Chapter 4

Perception and Individual

Dicision Making
This slide is adapted from
Robbins, S. P., & Judge, T. A. (2017).
Organizational Behavior (17th ed.).
England: Pearson Education.

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Chapter Learning Objectives
 After studying this chapter, you should be able to:
 Define perception and explain the factors that influence it.
 Explain attribute theory and list the three determinants of attribution.
 Identify the shortcuts individuals use in making judgments about
others.
 Explain the link between perception and decision making.
 Apply the rational model of decision making and contrast it with
bounded rationality and intuition.
 List and explain the common decision biases or errors.
 Explain how individual differences and organizational constraints affect
decision making.

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What is Perception
A process by which individuals organize and
interpret their sensory impressions in order
to give meaning to their environment.
People’s 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.
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Factors that influence perception

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Attribution Theory: Judging Others
 Our perception and judgment of others is significantly
influenced by our assumptions of the other person’s internal
state.
 When individuals observe behavior, they attempt to determine
whether it is internally or externally caused.
• Internal causes are under that person’s control
• External causes are not under the person’s control
 Causation judged through:
 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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Elements of Attribution Theory

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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
 We blame people first, not the situation

 Self-Serving Bias
 The tendency for individuals to attribute their own successes to
internal factors while putting the blame for failures on external
factors
 It is “our” success but “their” failure
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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
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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Another Shortcut: Stereotyping
Judging someone on the basis of one’s
perception of the group to which that person
belongs – a prevalent and often useful, if not
always accurate, generalization

Profiling
 A form of stereotyping in which members of a
group are singled out for intense scrutiny based on
a single, often racial, trait.
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Perceptions and Individual Decision
Making
Problem
 A perceived discrepancy between the current state of
affairs and a desired state
Decisions
 Choices made from among alternatives developed from
data
Perception Linkage:
 All elements of problem identification and the decision-
making process are influenced by perception.
• Problems must be recognized
• Data must be selected and evaluated
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Decision-Making Models in Organizations
 Rational Decision Making
 The “perfect world” model: assumes complete information, all
options known, and maximum payoff
 Six-step decision-making process
 Bounded Reality
 The “real world” model: seeks satisfactory and sufficient
solutions from limited data and alternatives
 Intuition
 A non-conscious process created from distilled experience that
results in quick decisions
• Relies on holistic associations
• Affectively charged – engaging the emotions
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Decision-Making Models in Organizations

Identify the Allocate

Define the
decision weights to the
problem
criteria criteria

Select the best Evaluate the Develop the

alternative alternatives alternatives

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Common Biases and Errors in Decision
Making
Overconfidence Confirmation
Anchoring Bias
Bias Bias

Escalation of Randomness
Availability Bias
Commitment Error

Risk Aversion Hindsight Bias

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Common Biases and Errors in Decision
Making
 Overconfidence Bias
 Believing too much in our own ability to make good decisions –
especially when outside of own expertise
 Anchoring Bias
 Using early, first received information as the basis for making
subsequent judgments
 Confirmation Bias
 Selecting and using only facts that support our decision
 Availability Bias
 Emphasizing information that is most readily at hand
• Recent
• Vivid

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More Common Decision –Making Errors
 Escalation of Commitment
 Increasing commitment to a decision in spite of evidence that it is wrong
– especially if responsible for the decision!
 Randomness Error
 Creating meaning out of random events – superstitions
 Winner’s Curse
 Highest bidder pays too much due to value overestimation
 Likelihood increases with the number of people in auction
 Risk aversion
 The tendency to prefer a sure gain of a moderate amount over a riskier
outcome, even if the riskier outcome might have a higher expected payoff.
 Hindsight Bias
 After an outcome is already known, believing it could have been
accurately predicted beforehand
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Reducing Biases and Errors

Increase Your
Options = The
Don’t try to more
create meaning alternatives you
Look for out of random can generate,
information that events = and the more
Focus on Goals disconfirms your accepting that diverse those
to be rational beliefs= there are events alternatives, the
counteracting in life that are greater your
overconfidence outside your chance of
and the controls finding an
confirmation outstanding one.
and hindsight
biases

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Individual Differences in Decision making

Personality

Cultural Decision
Making Gender
differences

Mental Ability

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Individual Differences in Decision making
 Personality
 Conscientiousness may effect escalation of commitment
• Achievement strivers are likely to increase commitment
• Dutiful people are less likely to have this bias
 Self-Esteem
• High self-esteem people are susceptible to self-serving bias

• Gender: Women analyze decisions more than

men – rumination
• Differences develop early

 Mental Ability
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Organizational Constraints

System-
Performance Reward Formal imposed Historical
Evaluation Systems Regulations Time Precedents
Constraints

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Organizational Constraints
 Performance Evaluation
 Managerial evaluation criteria influence actions
 Reward Systems
 Managers will make the decision with the greatest personal
payoff for them
 Formal Regulations
 Limit the alternative choices of decision makers
 System-Imposed Time Constraints
 Restrict ability to gather or evaluate information
 Historical Precedents
 Past decisions influence current decisions
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Ethics in Decision Making
Utilitarianism – Thuyết vị lợi
• Decisions made based solely on the outcome
• Seeking the greatest good for the greatest number
• Dominant method for businesspeople

Rights - Đúng
• Decisions consistent with fundamental liberties and privileges
• Respecting and protecting basic rights of individuals such as
whistleblower

Justice – Công bằng

• Imposing and enforcing rules fairly and impartially
• Equitable distribution of benefits and costs

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Ethical Decision-Making Criteria Assessed

• Utilitarianism
– Pro: Promotes efficiency and productivity
– Con: Can ignore individual rights, especially minorities
• Rights
– Pro: Protects individuals from harm; preserves rights
– Con: Creates an overly legalistic work environment
• Justice
– Pro: Protects the interests of weaker members
– Con: Encourages a sense of entitlement

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Improving Creativity in Decision Making

Creativity
 The ability to produce novel and useful ideas
Who has the greatest creative potential?
 Those who score high in Openness to Experience
 People who are intelligent, independent, self-
confident, risk-taking, have an internal locus of
control, tolerant of ambiguity, low need for
structure, and who persevere in the face of
frustration

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The three component model of Creativity

Proposition that
individual creativity
results from a mixture of
Intrinsic
three components Task Expertise
Motivation
3 components:
– Expertise: the foundation
– Creative-Thinking Skills: the
personality characteristics Creative-
associated with creativity Thinking Skills
– Intrinsic Task Motivation: the
desire to do the job because of
its characteristics
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Global Implications
 Attributions
 There are cultural differences in the ways people attribute cause
to observed behavior
 Decision Making
 No research on the topic: assumption of “no difference”
 Based on our awareness of cultural differences in traits that affect
decision making, this assumption is suspect
 Ethics
 No global ethical standards exist
 Asian countries tend not to see ethical issues in “black and white”
but as shades of gray
 Global companies need global standards for managers
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Summary and Managerial Implications
 Perception:
 People act based on how they view their world
 What exists is not as important as what is believed
 Managers must also manage perception

 Individual Decision Making

 Most use bounded rationality: they satisfice
 Combine traditional methods with intuition and creativity for
better decisions
• Analyze the situation and adjust to culture and organizational reward
criteria
• Be aware of, and minimize, biases

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