Perception & Decision Making

What is Perception?
• How individuals organize and interpret their
impressions in order to give meaning to their
environment.
• Behavior is based on perception of what
reality is, not on reality itself.
Factors that Influence Perception
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
Elements of Attribution Theory
 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 of 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
 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
Another Shortcut: Stereotyping
Judging someone on the basis of one’s
perception of the group to which that person
belongs

•Profiling
– A form of stereotyping in which members of a
group are singled out for intense scrutiny based
on a single, often racial, trait.
 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
 Decision-Making Models in
Organizations
• Rational Decision Making
– The “perfect world” model: assumes complete
information
– 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
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
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
• Hindsight Bias
– After an outcome is already known, believing it could have
been accurately predicted beforehand
 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
 Ethics in Decision Making
• Ethical Decision Criteria
– Utilitarianism
• Decisions made based solely on the outcome
• Seeking the greatest good for the greatest number
• Dominant method for businesspeople
– Rights
• Decisions consistent with fundamental liberties and privileges
• Respecting and protecting basic rights of individuals such as
whistleblowers
– Justice
• Imposing and enforcing rules fairly and impartially
• Equitable distribution of benefits and costs
 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
 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