Robbins & Judge

Organizational Behavior
14th Edition

Decision making

Kelli J. Schutte
William Jewell College

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 6-1

 What is Perception?

 A process by which individuals organize and interpret their

sensory impressions to give meaning to their environment

 People’s behaviour is based on their perception of what

reality is, not on reality - which is why perception is
important in OB

 The world as it is perceived is the world that is

behaviorally important.

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 Factors that Influence Perception

See E X H I B I T 6-1

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 Attribution Theory
 Our perception and judgement of others is significantly
influenced by our assumptions of the other person’s
internal state
– When individuals observe behaviour, they attempt to
determine whether the causes are internal or external
• Internal causes are under that person’s control
• External causes are not under the person’s control
 Causation judged through
– 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?
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 Elements of Attribution Theory

See E X H I B I T 6-2

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 Errors and Biases in Attribution
 Fundamental Attribution Error
– The tendency to underestimate the influence of external
factors and overestimate the influence of internal factors
when making judgements about the behaviour of others
– We blame people first, not the situation

 Self-Serving Bias
– The tendency for individuals to attribute their own success to
internal factors while putting the blame for failure on
external factors
– It is “our” success but “their” failure
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 6-6
 Frequently Used Shortcuts in Judging Others

 Selective Perception
– People selectively interpret what they see on
the basis of their interests, background,
experiences and attitudes
– This supports their own biases

 Halo Effect
– Drawing a general impression about an
individual on the basis of a single
characteristic

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 6-7

Frequently Used Shortcuts in Judging Others
 Contrast Effect
Evaluation of a person’s characteristics that is affected by comparison
with other people recently encountered who rank higher or lower on the
same characteristics

 Stereotyping
Judging someone on the basis of one’s perception of the group to which
that person belongs

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 Shortcut Applications in Organizations
 Employment Interview
– Perceptual biases affect the accuracy of interviewers’
judgements of applicants
– These perceptions are formed very quickly (some
researchers say 1/10 of a second)
 Performance Expectations
– Self-fulfilling prophecy (Pygmalion effect): The lower or
higher performance of employees shows leader expectations
about employee capabilities
 Performance Evaluation
– Appraisals are often the subjective perceptions of appraisers
of another employee’s job performance
– Strong impact on employees
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 Perceptions and Individual Decision Making

 Problem
– A perceived discrepancy between the
current state of affairs and some desired
state

 Decision
– A choice made amongst alternatives

 Link
– Perception influences this entire process
from problem recognition to data selection
to alternative chosen.

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 6-10

 Decision-Making Models in Organizations

 Rational Decision Making

– The “perfect world” model: assumes complete information,
all options identified, and maximum utility
– 6-step decision-making process
 Bounded Reality
– The “real world” model: sufficient solutions from limited
data and alternatives
 Intuition
– A non-conscious process created from distilled experience
that results in quick decisions

See E X H I B I T 6-3

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 Common Biases in Decision Making

 Hindsight Bias
The tendency to believe falsely, after an outcome of an
event is known, that one would have accurately predicted
that outcome

 Anchoring Bias
Using the information received initially as the basis for
making judgements and not adequately adjusting for
subsequent information

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 6-12

 Common Biases in Decision Making

 Confirmation Bias
Selecting and using only facts that support our past decisions

 Availability Bias
The tendency of people to base their judgements on
information that is easily available for them

 Overconfidence Bias
Believing too much in our own ability to make good decisions

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 6-13

 Common Decision-Making Errors

 Escalation of Commitment
– Increasing commitment to a decision in spite of evidence
showing that it is wrong especially if responsible for the
decision!

 Randomness Error
– Creating meaning in random events

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 6-14

 Individual Differences in Decision Making
 Personality
– Conscientiousness may affect escalation of commitment
• Achievement strivers are likely to increase commitment
• Dutiful people are less likely to have this bias
– Self-Esteem
• High self-esteem people are susceptible to self-serving bias

• Women analyze decisions more than

men

 Mental Ability
People with higher levels of mental ability are able to process information more quickly, solve problems more accurately and learn faster

 Gender

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 Organizational Constraints on Decision-
making
 Performance Evaluation
– Managerial evaluation criteria influence actions
 Reward Systems
– Managers will make the decision with the greatest personal
pay-off for them
 Formal Regulations
– Limit the alternative choices of decision makers
 Time Constraints
– Restrict ability to gather or evaluate information
 Historical Precedents
– Past decisions influence current decisions
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 Ethics in Decision Making

 Ethical Decision Criteria

– Utilitarianism
• Decisions made based on only the outcome
• Greatest good for greatest number
• This view dominates business decision making
– Rights
• Decisions consistent with fundamental liberties or privileges
• Respecting and protecting basic rights of individuals such as
whistleblowers
– Justice
Imposing and enforcing rules fairly to ensure equitable
distribution of benefits and costs

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. 6-17
 Ethical Decision-Making Criteria Assessed

 Utilitarianism
– Pro: Promotes productivity
– Con: Can ignore individual rights, especially minorities
 Rights
– Pro: Protects individuals from harm, preserves rights
– Con: Creates an overly legalistic work environment
 Justice
– Pro: Protects the interests of weaker members
– Con: Encourages a sense of entitlement

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. 6-18
 Creativity in Decision Making

 Creativity

– The ability to produce novel and useful ideas

– Better decisions are those that incorporate novel and useful

ideas

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 Global Implications

 Attribution
– There are cultural differences in how people attribute
observed behaviour to causes

 Ethics
– Global companies need global ethical standards for managers

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 Managerial Implications
– Behaviour follows perception so to influence behaviour at work
assess and manage how people perceive their work

– Make better decisions by recognizing and avoiding the biases and

errors in decision making

– Adjust your personal decision approach to ensure compatibility

with organizational factors

– Try to enhance your creativity by looking for novel solutions,

attempting to see problems in new ways and hiring creative talent

– Combine rational analysis with intuition and creativity for better

decisions

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 6-21