Chapter 5: Perception and Individual Decision Making

Perception

Perception is defined as a process of organising and interpreting impressions, thus giving meaning to the external environment, it is
organizing our world with impressions we have. It is different from reality, it’s subjective, personal. Factors which influence perception can
be grouped: there are factors in the perceiver (attitudes, motives, interests, etc.), factors in the target (novelty, motion, sounds, size,
etc…) and factors in the situation <context> (time, work and social setting).

Attribution theory

It is important to remember the attribution theory. It is based on the concept that when judging people we try to explain their behavior
in two possible ways. Why? Because we recognize that 1) behavior can be internally caused and/or 2) behavior can be externally caused.
When observing, judging a person we try to determine whether his behavior is caused internally or externally. Internally caused behaviors
are the ones we see as under the control of an individual. Externally caused are the ones we see as the situation forcing a person to do
something. There are, however, 3 factors that determine the fact whether we perceive one’s behavior as internally or externally caused.

1. Distinctiveness - > degree to which one behaves differently in different situations

2. Consensus -> degree to which people facing the same situation, respond similarly
3. Consistency -> degree to which one’s behavior is consistent, unchanging over time

Moreover, when we judge behaviors of others, we often make fundamental attribution error. It is a tendency to underestimate the
external environment (situational circumstances) and overestimate internal factors (e.g. blame the person, his personality).

Apart from fundamental attribution error, we are usually under the high influence of self-serving bias. It is one’s tendency of attributing
his successes to internal factors and failures to external factors. Not blaming self, blaming others.

Shortcuts in judging others

 Selective perception -> we base our judgments on the selected by us range/sample of characteristics (when we judge a person) or
aspects of a situation. We can ‘speed-read’ others, but there is a risk of inaccurate judgements.
 Hallo effect -> tendency to make mental generalizations, impressions about a person basing on just his one characteristic. A single
trait can influence the overall impression.
 Contrast effects -> when judging a person we compare him to other people we have lately met and whom we have evaluated
better or worse on a particular dimension
 Stereotyping-> judging someone on the basis of a perception we have about a group to which he belongs. Profiling is a different
category of stereotyping – it is selecting a particular group which we stereotype aiming at intensive inquiry/investigation (used in
police, criminology)

Applications of shortcuts in organizations:

 Employment interview - > first impression is extremely important

 Performance expectations -> might be concerned with self-fulfilling prophecy – effect of one’s inaccurate perception about another
person makes this person confirm that inaccurate perception (and behave in such way).
 Performance evaluation: subjective evaluations can be problematic.

Link between perception and individual decision making

Perceptions largely influence the quality of decision-making. The decision-maker will evaluate the data received according to his
perception, bias may be involved.

Decision-making in organisations can fall into one of the three categories:

1. Rational model -> decision-making model that consists of 6 steps, which one should take to find a problem-solution. Gives a
ready scheme that follows a logical order.
2. Bounded rationality -> based on the idea that people simplify problems to be able to deal with them, we take out multifaceted
aspects of the problem and thus reduce complexity. Only find the first acceptable solution, but not the optimal one.
3. Intuitive decision making -> relaying on intuition when making a decision, takes place on unconscious level. It would be
effective to complement this with evidence and good judgements in decision making.

Common biases and errors in decision- making:

 Overconfidence bias – we overestimate our abilities, intellect, knowledge.

 Anchoring bias – we rely too much on one piece of information or “anchor”.
 Confirmation bias – in a decision-making it means seeking out information that reaffirm our previous choices and discount
information that contradicts it.
 Availability bias – basing decision on information that is already gathered and available.
 Escalation of commitment – not changing the previous decision despite the negative information.
 Randomness error – tendency to believe that one can predict random events
 Winner’s curse – concept which states that winners of auctions usually pay too much

for items they bought, in that they overvalue the items.

 Hindsight bias – inclination to see events that have occurred as more predictable than they in fact were before they took place.
Individual differences in decision- making:

 Personality: achievement striving people are more likely to escalate commitments than dutiful people.
 Gender – women have tendency to rumination (over-thinking problems, decisions, analyzing them for very long, before and after
some decisions are made)

Organisational constraints:

 Performance evaluation – managers are influenced in their decision-making by criteria of their later evaluation
 Reward system – organization’s reward system influences decision-making
 Formal regulations – choices, decisions which are made have to fit to regulations, rules, directives of a firm
 System-imposed time constraints – imposing deadlines influence decision-making
 Historical precedents – today’s choices are influenced by past choices

Ethics in decision making - 3 ethical decision criteria

Utilitarian criterion – the aim of utilitarianism –> make the best decision that provides greatest good for the greatest number. Pros and
cons: promotes efficiency, productivity but ignores individuals (can be minorities).

Rights – making decisional choices consistent with rights, laws, liberties. This criterion protects whistle-blowers who are workers that
reveal unethical practices of their organization (because they have a right to free speech). Pros and cons: gives individual freedom, rights,
protection, but at the same time creates too much of a law-based environment, which lowers productivity and efficiency

Justice – criterion which characterises people who make decision to achieve equity and aim at fair distribution of benefits. Pros and cons:
protects rights of underprivileged, but creates a sense of entitlement, this reduces risks taking, innovation, productivity.

Utilitarianism tends to be the safe choice for decision-makers, but should not be the single criterion to judge good decisions.

Improving creativity in decision making

Creativity can be described as ability to generate new, innovative, useful and resourceful ideas. It is becoming more important in decision-
making process. Allows to see more perspectives and angles of a problem. Most of us need to learn to unleash our creative potential

Three-component model of creativity. It is a model that proposes that one’s creativity needs expertise (know-how, particular knowledge),
creative thinking skills and task motivation (high motivation to work on interesting, challenging projects)

Global consequences:

1. Attributions – attributions which people make differ across countries. One needs to be aware of this fact when making decision or
judging decisions of others.
2. Decision-Making – culture has influence on the decision-making process.
3. Ethics – there are different ethical norms in different cultures.