HND – 6. Perception & Individual Decision Making

Lim Sei Kee @ cK

Perception

• People’s behavior is based on their perception of what reality is, not on reality itself.

A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment.

Perception is the process by which individuals make sense of their world.

Individuals may look at the same thing, yet perceive it differently.

Differences in perceptions can cause problems ◦ Communication◦ Conflict◦ Motivation◦ Judgment◦ Decision Making

Perception

FACTORS IN THE PERCEIVER

Attitudes Motives Interests

Experience Expectations

FACTORS IN THE SITUATION

Time Work setting Social setting

FACTORS IN THE TARGET

• Motion• Sounds• Size

• Background• Similarity

PERCEPTION

Making Judgments About Others

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.

Attribution Theory

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

Suggests that perceivers try to “attribute” the observed behavior to a type of cause:

◦Internal – behavior is believed to be under the personal control of the individual

◦External –the person is forced into the behavior by outside events/causes

Attribution Theory

1. 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.

The tendency to attribute others' bad performance to internal causes & Attribute their good performance to external causes

Errors and Biases in Attributions

2. Self-serving bias

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

attribute successes to ourselves – internal attribute failures to the environment – external

Errors and Biases in Attributions

Selective perception

Halo effect

Contrast effect

Projection

Stereotyping

Shortcuts in judging others

Frequently Used Shortcuts in Judging Others

Selective Perception

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

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

Frequently Used Shortcuts in Judging Others

Projection

Attributing one’s own characteristics to other people

Stereotyping

Judging someone on the basis of one’s perception of the group to which that person belongs

The Link Between Perceptions and Individual Decision Making

Perception of the decision

maker

Outcomes

ProblemA perceived discrepancy between the current state of affairs and a desired state.DecisionsChoices made from among alternatives developed from data perceived as relevant.

Making consistent, value-maximizing choices within

specified constraints.

Rational decision-making model – a decision-making

model that describes how individuals should behave

in order to maximize some outcome.

Rational decision-making process

Assumptions of the Rational Decision-Making Model

Model Assumptions• Problem clarity• Known options• Clear preferences• Constant preferences• No time or cost

constraints• Maximum payoff

Rational Decision-Making Model

Describes how individuals should behave in order to maximize some outcome.

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.

Steps in the Rational Decision-Making Model

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

Creativity in Decision Making

Three-Component Model of Creativity

Expertise

Intrinsic Task Motivation

Creative-Thinking Skills

Proposes that individual creativity requires expertise,

creative-thinking skills and intrinsic task motivation

Expertise – foundation for all creative work

Creative-thinking skills – personality characteristics

associated with creativity.

Intrinsic task motivation - desire to work on

something

Three-component model of creativity

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.

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”

Decision Making in Bounded Rationality

Overconfidence bias

Anchoring bias

Confirmation bias

Availability bias

Representative bias

Escalation of Commitment bias

Randomness Error

Hindsight bias

Common Biases and Errors

Overconfidence Bias◦ Believing too much in our own ability to make good

decisions◦ ‘no problem in judgment and decision making’

Anchoring Bias◦ Using early, first received information as the basis for

making subsequent judgments◦ a tendency to fixate on initial information as a starting

point.

Overconfidence bias; Anchoring bias

Confirmation Bias◦Using only the facts that support our decision◦a specific case of selective perception; we seek out

information that reaffirms our past choices, and we discount information that contradicts past judgments

Availability Bias◦Using information that is most readily at hand◦the tendency for people to base their judgments on

information that is readily available to them

Confirmation bias; Availability bias

Representative Bias◦ Assessing the likelihood of an occurrence by trying to

match it with a preexisting category using only the facts that support our decision

Escalation of Commitment◦ In spite of new negative information, commitment

actually increases◦ Increasing commitment to a previous decision in spite of

negative information.

Representative bias; Escalation of Commitment bias

Randomness Error◦ Creating meaning out of random events◦ difficulty dealing with chance.

Hindsight Bias◦ Looking back, once the outcome has occurred, and

believing that you accurately predicted the outcome of an event

◦ Hindsight = ability to see, after the event, what should have been done

Randomness Error; Hindsight bias

An non-conscious process created out of distilled experience

Increases with experience

Can be a powerful complement to rational analysis in decision making

Intuitive Decision Making

Eight conditions for intuitive decision making –

When high level of uncertainty existsWhen there is little precedent to draw onWhen variables are less scientifically predictableWhen ‘facts’ are limitedWhen facts don’t clearly point the wayWhen analytical data are of little useWhen there are several plausible alternative solutions from

which to chooseWhen time is limited and there is pressure

Intuition

Directive – low tolerance for ambiguity and seek

rationality

Analytic – greater tolerance for ambiguity

Conceptual – tend to use data from multiple sources

and consider many alternatives

Behavioral – strong concern for the people in the

organization and their development

Decision making style

Decision-Style Model

Source: A.J. Rowe and J.D. Boulgarides, Managerial Decision Making, (Upper Saddle River, NJ: Prentice Hall, 1992), p. 29.

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.

Ethics in Decision Making

@ Utilitarianism

√ Promotes efficiency and productivity X Sideline the rights of some individuals

@ Rights

√ Protects individuals from injury and is consistent with freedom and privacy

X It can create a legalistic environment that hinders productivity and efficiency

Ethical Decision Criteria

@ Justice

√ Protects the interests of the underrepresented and less powerful

X It encourages a sense of entitlement that reduces risk taking, innovation, and productivity

Ethical Decision Criteria