Organizational Behavior

Eighteenth Edition

Chapter 6
Perception and Individual
Decision Making
 Learning Objectives
6.1 Explain the factors that influence perception.
6.2 Describe attribution theory.
6.3 Explain the link between perception and decision making.
6.4 Contrast the rational model of decision making with bounded
rationality and intuition.
6.5 Explain how individual differences and organizational
constraints affect decision making.
6.6 Contrast the three ethical decision criteria.
6.7 Describe the three-stage model of creativity.
 Factors That Influence Perception
• Perception is a process by which individuals organize and
interpret their sensory impressions 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.
 Explain the Factors That Influence
Perception (2 of 2)
Exhibit 6-1 Factors That Influence Perception
5-5
 Which of the black circles is bigger?

This image is an example of relative size perception. The black circle on the right appears bigger than the black circle on
the left because of the distance to the rings that surround them. A distant surrounding ring makes the inner circle look
smaller relative to an inner circle with a closer surrounding ring

6-6
What do you see?

5-7
Attribution Theory: Judging Others
• Attribution theory suggests that when we observe an
individual’s behavior, we attempt to determine whether it was
internally or externally caused.
 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.
• Determination depends on three factors:
– Distinctiveness
• Shows different behaviors in different situations
– Consensus
• Response is the same as others to same situation
– Consistency
• Responds in the same way over time
 Attribution Theory
Exhibit 6-2 Attribution Theory
Mary Martin, 30, received her baccalaureate degree in computer science from a reputable
state school in the Midwest. She also graduated with above-average grades. Mary is
currently working in the computer support/ analysis department as a programmer for a
nationally based firm. During the past year, Mary has missed 10 days of work. She seems
unmotivated and rarely has her assignments completed on time. Mary is usually given the
harder programs to work on.
Past records indicate Mary, on the average, completes programs classified as “routine” in
about 45 hours. Her co-workers, on the other hand, complete “routine” programs in an
average time of 32 hours. Further, Mary finishes programs considered “major problems,”
on the average, in about 115 hours. Her coworkers, however, finish these same “major
problem” assignments, on the average, in about 100 hours. When Mary has worked in
programming teams, her peer performance reviews are generally average to negative. Her
male peers have noted she is not creative in attacking problems and she is difficult to work
with.
The computer department recently sent a questionnaire to all users of its services to
evaluate the usefulness and accuracy of data received. The results indicate many
departments are not using computer output because they cannot understand the reports.
It was also determined that the users of output generated from Mary’s programs found
the output chaotic and not useful for managerial decision making.
 Attribution Theory
• Fundamental attribution error
– The tendency to underestimate the influence of external
factors and overestimate the influence of internal factors
when making judgments about the behavior of others
– We blame people first, not the situation

• Self-serving bias
– The tendency for individuals to attribute their own successes
to internal factors while putting the blame for failures on
external factors
– It is “our” success but “their” failure
 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.
• People selectively interpret what they see on the basis of
their interests, background, experience, and attitudes
 Attribution Theory
• Halo effect
– The halo effect occurs when we draw a general
impression based on 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.
 Attribution Theory
• Stereotyping
– Judging someone based on one’s perception of
the group to which that person belongs – a
prevalent and often useful, if not always accurate,
generalization
• We have to monitor ourselves to make sure we’re not
unfairly applying a stereotype in our evaluations and
decisions.
• Profiling
– A form of stereotyping in which members of a
group are singled out for intense scrutiny based on
a single, often racial, trait.
 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.
 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/ Galatea
effect, characterizes the fact that people’s expectations
determine their behavior.
– Expectations become reality.
– Pygmalion was a sculptor in Greek mythology, who fell in
love with a female statue he had carved out of ivory.
 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.
Perceptions and Individual Decision Making
• Problem
– A perceived discrepancy between the
current state of affairs and a desired
state
• Decisions
– Choices made from among alternatives
developed from data
• Perception Linkage:
– All elements of problem identification
and the decision-making process are
influenced by perception.
• Problems must be recognized
• Data must be selected and evaluated
6-19
Decision-Making Models in Organizations

• Rational Decision Making

– The “perfect world” model: assumes complete
information, all options known, and maximum payoff
• Bounded Reality
– The “real world” model: seeks satisfactory and
sufficient solutions from limited data and alternatives
• Intuition
– A non-conscious process created from distilled
experience that results in quick decisions
• Relies on general associations
• Affectively charged – engaging the emotions

6-20
 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.
• Believing too much in our own ability to make good decisions –
especially when outside of own expertise
– Anchoring Bias: fixating on initial information as a starting
point and failing to adequately adjust for subsequent
information.
• Using early, first received information as the basis for making
subsequent judgments
 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.
– Selecting and using only facts that support our decision

• Availability Bias: tendency for people to base judgments on

information that is readily available.
• Recent
• Vivid
 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.
 Randomness Error
• Master Blaster believes
that putting on his left
pad before the right one
brings him luck. He also
got his lucky bat
repaired before the
2011 World Cup as that
was the one tournament
he has always wanted to
win.

6-24
 Randomness Error
• Yuvraj Singh wears a jersey
with the number 12 on it
since his birthday is on the
12th of December, which
also happens to be the
12th month of the year. He
considers it to be his lucky
number. He also wears a
black thread on his wrist.
6-25
 Randomness Error
• Australia captain Michael Clarke listens to loud music before
going out to bat.
• Born on July 7, Dhoni considers it as his lucky number. No need
to guess that July is the seventh month of the year. He sports
number seven on his jersey.
• Sri Lanka batsman Mahela Jayawardena is known to kiss his bat
while batting.
• Indian seamer Zaheer Khan considers a yellow handkerchief as
his lucky charm. He carries it in every crucial match.
• India's former opening batsman Virender Sehwag started
wearing a number-less jersey as there were differences over
what number suited him. He decided not to sport any number.
Other than that, he is known to carry a red handkerchief.
 Randomness Error
• Casillas - touching the cross-bar whenever his
team scored.
• Terry - listening to the the same Usher songs
when going for a match.
• Cruyff - spitting gum on the opponent’s half.
• Ronaldo - always the last to come out when
playing for Real and the first when playing for
Portugal. Not to forget his multiple jumps while
entering the pitch!

6-27
 Randomness Error
• Rafael Nadal (Master
of quirk)
– Arranging his two bottles
with their labels always
facing the court-side.
– Occasionally adjusting his
shorts, tucking his hair,
after nearly every point.
– Never walking on court-
lines.

6-28
 Randomness Error
• Roger Federer
(Famous obsession
with 8)
– Carries 8 racquets,
wants to serve 8
aces before each
match, carries 8
towels and 8
bottles (usually).

6-29
 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.
 Individual Differences, Organizational
Constraints, and Decision Making
• Individual Differences
– Personality
• Conscientiousness
• High self-esteem
– Gender
• Women analyze decisions more than men –
rumination
• Differences develop early
– Mental Ability
– Cultural Differences
 Individual Differences, Organizational
Constraints, and Decision Making
• Organizational Constraints
– Performance Evaluation Systems
– Reward Systems
– Formal Regulations
– System-Imposed Time Constraints
– Historical Precedents
 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.
 Contrast the Three Ethical Decision Criteria

• Behavioral ethics: an area of study that analyzes how people

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.
 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.
 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.
 Describe the Three-Stage Model of Creativity
Exhibit 6-5 Three-Stage Model of Creativity in Organizations
 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.
 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.
 Implications for Managers

• Combine rational analysis with intuition. These are not

conflicting approaches to decision making. By using both,
you can 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.