Lecture Five

After
After studying
studying this
this chapter,
chapter, you
you should
should be
be
able
able to:
to:
1. Define perception and explain the factors that
influence it.
2. Identify the shortcuts individuals use in making
judgments about others.
3. Explain the link between perception and decision
making.
4. List and explain the common decision biases or errors.
5. Contrast the three ethical decision criteria.
6. Define creativity and discuss the three-component
model of creativity.

3-2
What
What Is
Is Perception,
Perception, and
and Why
Why Is
Is ItIt Important?
Important?

Perception
••People’s
People’sbehavior
behaviorisis
A process by which based
basedon ontheir
their
individuals organize perception
perceptionof of what
what
reality
realityis,
is, not
not on
onreality
reality
and interpret their
itself.
itself.
sensory impressions
in order to give ••The
Theworld
worldas
asitit isis
perceived
perceivedisisthe
theworld world
meaning to their
that
that isisbehaviorally
behaviorally
environment. important.
important.
 Factors
Factorsthat
that
Influence
Influence
Perception
Perception

E X H I B I T 5–1
E X H I B I T 5–1
 Person
Person Perception:
Perception: Making
Making Judgments
Judgments About
About
Others
Others
Attribution Theory
1.Ways in which we judge people differently based on the
meaning we attribute to a given behavior.
2.When individuals observe behavior, they attempt to determine
whether it is internally (under the personal control) or externally (by outside events)
caused.

Determinants
Determinantsof ofAttribution
Attribution
Distinctiveness:
Distinctiveness:Shows
Showsdifferent
differentbehaviors
behaviorsinindifferent
differentsituations.
situations.
Consensus:
Consensus:Response
Responseisisthe
thesame
sameas
asothers
otherstotosame
samesituation.
situation.
Consistency:
Consistency:Responds
Respondsininthe
thesame
sameway
wayover
overtime.
time.
Attribution
Attribution Theory
Theory E X H I B I T 5–2
E X H I B I T 5–2
 Errors
Errors and
and Biases
Biases in
in Attributions
Attributions
Fundamental Attribution Error In
Ingeneral,
general, we
wetend
tend
The tendency to underestimate the to
toblame
blamethethe
influence of external factors and person
personfirst,
first, not
not the
the
overestimate the influence of internal situation.
situation.
factors when making judgments about
the behavior of others Thought:
Thought:When
Whenstudents
students
get
getan
an“A”
“A”on
onananexam,
exam,
Self-Serving Bias they
theyoften
oftensay
saythey
they
studied
studiedhard.
hard.But
Butwhen
when
The tendency for individuals to they
theydon’t
don’tdodowell,
well,how
how
attribute their own successes to does
doesthe
theself-serving
self-servingbias
bias
internal factors while putting the come
comeinto
intoplay?
play?
blame for failures on external
Hint:
Hint:Whose
Whosefault
faultisisitit
factors
usually
usuallywhen
whenananexam
examisis
“tough”?
“tough”?
Common
Common Shortcuts
Shortcuts in
in Judging
Judging Others
Others

Selective Perception
People selectively interpret what they see on the basis
of their interests, background, experience, and
attitudes. (seeing what we want to see)

Halo Effect
Drawing a general impression
about an individual on the basis of
a single characteristic, e.g.
intelligence or appearance
Shortcuts
Shortcuts in
in Judging
Judging Others…..
Others…..
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. (Social
comparison theory)

Stereotyping
Judging someone on the
basis of one’s perception of
the group to which that person
belongs
 Specific
SpecificApplications
Applicationsof
ofshortcuts
shortcutsin
inOrganizations
Organizations

 Employment Interview
– Perceptual biases of raters affect the accuracy of
interviewers’ judgments of applicants
 Performance Expectations
– Self-fulfilling prophecy (Pygmalion effect): behavior
determined by other expectations.
– The lower or higher performance of employees reflects
preconceived leader expectations about employee
capabilities.
 Performance Evaluations
– Appraisals are often the subjective (judgmental)
perceptions of appraisers of another employee’s job
performance.
 The
The Link
Link Between
Between Perception
Perception and
and Decision
Decision
Making
Making
5-11

–Individual decision-making is an important part of

organizational behavior.
–Decision making occurs as a reaction to a perceived
problem. That is, a discrepancy exists between the current state of
affairs and some desired state, requiring us to consider alternative
courses of action.

 Perception influences:
Awareness that a problem exists
The interpretation and evaluation of information
Bias of analysis and conclusions
Rational
Rational Decision-making
Decision-making Model
Model

Rational Decision-
making Model Model
ModelAssumptions
Assumptions
Describes how individuals •• Problem
Problemclarity
clarity
should behave in order to •• Known
Knownoptions
options
maximize some outcome
•• Clear
Clearpreferences
preferences
•• Constant
Constantpreferences
preferences
•• No
Notime
timeor
orcost
cost
constraints
constraints
•• Maximum
Maximumpayoff
payoff
 Steps
Steps in
in Rational
Rational Decision-Making
Decision-Making Model
Model

1. Define the problem.

2. Identify the decision criteria (Standard use to judge)
3. Allocate weights to the criteria (Which criteria is more/less
important)

4. Develop the alternatives (Nokia, Samsung or LG)

5. Evaluate the alternatives (SWOT)

6. Select the best alternative.

3-13
 Assumptions
Assumptions of
of the
the Model
Model

 Complete knowledge of the situation

 All relevant options are known in an unbiased
manner
 The decision-maker seeks the highest utility

3-14
 Bounded
Bounded Rationality
Rationality

 The limited information-processing capability of human

beings makes it impossible to assimilate and understand
all the information necessary to optimize.

 So people seek solutions that are satisfactory and

sufficient, rather than optimal (they “satisfice”).

 Bounded rationality is constructing simplified models that

extract the essential features from problems without
capturing all their complexity.

3-15
 Decision
Decision Making
Making in
in Bounded
Bounded Rationality
Rationality

Simpler than rational decision making, composed of

three steps:

1. Limited search for criteria and alternatives – familiar

criteria and easily found alternatives

2. Limited review of alternatives – focus alternatives,

similar to those already in effect

3. Satisficing – selecting the first alternative that is

“good enough”
3-16
 Intuitive
Intuitive Decision
Decision Making
Making

 An non-conscious process
created out of distilled
experience
 Increases with experience
 Can be a powerful complement
to rational analysis in decision
making.

3-17
Intuition
Intuition

 Conditions Favoring Intuitive Decision Making

– A high level of uncertainty exists
– 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
 Common
Common Biases
Biases and
and Errors
Errors
 Overconfidence Bias
Believing too much in our own ability to make good decisions.
Anchoring Bias
A tendency to fixate on initial information and fail to adequately
adjust for subsequent (later) information
 Confirmation Bias
Seeking out information that reaffirms our past choices and
discounting information that contradicts past judgments
 Availability Bias
The tendency to base judgments on information that is readily
available
3-19
 Common
Common Biases
Biases and
and Errors
Errors
 Escalation of Commitment
Staying with a decision even when there is clear evidence that it
is wrong
 Randomness Error
Tendency to believe we can predict the outcome of random
events.(superstitious belief e.g. lucky no. 6)
Risk Aversion
Preferring a sure thing over a risky outcome. Even risk better
payoff.
 Hindsight Bias
 The tendency to believe falsely after the outcome is already
known, that we would have accurately predicted it.
3-20
 Decision
Decision Making
Making in
in
Organizations
Organizations
Individual Differences

Conscientiousness may effect escalation of commitment

Personality
Achievement strivers are likely to escalate commitment. Dutiful
people are less likely to have this bias

High self-esteem people are susceptible to self-serving bias

Women analyze decisions more than men – rumination (over

thinking)
Gender
Women are twice as likely to develop depression

Mental ability Higher level of mental ability-able to solve problems accurately and
decide 21
 Organizational
Organizational Constraints
Constraints on
on Decision
Decision Makers
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
 Ethics
Ethics in
in Decision
Decision Making
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
 Creativity
Creativity in
in Decision
Decision Making
Making
5-24

The ability to produce novel and

useful ideas

Helps people to:

 Better understand the problem

 See problems others can’t see

 Identify all viable alternatives

 Identify alternatives that aren’t

readily apparent
 Three-Component
Three-Component Model
Model of
of Creativity
Creativity
5-25
 Global
Global Implications
Implications
Attributions:
– Cross-cultural differences exist – especially in
collectivist traditions
Decision Making:
– Cultural background of the decision maker can
have significant influence on decisions made
Ethics:
– No global ethical standards exist
– Need organizational-level guidance

3-26
 Implications
Implications for
for Managers
Managers

Perception:
– To increase productivity, influence workers’
perceptions of their jobs
To improve decision making:
1. Analyze the situation
2. Adjust your decision approach
3. Be aware of biases and minimize their impact
4. Combine rational analysis with intuition
5. Try to enhance your creativity

3-27
 Keep
Keep in
in Mind…
Mind…

1. People have inherent biases in perception and

decision making
• Understanding those biases allows for better
prediction of behavior
2. Biases can be helpful
• Managers must determine when the bias may be
counterproductive
3. Creativity aids in decision making
• Helps to appraise, understand, and identify
problems

3-28
Chapter
Chapter Check-up:
Check-up: Perception
Perception
It’s your little sister’s first day in school, 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
Chapter Check-up:
Check-up: Decision
Decision Making
Making
Majid has just discovered he is 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. Majid has just
engaged in what?
 Chapter
Chapter Check-up:
Check-up: Decision
Decision Making
Making

In making his decision, Majid 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 didn’t Majid consider it?
Chapter
Chapter Check-up:
Check-up: Decision
Decision Making
Making

Majid engaged in the

rational decision making model,
and didn’t consider the paint color of
the rooms because he operates
under the confines of
bounded rationality.