HNDBM – 6. Perception & Individual Decision Making Lim Sei Kee @ cK

Perception A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment. Individuals may look at the same thing, yet perceive it differently.

FACTORS IN THE PERCEIVER Attitudes Motives Interests Experience Expectations FACTORS IN THE TARGET Motion Sounds Size Background Similarity PERCEPTION FACTORS IN THE SITUATION Time Work setting Social setting

Attribution theory When individuals observe behavior, they attempt to determine whether it is internally or externally caused. Depends on: Distinctiveness – displays different behaviors in different situations Consensus – everyone with a similar situation responds in the same way Consistency – respond the same way over time

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. Self-serving bias – the tendency for individuals to attribute their own successes to internal factors while putting the blame for failures on external factors.

Shortcuts in judging others Selective perceptions Halo effect Contrast effect Projection Stereotyping Self-fulfilling prophecy Profiling

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 characteristics. Contrast effect – evaluation of a persno’s characteristics that are affected by comparisons with other people recently encountered who rank higher or lower on the same characteristics.

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. Self-fulfilling prophecy – a situation in which one person inaccurately perceives a second person and the resulting expectations cause the second person to behave in ways consistent with the original perceptions. Profiling – a group of individuals is singled out – typically on the basis of race or ethnicity – for intensive inquiry or investigation.

Decisions – the choices made from among two or more alternatives Problem – a discrepancy between some current state of affairs and some desired state

Rational decision-making process 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. Defining the problem Identify the decision criteria Allocate weights to the criteria Develop the alternatives Evaluate the alternatives Select the best alternative

Assumptions of the model Problem clarity Known options Clear preferences Constant preferences No time or cost constraints Maximum payoff

Improving creativity in Decision Making Creativity – the ability to produce useful ideas Ideas that are different from what’s been done before but that are also appropriate to the problem or opportunity presented.

Three-component model of creativity 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

Decisions in organizations Bounded Rationality – individuals make decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity

Common biases and errors Overconfidence bias Anchoring bias Confirmation bias Availability bias Representative bias Escalation of Commitment bias Randomness Error Hindsight bias

Overconfidence bias – ‘no problem in judgment and decision making’ Anchoring bias – a tendency to fixate on initial information as a starting point. Confirmation bias – 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 – the tendency for people to base their judgments on information that is readily available to them

Representative bias – assessing the likelihood of an occurrence by trying to match it with a preexisting category. Escalation of Commitment Error – an increased commitment to a previous decision in spite of negative information. Randomness Error – difficulty dealing with chance. Hindsight bias – the tendency for us to believe falsely that we’d have accurately predicted the outcome of an event, after that outcome is actually known.

Intuition Intuitive decision making – an unconscious process created out of distilled experience. Eight conditions for intuitive decision making – When high level of uncertainty exists When there is little precedent to draw on When variables are less scientifically predictable When ‘facts’ are limited When facts don’t clearly point the way When analytical data are of little use When there are several plausible alternative solutions from which to choose When time is limited and there is pressure

Decision making style 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

Ethical decision criteria Utilitarianism – decisions are made to provide the greatest good for the greatest number Whistle-blowers – individuals who report unethical practices by their employer to outsiders Justice – impose and enforce rules fairly so that there is an equitable distribution of benefits and costs.

Presentation Q When relying on intuition, the decision maker often arrives at a conclusion without using a step-by-step logical process. Can we just depend on intuition? Explain.