Perception and

Individual Decision Making

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 Learning Objectives
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

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 Unit 6.1 Explain the Factors That Influence
Perception
 Perception is a process by which individuals organize and
interpret their sensory impressions to give meaning to their
environment.
 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.

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 Explain the Factors That Influence Perception
Factors That
Influence
Perception

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 Unit 6.2 Explain Attribution Theory (1 of 7)
 Attribution theory suggests that when we observe an
individual’s behavior, we attempt to determine whether it
was internally or externally caused.
 Determination depends on three factors:
 Distinctiveness
 Consensus
 Consistency

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 Explain Attribution Theory (2 of 7)

Attribution
Theory

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 Explain Attribution Theory (3 of 7)
 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.

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 Explain Attribution Theory (4 of 7)
 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.

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 Explain Attribution Theory (5 of 7)
 Halo effect
 The halo effect occurs when we draw a general impression
based on a single characteristic.
 Contrast effects
 We do not evaluate a person in isolation.
 Our reaction to one person is influenced by other persons
we have recently encountered.

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 Explain Attribution Theory (6 of 7)
 Stereotyping
 Judging someone based on one’s perception of the group
to which that person belongs.
 We have to monitor ourselves to make sure we’re not
unfairly applying a stereotype in our evaluations and
decisions.

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 Explain Attribution Theory (7 of 7)
 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.

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 Unit 6.3 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.

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 Rational Model of Decision Making

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

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 6.4 Rational Model of Decision Making vs.
Bounded Rationality and Intuition (1 of 6)
 Bounded Rationality
 Most people respond to a complex problem by reducing
it to a level at which it can be readily understood.
 People satisfice – they seek solutions that are
satisfactory and sufficient.
 Individuals operate within the confines of bounded
rationality.
 They construct simplified models that extract the
essential features.

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 Rational Model of Decision Making vs.
Bounded Rationality and Intuition (2 of 6)
 Intuition
 Intuitive decision making occurs outside conscious
thought; it relies on holistic associations, or links between
disparate pieces of information, is fast, and is affectively
charged, meaning it usually engages the emotions.
 The key is neither to abandon nor rely solely on intuition,
but to supplement it with evidence and good judgment.

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 Rational Model of Decision Making vs.
Bounded Rationality and Intuition (3 of 6)
 Common Biases and Errors in Decision Making
 Overconfidence Bias: individuals whose intellectual and
interpersonal abilities are weakest are most likely to
overestimate their performance and ability.
 Anchoring Bias: fixating on initial information as a starting
point and failing to adequately adjust for subsequent
information.

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 Rational Model of Decision Making vs.
Bounded Rationality and Intuition (4 of 6)
 Confirmation Bias: type of selective perception.
 Seek out information that reaffirms past choices, and
discount information that contradicts past judgments.
 Availability Bias: tendency for people to base judgments on
information that is readily available.

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 Rational Model of Decision Making vs.
Bounded Rationality and Intuition (5 of 6)
 Escalation of Commitment: staying with a decision even
when there is clear evidence that it’s wrong.
 Likely to occur when individuals view themselves as
responsible for the outcome.
 Randomness Error: our tendency to believe we can predict
the outcome of random events.
 Decision making becomes impaired when we try to create
meaning out of random events.

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 Rational Model of Decision Making vs.
Bounded Rationality and Intuition (6 of 6)
 Risk Aversion: the tendency to prefer a sure thing instead of
a risky outcome.
 Ambitious people with power that can be taken away
appear to be especially risk averse.
 People will more likely engage in risk-seeking behavior for
negative outcomes, and risk-averse behavior for positive
outcomes, when under stress.
 Hindsight Bias: the tendency to believe falsely that one has
accurately predicted the outcome of an event, after that
outcome is actually known.

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 6.5 Individual Differences, Organizational
Constraints, and Decision Making (1 of 2)
 Individual Differences
 Personality
 Conscientiousness
 High self-esteem
 Gender
 Rumination
 Mental Ability
 Cultural Differences

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 Individual Differences, Organizational
Constraints, and Decision Making (2 of 2)
 Organizational Constraints
 Performance Evaluation Systems
 Reward Systems
 Formal Regulations
 System-Imposed Time Constraints
 Historical Precedents

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 6.6 Contrast Ethical Decision Criteria (1 of 2)
 Utilitarianism: decisions are made solely on the basis of their
outcomes or consequences.
 Focus on rights: calls on individuals to make decisions
consistent with fundamental liberties and privileges as set
forth in documents such as the Bill of Rights.
 Protects whistle-blowers.
 Impose and enforce rules fairly and impartially to ensure
justice or an equitable distribution of benefits and costs.

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 Contrast Ethical Decision Criteria (2 of 2)
 Behavioral ethics: an area of study that analyzes how people
behave when confronted with ethical dilemmas.
 Individuals do not always follow ethical standards
promulgated by their organizations, and we sometimes
violate our own standards.
 There are ways to increase ethical decision making in
organizations.
 Consider cultural differences.

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 The Three-Stage Model of Creativity (1 of 2)
 Creativity is the ability to produce novel and useful ideas.
 These are ideas that are different from what has been
done before, but that are also appropriate to the problem.

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 The Three-Stage Model of Creativity (2 of 2)

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