CHAPTER 4 PERCEPTION AND INDIVIDUAL DECISION MAKING

In this chapter, the highlights are:

 Assumptions of the Rational Model

 The Basic Sub processes in Perception Attention Factor in selectivity
 Perceptual Organization
 Attribution theory
 Types of Attributions
 Attribution Errors
 The Link between Perception and Individual Decision Making
 The Rational Model in Decision making
 Bounded Rationality
 Common Biases and Errors in Decision Making

Individuals base their behavior not on the way their external environment actually is,
but rather on the way they see it or believe it to be. An understanding of the way people make
decisions can help us explain and predict behavior, but few important decisions are simple
clearly enough for the rational model’s assumptions to apply. We find individuals lookingfor
solutions that satisfy rather than optimize, injecting biases and prejudices into the
decisionprocess, and relying on intuition. Managers should encourage creativity in employees
andteams to create a route to innovative decision making.
Some points of view that we need to focus on after read all the slide of the chapter:
1. The factors that influence perception
- The process used for organizing and interpreting the impression of senses so that the
environment is given importance is known as perception
 What one perceives may be different in reality
 This can be described as an employee feels that the firm he/she is working with
has favorable working conditions: good job assignments, good payscale,
excellent benefits, understanding and responsible management or something
else; but in reality, it is very difficult to find such agreements.

Perception is given more importance as people trust on their perception rather
than what reality is.
- The factors that influence perception are the perceiver, the target, and the situation.
 Perceiver factors include attitudes, motives, interests, experiences
andexpectations.
 Target factors include novelty, motion, sound, size, background,proximity, and
similarity.
 Situation factors include time, work setting, and social settings
2. Attribution theory
- Attribution theory tries to explain the ways we judge people differently, depending on
the meaning we attribute to a behavior.
- Attribution theory suggests that when we observe an individual’s behavior, we attempt
to determine whether it was internally or externally caused.
- That determination depends largely on three factors: distinctiveness, consensus, and
consistency. It attempts to understand the people’s behaviour to interpret the behavior
of others.
3. The link between the perception and decision making
- Perception is the process of interpreting the behavior of the individual
- Decision making is the process of choosing the best among the alternatives
- The decision and choices of a person depends on his/her perception regarding the
alternatives
- Perception is the base for decision making
4. Individual differences and organizational constraints influence decision making
- Individual differences influence decision making, because every person is different
from another person: personality, gender, mental ability, cultural differences and many
more
- Personality includes thinking of a person, self-respect, ego, dedication to workand
many more
 Decision making is also influenced by an individual’s gender: before making
any decisions, women think a lot more than men, women carefully analyze the
decision once made
 Decision making is very quick and accurate, if a person is intelligent and has
ahigh mental ability
- Cultural differences also affect the decision making, especially in the selection
ofproblems and depth of analysis of a problem
- Different cultures have different beliefs and those beliefs play a role in decision
making
- Organization constraints influence decision making by the system-imposed time
constraints, performance evaluation, reward system, formal regulations, and historical
precedents.
- Reward systems also affect decision making.
 In reward systems, manager makes a decision has a great personal payoff.
 In historical precedent, past decisions affect current decision making.
 Formal regulations include rules and regulations which constraints thatmake a
freedom decisions and choices from limited alternative
5. The model of rational decision making and bounded rationality
- While the model of rational decision making describes how decisions should be made,
bounded rationality describes how decisions are made.
- When faced with a complex problem, most people reduce the problem to a level at
which is can be understood. Because humans have limited decision making capacity,
our decision making is often biased.
6. Intuition decision making
- Intuitive decision-making is a process that occurs unconsciously. It is the
accumulation of distilled experience that results in quick decisons. There is a growing
recognition that intuitive decision-making can be a legitimate alternative in certain
circumstances.
- Decision makers often make errors. Some of the most common errors include
overconfidence bias, anchoring bias, confirmation bias, availability bias, escalation of
commitment, randomness error, winner’s curse, and hindsight bias.
7. Ethics in decision making
- Three ethical criteria can be used when making decisions: utilitarianism, the rights
view, and the justice view.
- The goal of utilitarianism is to provide the greatest good for the greatest number of
people. This view tends to dominate business decision making, as it is consistent with
goals of efficiency, productivity, and high profits.
- The rights focus emphasizes decision-making that respects and protects the rights of
individuals, including the rights to privacy, free speech, and due process.
- In contrast, the justice focus relies on fairly and impartially applying rules in an
attempt to equitably distribute benefits and costs. Each of these decision criteria has
advantages and costs that must be carefully considered.
8. The creativity in decision making
- Creativity, or the ability to produce novel and useful ideas,
- Consists of expertise, creative-thinking skills, and intrinsic task motivation.
- The potentiality for creativity is enhanced when individuals work in environments that
provide flow of ideas, fair and constructive judgment of ideas, rewards for creative
work, sufficient financial, material, and information resources, freedom, to decide
what work is to be done and how to do it, a supervisor who communicates effectively,
shows confidence in others, and supports the work group, and work group members
who support and trust each other