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

1. Distinctiveness: shows different behaviors in different situations.

2. Consensus: response is the same as others to same situation.

3. Consistency: responds in the same way over time.

Attribution Theory


Attribution Theory

Errors in attributions Fundamental Attribution Error

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

Perception of the Decision

Maker

Perception of the Decision

Maker

Outcomes

ProblemA perceived discrepancy between the current state of affairs and a desired state

DecisionsChoices made from among alternatives developed from data perceived as relevant

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

Assumptions ofrationality in

classical decisionmaking model

Problem isclear and

unambiguous

Single, well-defined goal

is to be achievedAll alternatives

and consequences are

known

Preferencesare clear

Preferencesare constantand stable

No time or costconstraints exist

Final choicewill maximize

payoff


Classical Model of Decision Making

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”

ProcessingProcessingInformationInformation

Evaluation Evaluation TimingTiming

Rational: People can process all information

Rational: Choices evaluated simultaneously

GoalsGoals Rational: Clear, compatible, agreed upon

OB: Ambiguous, conflicting, lack agreement

OB: People process only limited information

OB: Choices evaluated sequentially

Making Choices: Rational vs OB

Source: Shane & Von Glinow, 2005

Info QualityInfo Quality

Decision Decision ObjectiveObjective

Rational: People rely on factual information

Rational: Maximization -- the optimal choice

StandardsStandards Rational: Evaluate against absolute standards

OB: Evaluate against implicit favorite

OB: Rely on perceptually distorted information

OB: Satisficing -- a “good enough” choice

Making Choices: Rational vs OB


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 problems are Identified Visibility over importance of problem

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 Bias

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 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 Error Creating meaning out of random events

Hindsight 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 Potential Involvement OutcomesOutcomes

ContingenciesContingenciesof Involvementof Involvement

Employee Employee InvolvementInvolvement

Better problem identification

More/better solutions generated

Best choice more likely

Higher decision commitment


Contingencies of Involvement

Knowledge Knowledge SourceSource

Decision Decision CommitmentCommitment

• Employees have relevant knowledge beyond leader

• Employees would lack commitment unless involved

Risk ofRisk ofConflictConflict

• Norms support firm’s goals• Employee agreement likely

Decision Decision StructureStructure

• Problem is new & complex(i.e non-programmed decision)

More employee involvement is better when:More employee involvement is better when:


Characteristics of Creative People

Above average intelligence

Persistence

Relevant knowledge and experience

Inventive thinking

Source: McShane & VonGinow, 2006

Creativity in Decision Making

Preparation Incubation Insight Verification

• Education• Study• Knowledge• Intelligence• Persistence

• Reflection• Thinking• Consideration• Rest

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

• Test• Check

The Creative Process

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


Creative Activities

• Review Review abandoned abandoned projectsprojects

•• Explore issue Explore issue with other with other peoplepeople

RedefineRedefinethe Problemthe Problem

•• StorytellingStorytelling

•• Artistic Artistic activitiesactivities

•• Morphological Morphological analysisanalysis

AssociativeAssociativePlayPlay

•• Diverse teamsDiverse teams

•• Information Information sessionssessions

• Internal Internal tradeshowstradeshows

Cross-Cross-PollinationPollination


1. Looking for the “right” answer.

2. Always trying to be logical.

3. Strictly following the rules.

4. Insisting on being practical.

5. Avoiding ambiguity.

6. Fearing and avoiding failure.

7. Forgetting how to play.

8. Becoming too specialized.

9. Not wanting to look foolish.

10. Saying “I’m not creative.”

Source: Krietner, 2004

Ten Mental “Locks” on Creativity

Organizational Factors Impeding Creativity

1. Expected evaluation

2. Surveillance

3. External motivators

4. Competition

5. Constrained choice


perception & idm

Documents

classical decision

individuals perception

behavioral model of

decision criteria

relevant perception

attribution theory source

reality perception source

attribution theory errors