order to reality is, not on
give meaning to their reality itself.
environment.
• The world as it is
perceived is the world
that is behaviorally
important.

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 Factors That
Influence
Perception

E X H I B I T 5–1

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 Person Perception: Making Judgments About
Others

Attribution Theory
When individuals observe
behavior, they attempt to
determine whether it is
internally or externally
caused.

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.

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 Attribution Theory
E X H I B I T 5–2

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 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.

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 Errors and Biases in Attributions (cont’d)

Self-Serving Bias
The tendency for individuals to
attribute their own successes
to internal factors while
putting the blame for failures
on external factors.

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 Frequently Used Shortcuts in Judging Others

Selective Perception
People selectively interpret what they see on the
basis of their interests, background, experience,
and attitudes.

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 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 person’s characteristics that
are affected by comparisons with other
people recently encountered who rank higher
or lower on the same characteristics.

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 Frequently Used Shortcuts in Judging Others

Projection Stereotyping
Attributing one’s own Judging someone on the
characteristics to other basis of one’s perception of
people. the group to which that
person belongs.

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 Specific Applications 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 out—typically on the basis of race or
ethnicity—for intensive inquiry, scrutinizing, or
investigation.

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 Specific Applications in Organizations (cont’d)
 Performance Evaluations
– Appraisals are often the subjective (judgmental)
perceptions of appraisers of another employee’s job
performance.
 Employee Effort
– Assessment of individual effort is a subjective
judgment subject to perceptual distortion and bias.

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 The Link Between Perceptions and Individual
Decision Making

Problem
A perceived discrepancy
between the current state of
affairs and a desired state. Perception
of the
decision
Decisions maker
Choices made from among
alternatives developed from
data perceived as relevant.

Decision making occurs as a reaction to a problem Outcomes

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 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 5–3

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 Assumptions of the Rational model

 Assumptions
– The decision maker…
• Has complete information.
• Is able to identify all the relevant options in an
unbiased manner.
• Chooses the option with the highest utility.

 Most decisions in the real world don’t follow the

rational model.
 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.

The decision maker reviews a limited

list of choices, looking for a solution
that is “good enough.”

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 How Are Decisions Actually Made in
Organizations (cont’d)

 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)
 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.

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 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 don’t clearly point the way
– Analytical data are of little use
– Several plausible alternative solutions exist
– Time is limited and pressing for the right decision

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 Common Biases and Errors
 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.
 Risk Aversion

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 Common Biases and Errors
 Escalation of Commitment
– Increasing commitment to a previous decision in spite
of negative information.
 Randomness Error
– Trying to create meaning out of random events by
falling prey to a false sense of control or superstitions.
 Hindsight Bias
– Falsely believing to have accurately predicted the
outcome of an event, after that outcome is actually
known.

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 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 we’re smarter than
we actually are.
 Don’t try to create meaning out of random events.
– Don’t 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.
Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control E X H I B I T 5–6
of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164–68.
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 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. Don’t 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.

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 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.

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 Cultural Differences in Decision Making
 Problems selected
 Time orientation
 Importance of logic and rationality
 Belief in the ability of people to solve problems
 Preference for collect decision making

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 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.

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