Improvement Is A Proof!

RESUME

ORGANIZATIONAL BEHAVIOR

CHAPTER 6 PERCEPTION AND

INDIVIDUAL DECISION MAKING

STUDENT DEVELOPMENT DIVISION

MANAGEMENT STUDENT SOCIETY 2013

@MSSFEUI

Need more Million$?

VISIT www.tinyurl.com/MillionsMSSFEUI

Improvement Is A Proof!

PERCEPTION is the way people organize the massive amounts of information they receive

into patterns that give it meaning. People will use their perceptions of reality, not reality

itself, to decide how to behave.

Factors that Influence Perception

PERSON PERCEPTION

1. Attribution Theory: Judging Others

– Attribution Theory tries to explain the ways which we judge people

differently depending on to meaning we attribute to a given behavior. 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

– The determination depends on the factors:

• 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

Improvement Is A Proof!

– Elements of attribution Theory is used to see the connection between

external or internal driven factors

– Errors and Biases in Attributions

• Fundamental Attribution Error: underestimate the influence of

external factors and overestimate the influence of internal factors. It is

like We blame people first, not the situation

• Self-Serving Bias: when individuals attribute their own successes to

internal factors and blame external factors when they don’t

experience success. It is “our” success but “their” failure

2. Common shortcuts in Judging others

– Selective Perception: People selectively interpret what they see on the basis

of their interests, background, experience, and attitudes.

Ex: when the sales executives was asked what the most important problem in

the case given. Most of them rated sales important because it is related to

their own unit’s activities.

– Halo Effect: Drawing a general impression about an individual on the basis

of a single characteristic.

Ex: if a chef is famous for making one particular dish, then the halo effect

allows people to assume that he can cook anything with equal proficiency

– 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.

Global Implications

There are cultural differences in the ways people attribute cause to

observed behavior

Improvement Is A Proof!

Ex: When you meet two other people, you are likely to compare each against

the other on several dimensions to decide which you prefer. This may include

physical beauty, similarity of interests and various personality factors.

– Stereotyping: making generalizations about an individual based on the

group to which that person belongs. This generalization can be useful in

making decisions, however, it can also be inaccurate and cause us to

mistakenly develop a perception about an individual that is not

representative of who they are.

Ex: people often assume older workers can’t learn new skills

Profiling is an application of stereotyping where members of a group are

singled out for scrutiny based on a single trait.

3. Specific Shortcut Applications in Organizations

Organizations use these shortcuts often to make decisions

– Employment Interview

• Perceptual biases of raters affect the accuracy of interviewers’

judgments of applicants

– Performance Expectations

• Self-fulfilling prophecy (Pygmalion effect): The lower or higher

performance of employees reflects preconceived leader expectations

about employee capabilities

• The higher the expectations, the better people tend to perform and vice

versa.

– Performance Evaluations

• Appraisals are often the subjective (judgmental) perceptions of

appraisers of another employee’s job performance

• Critical impact on employees and their wages.

THE LINK BETWEEN PERCEPTION 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

Improvement Is A Proof!

DECISION MAKING MODELS IN ORGANIZATION

1. Rational Decision Making

– The “perfect world” model: assumes complete information, all options

known, and maximum payoff

– Six-step decision-making process

1. Define the problem

2. Identify the decision criteria

3. Allocate weights to all criteria

4. Develop the alternatives

5. Evaluate the best alternative

– Analytical process that companies use to come up with a fact-based decision.

– It is not always a realistic choice for organizations due to time constraints

and other pressures

2. Bounded Reality

– The “real world” model: seeks satisfactory and sufficient solutions from

limited data and alternatives

– was developed to explain why limits exist to how rational a decision maker

can actually be within a decision-making environment

3. Intuition

– A non-conscious process created from distilled experience that results in

quick decisions

• Relies on holistic associations

• Affectively charged – engaging the emotions

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

Improvement Is A Proof!

Common Biases and Errors in Decision Making

1. Overconfidence Bias: Believing too much in our own ability to make good decisions

especially when outside of own expertise.

Ex: when we’re asked to judge the probability of something, people tend to

be too optimistic. When they say 100 percent sure about something, they

tend to be 70-85 percent correct.

2. Anchoring Bias: when you make your decisions based on the information you

received first and not on the new information received, causing you to jump to a

decision before you have the right information.

Ex: the initial price offered for a used car sets the standard for the rest of the

negotiations, so that prices lower than the initial price seem more reasonable

even if they are still higher than what the car is really worth.

3. Confirmation Bias: Selecting and using only facts that support our decision and

Ignoring facts that go against your decision can limit the success of the solution.

4. Availability Bias: Emphasizing information that is most readily at hand (recent &

vivid)

Ex: more people fear flying than fear driving in a car whereas car accident is

more often happens. it is because media give much more attention to air

accidents

5. Escalation of Commitment: Increasing commitment to a decision in spite of

evidence that it is wrong – especially if responsible for the decision!

Ex: When an investor buys stock expecting the price to rise and then

continues to buy more and more as the price drops, they are escalating their

commitment. Instead of their original plan of investing $10,000, they end up

paying in much more in an attempt to make their original decision right.

6. Randomness Error: Creating meaning out of random events – superstitions

Ex: people who believe in the myth Friday the 13th will never make

important decision on that day

7. Winner’s Curse

Ex: Highest bidder pays too much due to value overestimation

Likelihood increases with the number of people in auction

8. Hindsight Bias After an outcome is already known, believing it could have been

accurately predicted beforehand

Ex: before an ad campaign, a manager may have anticipated an 80 percent

success rate. But if the campaign fails, he is likely to recall having given it a

lower chance of success

Improvement Is A Proof!

INFLUENCES ON DECISION MAKING

Individual Differences

Personality

– Conscientiousness may affect 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

People with higher levels of mental ability make decisions more quickly as well as

make better decisions because they are able to process information more effectively.

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

Global implications in 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

Reducing biases and errors

Focus on Goals: clear goals make decision making easier and help

you eliminate options that are inconsistent with your interests

Look for information that disconfirms your beliefs: when we overtly

consider various ways we could be wrong, we challenge our

tendencies to think we’re smarter than we actually are

Don’t try to create meaning out of random events: don’t attempt to

create meaning out of coincidence.

Increase your options: the more alternatives you can generate, and the

more diverse those alternatives, the greater your choice of finding an

outstanding one

Improvement Is A Proof!

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

• So long as a course of action produces maximum benefits for everyone,

utilitarianism does not care whether the benefits are produced by lies,

manipulation, or coercion.

Pro: Promotes efficiency and productivity

Con: Can ignore individual rights, especially minorities

Rights

• Decisions consistent with fundamental liberties and privileges

• Respecting and protecting basic rights of individuals such as whistleblowers

Pro: Protects individuals from harm; preserves rights

Con: Creates an overly legalistic work environment

Justice

• Imposing and enforcing rules fairly and impartially

• Equitable distribution of benefits and costs

Pro: Protects the interests of weaker members

Con: Encourages a sense of entitlement

Ex: union members typically favor this view to make employers pay the same

wage for a given job regardless of performance differences

Improving Creativity in Decision Making

Creativity

– The ability to produce novel and useful ideas in terms of making better

decisions

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

Global implications in 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

Improvement Is A Proof!

who persevere in the face of frustration

The Three Component Model of Creativity

Proposition that individual creativity results from a mixture of

three components

– Expertise is the foundation and is based on the

knowledge and experience of the individual.

– Creative-Thinking Skills are the personality

characteristics associated with creativity, such as

the ability to use analogies and the talent to see

things differently.

– Intrinsic Task Motivation is the desire to do the

job because of the characteristics associated with

the job.

Expertise

Creative-Thinking Skills

Intrinsic Task

Motivation