Chapter 6 Robbins and Judge

Perception and
Individual Decision-Making

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PERCEPTION  

 Perception is a process by which individuals

organize and interpret their sensory impressions
in order to give meaning to their environment.

 It is important to the study of OB because

peoples’ behaviors are based on their perception
of what reality is, not on reality itself.

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THE FACTORS THAT INFLUENCE PERCEPTION  

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 PERSON PERCEPTION: ATTRIBUTION THEORY

 Person perception refers to the perception people form about

other people.
 Attribution theory suggests that when we observe an
individual’s behavior, we attempt to determine whether it was
internally or externally caused.
 Internally caused - those that are believed to be under the

personal control of the individual.

 Externally caused - resulting from outside causes. ; that is,

the person is seen as having been forced into the behavior by the
situation.

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ATTRIBUTION THEORY
 Determination/attribution depends on three factors:
 Distinctiveness: Whether an individual displays

different behaviours in different situations

 Consensus: Do everyone facing a similar

situation react in a similar manner?

 Consistency: Does an individual behave in the

same way over time?

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ATTRIBUTION THEORY

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ATTRIBUTION ERRORS
 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 more and failures on external

factors.

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COMMON SHORTCUTS USED TO MAKE
JUDGMENTS
 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 about

us, we engage in selective perception.

 Halo Effect
 The halo effect occurs when we draw a general

impression about someone on the basis of a single

characteristic.
 The reality of the halo effect was confirmed in a

classic study. 6-9

COMMON SHORTCUTS USED TO MAKE
JUDGMENTS
 Contrast Effects
 We do not evaluate a person in isolation.

 Our reaction to one person is influenced by

other persons we have recently encountered.

 For example, an interview situation in which

one sees a pool of job applicants can distort

perception.
 Distortions in any given candidate’s evaluation
can occur as a result of his or her place in the
interview schedule.

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ATTRIBUTION ERRORS OR SHORTCUTS

 Stereotyping
 Judging someone on the basis of our perception

of the group to which he or she belongs.

 This is a means of simplifying a complex world,

and it permits us to maintain consistency.

 The problem, of course, is when we inaccurately

stereotype. In organizations, we frequently hear

comments that represent stereotypes based on gender,
age, race, ethnicity, and even weight

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 APPLICATIONS OF SHORTCUTS IN
ORGANIZATIONS
 Employment Interview
 Evidence indicates that interviewers make perceptual

judgments that are often inaccurate.

 Agreement among interviewers is often poor.

 One common shortcut used during interviews is “first

impression bias”.

 Performance Expectations
 Evidence demonstrates that people will attempt to validate their

perceptions of reality, even when those perceptions are faulty.

 Self-fulfilling prophecy or Pygmalion effect characterizes the

fact that people’s expectations determine their behavior.

Expectations become reality. 6-12
 THE LINK BETWEEN PERCEPTION AND
DECISION-MAKING

 Decision-making occurs as a reaction to a problem.

 Every decision requires interpretation and evaluation of
information.
 Alternatives will be developed, and the strengths and
weaknesses of each will need to be evaluated.
 Finally, decision is made.

Perception and the perceptual process affects all of these

steps.
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 Copyright © 2013 Pearson Education,
Inc. publishing as Prentice Hall

DECISION MAKING
 Individuals need to take a decision when they are
faced with a problem.
 Problem is a discrepancy between some current
state of affairs and some desired state
 Decisions refer to choosing between multiple
alternative course of actions.
 Ideally, individuals and managers should be
rational while making decisions.

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 Copyright © 2013 Pearson Education,
Inc. publishing as Prentice Hall

MODELS OF DECISION MAKING

There are 3 models of decision making:

1. Rational model: Individuals will make the decision that will

maximize their value/utility while remaining within the
specified constraints. .
2. Bounded rational model: Individuals will take decisions that
will satisfice rather than maximize value.
3. Intuitive decision making model: individuals will rely more
on gut feeling, emotion and intuition while taking decisions
rather than on systematic approach of logic.

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MODELS OF DECISION-MAKING: RATIONAL

Assumptions of the Rational Model

The decision maker has complete information;
is able to identify all the relevant options in an
unbiased manner; and Chooses the option
with the highest utility.
Most decisions in the real world don’t follow the rational model. 6-16
 MODELS OF DECISION-MAKING: BOUNDED RATIONALITY
 Bounded Rationality
 Most people respond to a complex problem by reducing the problem to a
level at which it can be readily understood.
 Individuals operate within the confines of bounded rationality. They
construct simplified models that extract the essential features.

 How does bounded rationality work?

 Once a problem is identified, the search for criteria and options

begins.
 Identify a limited list made up of the more conspicuous choices,

which are easy to find, tend to be highly visible, and they will
represent familiar criteria and previously tried-and-true solutions.
 Once this limited set of options is identified, the decision maker

will begin reviewing it.

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 MODELS OF DECISION-MAKING: INTUITION

 Intuition
 Intuition occurs outside conscious thought; it relies

on holistic associations, or links between disparate

pieces of information; it’s fast; and it’s 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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COMMON DECISION BIASES OR ERRORS

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COMMON DECISION BIASES OR ERRORS
 Overconfidence Bias
 The tendency to be too confident and optimistic about one’s own

ability, skills and decision making prowess.

 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 while taking decisions.

 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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 COMMON DECISION BIASES OR ERRORS
 Escalation of Commitment
 Staying with a decision even when there is clear evidence

that it’s wrong.

 Randomness Error
 Decision-making becomes impaired when we try to create

meaning out of random events.

 Risk Aversion
 Risk-averse employees will stick with the established way

of doing their jobs, rather than taking a chance on

innovative or creative methods.
 Hindsight Bias
 Tendency to believe falsely that one has accurately

predicted the outcome of an event, after that outcome is

actually known. 6-21
 Copyright © 2013 Peason Education,
Inc. publishing as Prentice Hall

APPLICATION IN FINANCIAL DECISION MAKING

 The US mortgage market crash that led to the

global financial recession of 2008/2009 is a grate
case of seeing the application of the various
biases in organizational decision making.

 In the above case, overconfidence bias,

confirmation bias and escalation of commitment
were very prevalent.

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INFLUENCES ON DECISION MAKING: INDIVIDUAL DIFFERENCES
AND ORGANIZATIONAL CONSTRAINTS

 Individual differences affect the decision making process and

might cause individuals to deviate from a rational approach.
 These differences include:
 Personality differences: For example, conscientiousness affects
decision making.
 Gender differences: females, compared to males, spend much
more time analyzing the past, present and future. They are likely
to overanalyze problems, rehash a decision once made, regret over
past decisions and suffer from depression. But their decision is also
likely to be more sound and well thought.
 Mental ability differences

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INFLUENCES ON DECISION MAKING: INDIVIDUAL DIFFERENCES
AND ORGANIZATIONAL CONSTRAINTS

 Organizational constraints include:

 Performance evaluation and reward system
 Formal regulations
 System imposed time constraint
 Historical precedent

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 ETHICAL DECISION-CRITERIA

 Utilitarian criterion—decisions are made solely on the

basis of their outcomes or consequences. Focus is on
achieving greater good for the maximum number of
people.
 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.
 Impose and enforce rules fairly and impartially to
ensure justice or an equitable distribution of benefits and
costs.

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CREATIVITY: THE THREE-COMPONENT MODEL
OF CREATIVITY

Expertise

Creative Thinking
Skills
Creativity

Intrinsic Task
Motivation

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