Individual Decision Making 5 Perception and Individual Decision Making

Perception Perception: The process by which individuals select, organize, and interpret the input from their senses. Schemas, motivational state, and mood all play a part in perception.

Components of Perception Perceiver: The person trying to interpret some observation that he or she has just made. Target: Whatever the perceiver is trying to make sense of. Situation: The context in which the perception takes place.

FIGURE 4.2 Characteristics of the Perceiver That Affect Perception

Schemas Schemas: Abstract knowledge structures that are stored in memory and make possible the organization and interpretation of information about targets of perception.

Motivational State and Mood Motivational State: The needs, values, and desires of a perceiver at the time of perception. Mood: How a perceiver feels at the time of perception.

Characteristics of the Target and the Situation Ambiguity Social Status Motion Size SITUATION: Salience novel standing out inconsistent with expectations

Salience The extent to which a target of perception stands out in a group of people or things. Causes might be: Being novel Standing out Being Inconsistent with Expectations

Perception Biases and Problems Primacy Effects* Contrast Effects Halo Effect Similar-to-me Effects* Harshness, Leniency, and Average Tendency Biases* Knowledge-of-Predictor Bias* Selective Perception Projection Stereotyping

Primacy Effects The initial pieces of information that a perceiver has about a target have an inordinately large effect on the perceiver’s perception and evaluation of the target. For example, interviewers decide in the first few minutes whether or not a job candidate is a good prospect.

Contrast Effects The perceiver’s perceptions of others distort the perceiver’s perception of a target. For example, a manager’s perception of an average subordinate is likely to be lower if that subordinate is in a group with very high performers rather than in a group with very low performers.

Halo Effect The perceiver’s general impression of a target distorts his or her perception of the target on specific dimensions. For example, a subordinate who has made a good overall impression on a supervisor is rated as performing high-quality work and always meeting deadlines even when work is flawed.

Similar-to-Me Effects People perceive others who are similar to themselves more positively than they perceive those who are dissimilar. For example, supervisors rate subordinates who are similar to them more positively than they deserve.

Harshness, Leniency, and Average Tendency Biases Some perceivers tend to be overly harsh in their perceptions, some overly lenient. Others view most targets as being about average. For example, some supervisors give nearly everyone a poor rating, some give nearly everyone a good rating, and others give mostly average ratings.

Knowledge-of-Predictor Bias Knowing how a target stands on a predictor of performance influences perceptions of the target. For example, a professor perceives a student more positively than she deserves because the professor knows the student had a high score on the SAT.

Selective Perception selectively interpret what see based on own interests, background, experience, and attitudes.

Projection attribute own characteristics to others.

Stereotyping judge someone on the basis of the perception of the group to which they belong instead of their own characteristics.

Definition Attribution Theory: A group of theories that describe how people explain the causes of behavior.

FIGURE 4.3 Types of Attributions

Sources of Information Internal attribution if low consensus, low distinctness, high consistency External attribution if high consensus, high distinctness,

Theory and Individual Behavior Attribution of Cause Interpretation Observation Theory and Individual Behavior External Internal Distinctiveness Consensus Consistency High Low Prentice Hall, 2001

Attributional Biases Fundamental attribution error - the tendency to overattribute behavior to internal rather than external causes. Actor-observer effect - the tendency to attribute the behavior of others to internal causes and to attribute one’s own behavior to external causes.

Attributional Bias Self-serving attribution - the tendency to: perceive own success as internal and failures as external. perceive others success as external, and failure as internal take credit for successes and avoid blame for failures.

Definition Decision Making: The process by which members of an organization choose a specific course of action to respond to both problems and opportunities.

The Decision-Making Process Rational Model of Decision Making Bounded Rationality Intuitive Model

Rational Model of Decision Making A prescriptive approach based on the assumptions that the decision maker has all the necessary information and will choose the best possible solution or response.

Rational Model of Decision Making Problem Identify and Define Problem Develop Alternatives A1 A2 A3 A4 An Evaluate + Criteria Weight the Criteria T E C H Set Decision Choice Make Optimal Decision Prentice Hall, 2001

Assumptions of the Rational Model Problem clarity. Known options. Clear preferences. Constant preferences. No time or cost constraints. People choose maximum payoff. People have very high computational abilities

Bounded Rationality Bounded Rationality: People’s ability to reason is constrained by the limitations of the human mind itself. If a problem is too complicated people simplify it and use satisficing Satisficing: Searching for and choosing the first acceptable response or solution, not necessarily the best possible one.

Intuitive Model an unconscious process created out of distilled experience. intuition is often based on accumulated experiences which allow one to recognize patterns. Main problem: since the criteria are not open to examination, intuition is often strongly influenced by perceptual biases.

Intuitive Decision Making most common under conditions of High uncertainty levels Little precedent Hard to predictable variables Limited facts Unclear sense of direction Analytical data is of little use Several plausible alternatives Time constraints Prentice Hall, 2001

Sources of Error in Decision Making Perceptual Biases Heuristics Availability Representitiveness Anchoring Escalation of Commitment

Heuristics: Rules of thumb that simplify decision making.

FIGURE 14.2 Heuristics and the Biases They May Lead To

Availability Heuristic The rule of thumb that says an event that is easy to remember is likely to have occurred more frequently than an event that is difficult to remember. Potential bias is overestimating the frequency of vivid, extreme, or recent events and causes.

Availability Biases Vividness and Recency individuals judge events that are easier to remember to be more numerous than events that are difficult to remember

Representativeness Heuristic The rule of thumb that says similar kinds of events that happened in the past are a good predictor of the likelihood of an upcoming event. Potential bias is failure to take into account base rates and overestimating the likelihood of rare events.

Representativeness Biases Insensitivity to base rates individuals tend to ignore base rates in assessing the likelihood of events when other descriptive information is present, even if that other information is irrelevant

Anchoring and Adjustment Heuristic The rule of thumb that says that decisions about how big or small an amount should be can be made by making adjustments from some initial amount. Potential bias is inappropriate decisions when initial amounts are too high or too low.

Anchoring and Adjustment Biases Insufficient anchor adjustment individuals make estimates for values based on some initial value, even when the initial value is irrelevant Overconfidence individuals tend to be overconfident of the infallibility of their judgements when answering difficult questions

One Additional Biases Hindsight Bias after finding out the correct outcome of an event, individuals tend to overestimate the extent to which they would have predicted that outcome

Escalation of Commitment Increased commitment to a previous decision in spite of negative information The tendency to invest additional time, money, or effort into what are essentially bad decisions or unproductive courses of action.

The Three Components of Creativity Expertise Creativity Task Motivation Creativity Skills Prentice Hall, 2001

Decision-Making Styles Tolerance for Ambiguity High Analytic Conceptual Tolerance for Ambiguity Directive Behavioral Low Rational Way of Thinking Intuitive Prentice Hall, 2001

Organizational Constraints Performance Evaluation Reward System Organizational Constraints Programmed Routines Historical Precedents Prentice Hall, 2001