Perception and individual decision making Formatted by Shahbaz

Perception and individual decision making Formatted by: Shahbaz Afzal Khan

Perception The ability to see, hear, or become aware of something through the senses. A process by with individuals organize and interpret their sensory impressions in order to give meaning to their environment.

Perception Example, all employees in a firm may view it as a great place to work—favorable working conditions, interesting job assignments, good pay, excellent benefits, understanding and responsible management—but, as most of us know, it’s very unusual to find such agreement

Factors that influence perception Example: if you expect police officers to be authoritative or young people to be lazy, you may perceive them as such, regardless of their actual traits. Factors in perceiver • Attitudes • Motives • Interests • Experience • expectations Factors in Situation • Time • Work setting • Social setting Perception Factors in the target • newness • movement • Sound • Size • Background • similarity

Person perception: making judgments about others • Attribution Theory: • It explains the ways in which we judge people differently • An attempt to determine whether an individual’s behavior is internally or externally caused. • Exp: If one of your employees is late for work, you might attribute that to his last night party and then oversleeping. This is an internal attribution. But if you attribute lateness to an automobile accident that tied up traffic, you are making an external attribution

Person perception: making judgments about others • Attribution Theory: • It tries to explain the ways in which we judge people • differently, – behavior caused internally or externally • Internally caused behavior: are the behaviors which are under the control of the individual • Externally caused behavior: which we imagine the situation forced the individual to do. – Three factors of behavior determination • Distinctiveness: different behavior in different situations. • Consensus: if everyone who faces a similar situation responds in the same way (all late because of same route) • Consistency: does the person respond the same way over time

Attribution Theory

Person perception: making judgments about others • When we make judgments about the behavior of other people, we tend to underestimate the influence of external factors and overestimate the influence of internal or personal factors. This fundamental attribution error can explain why a sales manager is prone(victim) to attribute the poor performance of her sales agents to laziness rather than to the innovative product line introduced by a competitor

Person perception: making judgments about others • Fundamental Attribution Error: underestimate the influence of external factors and overestimate the influence of internal factors. • Self-serving bias: • The tendency for individuals to attribute their own successes to internal factors and put the blame for failures on external factors. • Page 171

Person perception: making judgments about others Common shortcuts in judging others • Selective Perception: selectively interpret on the basis of one’s interests, background, experience, and attitudes. • Halo Effect: drawing a general impression about a person based on a single characteristic

Person perception: making judgments about others • Contrast Effect: evaluation effected by comparison with other people recently encountered. • Stereotyping: judging someone on the basis of the perception of the group he belongs.

Person perception: making judgments about others. specific applications of shortcuts in organizations • Employment interview (the first impression is the last impression) • Performance expectations self-fulfilling prophecy and Pygmalion effect how an individual’s behavior is determined by others expectations.

Person perception: making judgments about others • Performance evaluations – Objective evaluation • On attaining the objective • evaluator's views and biases do not affect the evaluation – Subjective evaluation • evaluator makes judgment on the bases of how duties are performed. • it allows managers to place emphasis on what they think is most important

The link between perception and individual decision making • Decision making is a reaction of problem • Problem: a discrepancy between the current state of affairs and some desired state • Decision: choices made from among two or more alternatives • Perception linkage: – all elements of decision making are influenced by perception – Problems must be recognized and data must be evaluated.

Decision making in organizations Approaches for decision making • Rational decision making: (the perfect world model) a model that describes how individuals should behave in order to maximize outcome. – Rational : makes consistent, value-maximizing choices within specified constraints. – Includes 6 steps • • • Define the problem Identify the decision criteria. Allocate weight to the criteria. Develop the alternatives. Evaluate the alternatives. Select the best alternative.

Decision making in organizations • Bounded Rationality: (the real world model) satisfactory and sufficient solution from limited data and alternatives. • Intuition: (unconscious process) – links between some pieces of information, its affectively charged (engage the emotions)

Decision making in organizations common biases and errors in decision making: • Overconfidence Bias: believing too much in own ability, specially when outside of own expertise • Anchoring Bias: using early, first received information as a basis of making subsequent judgments.

Decision making in organizations common biases and errors in decision making: • Confirmation Bias: selecting and using the facts that support our decision. • Availability Bias: to base judgment on information that is readily available.

• Escalation of Commitment: staying with a decision even when it’s wrong. • Randomness Error: (superstitions) the tendency to believe that one can predict the outcome of random events. • Risk Aversion: to prefer a sure gain over a riskier outcome, even if the riskier outcome have a higher expected payoff.

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

Influences on decision making • Individual Differences – Personality – Gender – Mental ability • Organizational Constraints – Performance evaluation – Reward system – Formal regulations – System-imposed time constraints – Historical precedents

Ethics in decision making three ethical decision criteria. • Utilitarianism: a system in which decisions are made to provide the greatest good for the greatest number. • Whistle-Blowers: – Individuals who report unethical practices by their employees to outside – So to avoid them we should take care of employees rights.