Chapter 3 Perception & Individual Decision Making 1

Individuals & Perception Perception: Process by which we organize and interpret our sensory input to give our environment meaning. (The world we perceive is the world that’s meaningful and important.)

Managers and Perception Mgmt. jobs require (among other things): Observing people and situations Gathering and interpreting information Making decisions based on: factual information (ideal) subjective interpretations (reality)

The Three Stages of Perception Stage 1: Attention Stage 2: Organization Stage 3: Judgment and Interpretation Social perception is a process that consists of three stages: attention, organization, and interpretation and judgment. 4

Stage 1: Attention Perceptual Filters Selective Attention Salient Cues The first stage of the social perception process involves paying attention to signals from the environment. This attention stage involves selecting the cues, stimuli, and signals to which we will pay attention. In this stage, we filter out some information and allow other cues to enter the perception process. This process is called the perceptual filter. At the core of this process is selective attention--we pay attention to some, but not all, physical and social cues. Many factors determine what makes it through our perceptual filter during the attention stage. Culture is one factor; another is salience. Salient cues are those that are so striking that they stand out. All else being equal, we will pay attention to cues that are novel or brighter, noisier, or more dynamic than others. Intensity of stimuli and cultural differences also affect the ways in which we perceive various stimuli. Once information breaks through the perceptual filter to grab our attention, we must organize the cues and information into meaningful sets that we can use. 5

Stage 2: Organization The Use of Schemas Positive Aspects? Negative Aspects? The second stage of the perception process is called organization. During this stage, we organize information that the perceptual filter allowed through during the attention stage. The major process at work during this stage is the use of schemas--mental models that people apply to explain certain situations and events. On the plus side, schemas allow us to process information quickly. They help us remember details and complete gaps in information. On the negative side, schemas can lead to error. For instance, we may use closure too quickly and accept what seems to “fit” too readily. Another disadvantage is that schemas are hard to change for two reasons: (1) our lack of awareness of the schemas that we hold and (2) our reluctance to abandon schemas that we value. Our schemas are greatly affected by our cultural background. When interacting with others, we must remember that our schemas affect our perceptions. 6

The Attribution Process Stage 3: Judgment and Interpretation The Attribution Process Internal (or Personal) External (or Situational) In the interpretation and judgment stage of social perception, we clarify and translate the information we have organized so that we may decide on its meaning. Through interpretation, we form an opinion about an event or a person. Through judgment, we decide on causes. We use the attribution process to assign causes to our behavior. If we make an internal attribution, we believe the behavior was caused by factors within the control of the person. They may be stable (values or personality) or impermanent (effort or motivation). We make external attributions when we think that factors “outside” the person cause behaviors; such as, luck, physical setting, task difficulty, organizational culture, or the behavior of others. Attributions are important to managers when interviewing potential workers or evaluating performance. When making attributions, managers consider several factors: whether the behavior is unique or distinctive to a particular task or situation; whether the behavior reflects a consensus or is unique to the person and situation; and whether there is some consistency to the behavior. The self-perception theory refers to people’s tendency to look for internal and external factors when asked to explain their behaviors. When we receive high external rewards, we are likely to see them as the cause of our behavior. The tendency to make external attributions when external rewards are given is called overjustification. When there are no clear rewards, we attribute behavior to internal causes. 7

Biases (or “shortcuts” to judging) Attribution (self-serving bias) Stereotyping Selectivity, Contrast Halo (and Horn) Projection Similar-to-me Primacy, Recency Perceptual biases are distortions, often caused by cognitive shortcuts. The halo effect creates a positive impression that becomes the central factor around which all other information is selected, organized, and interpreted. The similar-to-me effect leads one to like a person that seems similar to him or her or to quickly dislike a person that is different. A stereotype is a generalization about a person based on one’s perception of the group to which that person belongs. While stereotypes allow us to process information quickly, they compromise effectiveness and accuracy. And once formed, they are difficult to change. The primacy effect occurs when people overemphasize early information. The recency effect occurs if people overemphasize the most recent information. Just like halos and stereotypes, primacy and recency effects will bias perception at the attention and organization stages. Fundamental attribution error is the tendency to underestimate situational factors and overestimate personal factors when making attributions about the behavior of others. We tend not to give people the benefit of the doubt. When we look for the causes of our own behavior, we rely on external observations. This process is called the actor-observer difference. Self-serving bias the tendency to accept credit for success and reject blame for failures. 8

Management Activities Affected by Perceptual Biases Interviews Hiring Training Raises Promotions Discipline Performance Evaluations (anything requiring info. processing!)

Forces Working to Increase Biases Need for Consistency: We unconsciously push for “data” that confirm our assumptions and beliefs; we “force” information to fit expectations. Phenomenal Absolutism: “What I see is objective reality; what you see is perceived bias.” Channeling: Self-reinforcing cycle (we perceive people a certain way and never give them a chance to show otherwise; we thus always see them how we perceived them). Pygmalion Effect: Self-fulfilling prophecy (we perceive people a certain way, treat them accordingly and they become what we believed them to be (i.e., they develop the very KSAOs, etc.) Perceptual biases are distortions, often caused by cognitive shortcuts. The halo effect creates a positive impression that becomes the central factor around which all other information is selected, organized, and interpreted. The similar-to-me effect leads one to like a person that seems similar to him or her or to quickly dislike a person that is different. A stereotype is a generalization about a person based on one’s perception of the group to which that person belongs. While stereotypes allow us to process information quickly, they compromise effectiveness and accuracy. And once formed, they are difficult to change. The primacy effect occurs when people overemphasize early information. The recency effect occurs if people overemphasize the most recent information. Just like halos and stereotypes, primacy and recency effects will bias perception at the attention and organization stages. Fundamental attribution error is the tendency to underestimate situational factors and overestimate personal factors when making attributions about the behavior of others. We tend not to give people the benefit of the doubt. When we look for the causes of our own behavior, we rely on external observations. This process is called the actor-observer difference. Self-serving bias the tendency to accept credit for success and reject blame for failures. 8

Strategies to Decrease Biases Recognition: The first step is to admit you don’t objectively see “reality” (ask: “What else could be true?”) Awareness: What are the areas in which your biases typically operate? What are your implicit cognitive schema? What are your culturally-based mental models? Support: Ask for reminders, solicit help and seek for open and honest feedback. Contact: Spend time with people from groups you stereotype and actively seek all the “disconfirming” evidence you can (avoid the “exception” hypothesis). Perceptual biases are distortions, often caused by cognitive shortcuts. The halo effect creates a positive impression that becomes the central factor around which all other information is selected, organized, and interpreted. The similar-to-me effect leads one to like a person that seems similar to him or her or to quickly dislike a person that is different. A stereotype is a generalization about a person based on one’s perception of the group to which that person belongs. While stereotypes allow us to process information quickly, they compromise effectiveness and accuracy. And once formed, they are difficult to change. The primacy effect occurs when people overemphasize early information. The recency effect occurs if people overemphasize the most recent information. Just like halos and stereotypes, primacy and recency effects will bias perception at the attention and organization stages. Fundamental attribution error is the tendency to underestimate situational factors and overestimate personal factors when making attributions about the behavior of others. We tend not to give people the benefit of the doubt. When we look for the causes of our own behavior, we rely on external observations. This process is called the actor-observer difference. Self-serving bias the tendency to accept credit for success and reject blame for failures. 8

Link between Perception and Decision Making Decision making occurs as a reaction to a problem situation Perception influences: Awareness that a problem exists Interpretation and evaluation of information Bias in analyses and conclusions

Individual Decision Making What makes a decision “good”? Follows a “rational” process Achieves the intended goal or objective It is ethical (or morally sound)

Rational Decision-Making Model 5. Evaluate Alternatives 1. Define the Problem 4. Develop Alternatives 2. Identify the Criteria 5. Evaluate Alternatives The rational decision-making process promotes objective, thorough gathering and use of information to make rational decisions. The model assumes that managers have complete information about the situation, the alternatives, and their consequences; that managers want to make the best decision; that decisions are made without biases or interpersonal conflicts; and that decision makers do not have time or cost constraints. To identify the problem, managers must move through the first four steps of the rational decision-making process: (1) understand the situation, (2) define the problem, (3) define objectives, and (4) diagnose the problem. To make and implement a decision, managers must follow the last four steps: (1) develop alternatives, (2) evaluate alternatives, (3) choose an alternative, and (4) implement a solution. In reality, the assumptions of the rational decision-making model rarely exist. The bounded rationality model, discussed next, describes a decision-making process that occurs more often in organizations. 3. Weight the Criteria 6. Select “Best” Option 3

Assumptions of the Rational Decision-Making Model Managers have complete info. about: the situation the alternatives the consequences Managers want to make “best” decision There are clear and constant preferences There’s no interference from perceptual biases or interpersonal conflicts There are no time or cost constraints

Bounded Rationality Model Situation Constraints Attention Task and Situation Constraints Organization Interpretation and Judgment The bounded rationality decision-making model assumes that numerous organizational and individual factors restrict rational decision making. The following assumptions guide the model: (1) Early alternatives and solutions are adopted quickly because of perceptual limitations. (2) Managers rarely have all of the information they need. (3) Managers do not know all possible alternatives and cannot fully predict their consequences. (4) Organizational goals constrain decisions. (5) Conflicting goals of multiple stakeholders can restrict decisions and force compromise solutions. The model assumes that the perceptual process is an individual factor that constrains rational decision making. First, people have limited information- processing abilities, so they cannot process all possible information. Second, perceptual biases affect the decision-making process. Third, the complexity of the environment and task affect how objectively managers make decisions. Given the limits of the perceptual process, most decision makers reduce complex decisions to a manageable size. They also limit the number of choices and the amount of information they gather. Instead of optimizing, therefore, decision makers often satisfice by making decisions which are acceptable and satisfactory (not necessarily ideal). Behaviors Bounded Rationality (or, the quest to “suffice”) 4

Implications of Bounded Rationality Limited info-processing capabilities means use of all information to optimize, is impossible. Limited list of criteria, based on more obvious choices. We quickly accept satisficing choices (first acceptable), rather than “work” for optimal. All biases from human perception readily come into play.

Intuition and Decision Making Intuition: Unconscious process created out of deep expertise, resulting in rapid decisions with apparently very limited info. When do we typically see effective Intuition used? High uncertainty exists Little precedent to draw on Variables are less predictable Facts/data are limited Facts/data don’t clearly point the way Analytical data of little use Several plausible solutions to choose from Limited time with high pressure for right decision (effective use of the above assumes high expertise)

Common Decision- Making Individual Biases/Errors Escalation of commitment Overconfidence bias Anchoring bias Confirmation bias Availability bias Representative bias Randomness error Hindsight bias Attribution/Self-serving bias Perceptual biases are distortions, often caused by cognitive shortcuts. The halo effect creates a positive impression that becomes the central factor around which all other information is selected, organized, and interpreted. The similar-to-me effect leads one to like a person that seems similar to him or her or to quickly dislike a person that is different. A stereotype is a generalization about a person based on one’s perception of the group to which that person belongs. While stereotypes allow us to process information quickly, they compromise effectiveness and accuracy. And once formed, they are difficult to change. The primacy effect occurs when people overemphasize early information. The recency effect occurs if people overemphasize the most recent information. Just like halos and stereotypes, primacy and recency effects will bias perception at the attention and organization stages. Fundamental attribution error is the tendency to underestimate situational factors and overestimate personal factors when making attributions about the behavior of others. We tend not to give people the benefit of the doubt. When we look for the causes of our own behavior, we rely on external observations. This process is called the actor-observer difference. Self-serving bias the tendency to accept credit for success and reject blame for failures. 8

Common Organization- Level Constraints Performance evaluations Reward/punishment systems Formal regulations and policies System-imposed time and resource constraints Historical precedents Perceptual biases are distortions, often caused by cognitive shortcuts. The halo effect creates a positive impression that becomes the central factor around which all other information is selected, organized, and interpreted. The similar-to-me effect leads one to like a person that seems similar to him or her or to quickly dislike a person that is different. A stereotype is a generalization about a person based on one’s perception of the group to which that person belongs. While stereotypes allow us to process information quickly, they compromise effectiveness and accuracy. And once formed, they are difficult to change. The primacy effect occurs when people overemphasize early information. The recency effect occurs if people overemphasize the most recent information. Just like halos and stereotypes, primacy and recency effects will bias perception at the attention and organization stages. Fundamental attribution error is the tendency to underestimate situational factors and overestimate personal factors when making attributions about the behavior of others. We tend not to give people the benefit of the doubt. When we look for the causes of our own behavior, we rely on external observations. This process is called the actor-observer difference. Self-serving bias the tendency to accept credit for success and reject blame for failures. 8

Three Components of Creativity Creativity Skills Expertise Creativity Task Motivation

Characteristics of Creative People Self-confidence and perseverance in the face of obstacles Willingness to take risks Openness to new experiences (“lateral” thinkers) and a willingness to grow Tolerant with ambiguity

Org. Factors Affecting Creativity Attitudes toward divergent views, opinions and questioning Cultural value placed on tradition and conformity versus innovation Leadership attitudes toward dissent Degree of formality in org. structures Acceptance of risk and failure

Org. Factors Impeding Creativity Expected evaluation Surveillance External motivators Competition Constrained choice

Impact of Cultural Differences Cultural background significantly influences: Selection of problems What constitutes “acceptable” criteria Depth of analysis Importance placed on logic and rationality Whether decisions should be made: Autocratically (by one person, manager), or Collectively (by groups)

Implications for Managers Six suggestions to improve decision making: Analyze the situation and adjust to the national culture and criteria of the organization Be aware of, and work past, your personal biases Recognize that your specific decision style is *not* always appropriate for every job or situation Combine rational analysis with intuition Use creativity-enhancing techniques Be prepared to take a stand for your ethics/beliefs