Common shortcuts in judging others

Decision Making

6

Copyright © 2017 Pearson Education, Inc.

Learning Objectives

Explain the factors that influence perception.

Describe attribution theory.

Explain the link between perception and decision

making.

Contrast the rational model of decision making

with bounded rationality and intuition.

Explain how individual differences and

organizational constraints affect decision making.

Contrast the three ethical decision criteria.

Describe the three-stage model of creativity.

6-3

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Explain the Factors That Influence 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

people’s behaviors are based on their

perception of what reality is, not on reality itself.

6-4

LO 1

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Explain the Factors That Influence Perception

6-5

LO 1

Copyright © 2017 Pearson Education, Inc.

Explain Attribution Theory

Attribution theory suggests that when we

observe an individual’s behavior, we attempt to

determine whether it was internally or

externally caused.

Determination depends on three factors:

 Distinctiveness

 Consensus

 Consistency

6-6

LO 2

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Explain Attribution Theory

Clarification of the differences between

internal and external causation

 Internally caused – those that are

believed to be under the personal control of

the individual.

 Externally caused – resulting from outside

causes.

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LO 2

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Explain Attribution Theory

6-8

LO 2

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Explain Attribution Theory

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.

6-9

LO 2

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Explain Attribution Theory

Common Shortcuts in Judging Others

 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

around us, we engage in selective

perception.

6-10

LO 2

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Explain Attribution Theory

Halo effect

 The halo effect occurs when we draw a

general impression on the basis of a single

characteristic.

Contrast effects

 We do not evaluate a person in isolation.

 Our reaction to one person is influenced by

other persons we have recently

encountered.

6-11

LO 2

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Explain Attribution Theory Stereotyping

 Judging someone on the basis of our

perception of the group to which he or she

belongs.

We have to monitor ourselves to make

sure we’re not unfairly applying a

stereotype in our evaluations and

decisions.

6-12

LO 2

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Explain Attribution Theory

Applications of Shortcuts in Organizations

 Employment Interview

Evidence indicates that interviewers make

perceptual judgments that are often

inaccurate.

Interviewers generally draw early impressions

that become very quickly entrenched.

Studies indicate that most interviewers’

decisions change very little after the first four

or five minutes of the interview.

6-13

LO 2

Copyright © 2017 Pearson Education, Inc.

Explain Attribution Theory

Performance Expectations

Evidence demonstrates that people will attempt to validate their perceptions of reality, even when those perceptions are faulty.

Self-fulfilling prophecy, or the Pygmalion effect, characterizes the fact that people’s expectations determine their behavior.

Expectations become reality.

6-14

LO 2

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Explain Attribution Theory

Performance Evaluation

 An employee’s performance appraisal is

very much dependent upon the perceptual

process.

Many jobs are evaluated in subjective

terms.

Subjective measures are problematic

because of selective perception, contrast

effects, halo effects, and so on.

6-15

LO 2

Copyright © 2017 Pearson Education, Inc.

Explain the Link Between

Perception and Decision Making

Individuals make decisions – choosing from

two or more alternatives.

Decision making occurs as a reaction to a

problem.

 There is a discrepancy between some

current state of affairs and some desired

state, requiring consideration of alternative

courses of action.

One person’s problem is another’s

satisfactory state of affairs.

6-16

LO 3

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Rational Model of Decision Making vs.

Bounded Rationality and Intuition

6-17

LO 4

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Rational Model of Decision Making vs.

Bounded Rationality and Intuition

Assumptions of the Rational Model

 The decision maker…

Has complete information.

Is able to identify all the relevant options in

an unbiased manner.

Chooses the option with the highest utility.

Most decisions in the real world don’t follow

the rational model.

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LO 4

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Rational Model of Decision Making vs.

Bounded Rationality and Intuition

Bounded Rationality

 Most people respond to a complex problem by reducing it to a level at which it can be readily understood.

People satisfice – they seek solutions that are satisfactory and sufficient.

 Individuals operate within the confines of bounded rationality.

They construct simplified models that extract the essential features.

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LO 4

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Rational Model of Decision Making vs.

Bounded Rationality and Intuition

How does bounded rationality work?

 Once a problem is identified, the search for

criteria and options begins.

A limited list of the more conspicuous

choices is identified.

The decision maker then reviews the list,

looking for a solution that is “good

enough.”

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LO 4

Copyright © 2017 Pearson Education, Inc.

Rational Model of Decision Making vs.

Bounded Rationality and Intuition

Intuition

 Intuitive decision making occurs outside

conscious thought; it relies on holistic

associations, or links between disparate

pieces of information, is fast, and is

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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LO 4

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Rational Model of Decision Making vs.

Bounded Rationality and Intuition

6-22

LO 4

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Rational Model of Decision Making vs.

Bounded Rationality and Intuition

Common Biases and Errors in Decision Making

 Overconfidence Bias: 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.

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LO 4

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Rational Model of Decision Making vs.

Bounded Rationality and Intuition

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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LO 4

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Rational Model of Decision Making vs.

Bounded Rationality and Intuition

Escalation of Commitment: staying with a

decision even when there is clear evidence that

it’s wrong.

Likely to occur when individuals view

themselves as responsible for the outcome.

Randomness Error: our tendency to believe we

can predict the outcome of random events.

Decision making becomes impaired when

we try to create meaning out of random

events.

6-25

LO 4

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Rational Model of Decision Making vs.

Bounded Rationality and Intuition

Risk Aversion: the tendency to prefer a sure thing instead of a risky outcome.

Ambitious people with power that can be taken away appear to be especially risk averse.

People will more likely engage in risk-seeking behavior for negative outcomes, and risk- averse behavior for positive outcomes, when under stress.

Hindsight Bias: the tendency to believe falsely that one has accurately predicted the outcome of an event, after that outcome is actually known.

6-26

LO 4

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Individual Differences, Organizational

Constraints, and Decision Making

Individual Differences

 Personality

Conscientiousness

High self-esteem

 Gender

Rumination

 Mental Ability

 Cultural Differences

 Nudging

6-27

LO 5

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Individual Differences, Organizational

Constraints, and Decision Making

Organizational Constraints

 Performance Evaluation Systems

 Reward Systems

 Formal Regulations

 System-Imposed Time Constraints

 Historical Precedents

6-28

LO 5

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Contrast the Three

Ethical Decision Criteria

 Utilitarianism: decisions are made solely on

the basis of their outcomes or consequences.

 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.

 Protects whistle-blowers.

Impose and enforce rules fairly and impartially

to ensure justice or an equitable distribution of

benefits and costs. 6-29

LO 6

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Contrast the Three

Ethical Decision Criteria

Behavioral ethics: an area of study that

analyzes how people actually behave when

confronted with ethical dilemmas.

 Individuals do not always follow ethical

standards promulgated by their

organizations, and we sometimes violate

our own standards.

 There are ways to increase ethical decision

making in organizations.

 Consider cultural differences.

6-30

LO 6

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Contrast the Three

Ethical Decision Criteria Lying

One of the top unethical activities we may indulge in daily.

It undermines all efforts toward sound decision making.

Managers—and organizations—simply cannot make good decisions when facts are misrepresented and people give false motives for their behaviors.

Lying is a big ethical problem as well.

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LO 6

Copyright © 2017 Pearson Education, Inc.

Describe the Three-Stage

Model of Creativity

Creativity is the ability to produce novel and

useful ideas.

 These are ideas that are different from what

has been done before, but that are also

appropriate to the problem.

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LO 7

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Describe the Three-Stage

Model of Creativity

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LO 7

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Implications for Managers

Behavior follows perception, so to influence

behavior at work, assess how people perceive

their work. Often behaviors we find puzzling

can be explained by understanding the

initiating perceptions.

Make better decisions by recognizing

perceptual biases and decision-making errors

we tend to commit. Learning about these

problems doesn’t always prevent us from

making mistakes, but it does help.

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Implications for Managers

Adjust your decision-making approach to the

national culture you’re operating in and to the

criteria your organization values. If you’re in a

country that doesn’t value rationality, don’t feel

compelled to follow the rational decision-

making model or to try to make your decisions

appear rational. Adjust your decision approach

to ensure compatibility with the organizational

culture.

6-35

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Implications for Managers

Combine rational analysis with intuition. These

are not conflicting approaches to decision

making. By using both, you can actually

improve your decision making effectiveness.

Try to enhance your creativity. Actively look for

novel solutions to problems, attempt to see

problems in new ways, use analogies, and

hire creative talent. Try to remove work and

organizational barriers that might impede your

creativity.