Perception & Idm

Perception and Decision Making

Perception  Perception 

A process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment  



Perceptual processes differ across individuals Perception is basis of meaning

Behaviors are based on perceptions, not on reality

Perception

Source: Robbins, 2001

Shortcuts in Perception  Selective

perception  Categorical thinking  Mental models

Social Identity Theory  Personal

identity  Social identity  Social perceptions    

Categorization Homogenization Differentiation Stereotyping

Errors in Perception  Primacy

effect  Recency effect  Projection  Halo effect  Contrast effect

Attribution Theory 

How do people determine the source or cause of others’ behaviors?  







Internal attribution External attribution

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

Source: Robbins, 2001

Attribution Theory  Errors 

Fundamental Attribution Error 



in attributions

The tendency to 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 while putting the blame for failures on external factors

The Link Between Perceptions and Individual Decision Making Problem A perceived discrepancy between the current state of affairs and a desired state

Decisions

Perception of the Decision Maker

Choices made from among alternatives developed from data perceived as relevant

Outcomes

The Classical Model of Decision Making 1. Identify and define the Problem 2. Identify decision criteria 3. Allocate weights to criteria 4. Develop alternatives 5. Analyze alternatives 6. Select the “best” alternative 7. Implement the alternative 8. Evaluate decision effectiveness

Classical Model of Decision Making All alternatives and consequences are known

Preferences are clear

Single, welldefined goal is to be achieved Problem is clear and unambiguous

Assumptions of rationality in classical decision making model

Preferences are constant and stable Source: Robbins, 1999

Final choice will maximize payoff

No time or cost constraints exist

Behavioral Model of Decision Making  Classical

model is “prescriptive”: It tells managers what they should do  Behavioral model is “descriptive”: It tells us how managers actually make decisions  

Managers attempt to be rational, but assumptions of complete rationality are relaxed (i.e., we know managers don’t have complete and accurate information) – “bounded rationality”

Making Choices: Rational vs OB Goals

Rational: Clear, compatible, agreed upon OB: Ambiguous, conflicting, lack agreement

Processing Information

Rational: People can process all information OB: People process only limited information

Evaluation Timing

Rational: Choices evaluated simultaneously OB: Choices evaluated sequentially

Source: Shane & Von Glinow, 2005

Making Choices: Rational vs OB Standards

Rational: Evaluate against absolute standards OB: Evaluate against implicit favorite

Info Quality

Rational: People rely on factual information OB: Rely on perceptually distorted information

Decision Objective

Rational: Maximization -- the optimal choice OB: Satisficing -- a “good enough” choice

Source: Shane & Von Glinow, 2005

Behavioral Model of Decision Making  How       

do managers actually make decisions?

They satisfice rather than optimize They use their intuition They act politically (e.g., coalitions) They take risks They escalate their commitment They have their own decision making styles They use heuristics

How Are Decisions Actually Made in Organizations?  How/Why 

Visibility over importance of problem  



problems are Identified

Attention-catching, high profile problems Desire to “solve problems”

Self-interest (if problem concerns decision maker)

 Alternative 



Development

Satisficing: seeking the first alternative that solves problem Engaging in incremental rather than unique problem solving through successive limited comparison of alternatives to the current alternative in effect

Common Biases and Errors  Overconfidence 

Believing too much in our own ability to make good decisions

 Anchoring 

Bias

Using early, first received information as the basis for making subsequent judgments

 Confirmation 

Bias

Bias

Using only the facts that support our decision

Common Biases and Errors  Availability 

Bias

Using information that is most readily at hand  Recent  Vivid

 Representative  

Bias

“Mixing apples with oranges” Assessing the likelihood of an occurrence by trying to match it with a preexisting category using only the facts that support our decision

Common Biases and Errors  Escalation 

of Commitment

In spite of new negative information, commitment actually increases

 Randomness 

Creating meaning out of random events

 Hindsight 

Error

Bias

Looking back, once the outcome has occurred, and believing that you accurately predicted the outcome of an event

Intuition  Intuitive 

Decision Making

An unconscious process created out of distilled experience

 Conditions

Favoring Intuitive Decision

Making        

A high level of uncertainty exists There is little precedent to draw on Variables are less scientifically predictable “Facts” are limited Facts don’t clearly point the way Analytical data are of little use Several plausible alternative solutions exist Time is limited and pressing for the right decision

Ways to Improve Decision Making 1.

Analyze the situation and adjust your decision making style to fit the situation.

2.

Be aware of biases and try to limit their impact.

3.

Combine rational analysis with intuition to increase decision-making effectiveness.

4.

Don’t assume that your specific decision style is appropriate to every situation.

5.

Enhance personal creativity by looking for novel solutions or seeing problems in new ways, and using analogies.

Toward Reducing Bias and Errors  Focus 

on goals.

Clear goals make decision making easier and help to eliminate options inconsistent with your interests.

 Look

for information that disconfirms beliefs. 

Overtly considering ways we could be wrong challenges our tendencies to think we’re smarter than we actually are.

Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164–68.

Toward Reducing Bias and Errors  Don’t

try to create meaning out of random events. 

Don’t attempt to create meaning out of coincidence.

 Increase 

your options.

The number and diversity of alternatives generated increase the chance of finding an outstanding one.

Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164–68.

Common Biases in Decision Making  Heuristics 





are “rules of thumb”

The availability heuristic: use information that is easily recalled The representativeness heuristic: categorize and stereotype based on limited information (e.g., you can tell a book by its cover) The anchoring and adjustment heuristic: place too much weight on initial information

Source: Prentice-Hall 2003

Common Biases in Decision Making  Escalation 

of Commitment

The tendency of decision makers to invest additional time, money, or effort into what are essentially bad decisions or unproductive courses of action that are already draining organizational resources.

Common Biases in Decision Making 

Escalation of commitment occurs because of…     

Ego / Self-justification Sunk costs fallacy Gambler’s fallacy Stopping costs Perceptual filters



To help resolve and prevent escalation of commitment…   





Don’t look at other people to set what you should do Continually remind yourself of the costs Set limits on your involvement and commitment Focus on the quality of the decision, not the quantity of the outcome Stay vigilant

Employee Involvement Model Potential Involvement Outcomes  Better

problem identification

Employee Involvement

 More/better

solutions generated Contingencies of Involvement

 Best

choice more

likely  Higher

decision commitment

Source: Shane & Von Glinow, 2005

Contingencies of Involvement More employee involvement is better when: Decision Structure Knowledge Source Decision Commitment Risk of Conflict

Source: Shane & Von Glinow, 2005

• Problem is new & complex (i.e non-programmed decision) • Employees have relevant knowledge beyond leader • Employees would lack commitment unless involved • Norms support firm’s goals • Employee agreement likely

Characteristics of Creative People 

Above average intelligence



Persistence



Relevant knowledge and experience



Inventive thinking

Source: McShane & VonGinow, 2006

Creativity in Decision Making The Creative Process Preparation • • • • •

Education Study Knowledge Intelligence Persistence

Incubation • • • •

Reflection Thinking Consideration Rest

Insight

Verification

• Breakthrough • “ah-hah!” • “light turned on”

• Test • Check

Creative Work Environments 

Learning orientation

 Encourage

experimentation  Tolerate mistakes 

Intrinsically motivating work

 Task

significance, autonomy, feedback

Open communication and sufficient resources  Team trust and project commitment 

Source: McShane & VonGinow, 2006

Creative Activities Redefine the Problem • Review abandoned projects • Explore issue with other people

Source: McShane & VonGinow, 2006

Associative Play

CrossPollination

• Storytelling

• Diverse teams

• Artistic activities

• Information sessions

• Morphological analysis

• Internal tradeshows

Ten Mental “Locks” on Creativity 1.

3.

5.

7.

9.

Looking for the “right” answer.

1.

Fearing and avoiding failure.

3.

Forgetting how to play.

5.

Becoming too specialized.

7.

Not wanting to look foolish.

9.

Saying “I’m not creative.”

Always trying to be logical. Strictly following the rules. Insisting on being practical. Avoiding ambiguity.

Source: Krietner, 2004

Organizational Factors Impeding Creativity 1. 2. 3. 4. 5.

Expected evaluation Surveillance External motivators Competition Constrained choice

Source: Robbins, 2003