What is perception?

• Perception: process by which individuals organize and interpret their sensory impressions in order to give meaning to their environment.

Person perception: making judgements about others

• Attribution theory: attempt to determine whether an individual’s behavior is internally or externally caused.

  

• Fundamental attribution theory: tendency to underestimate the influence of external factors and overestimate the influence of internal factors when making judgements about the behavior of others.

• Self-serving bias: tendency for individuals to attribute their own success to internal factors and put the blame for failures on external factors.

• Frequently used shortcuts in judging others

  • Selective perception: tendency to selectively interpret what one sees on the basis of one's interests, background, experience and attitudes.

  • Halo effect: tendency to draw a general impression about an individual on the basis of a single characteristic.

  • Contrast effects: evaluation of a person’s characteristics that is affected by comparisons 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.

• Specific applications of shortcuts in organizations

  • Employment interview → perceptual judgements are made that are often inaccurate.

  • Performance expectations → if a manager expects great things from her workers, they are likely to meet their expectations.

    • Self-fulfilling prophecy: situation in which a person inaccurately perceives a second person and the resulting expectations cause the second person to behave in ways consistent with the original perception.

  • Performance evaluation can be problematic because many shortcuts and subjectiveness is used.

The link between perception and individual decision-making

• Decisions: choices from among to or more alternatives.

• Problem: discrepancy between the current state of affairs and some desired state.

Decision making in organizations

• Rational decision making

  • Rational: characterized by making consistent, value maximizing choices within specified constraints.

  • Rational decision making model: decision making model that describes how individuals should behave in order to maximize some outcome.

    • Define the problem

    • Identify the decision criteria

    • Allocate weights to the criteria

    • Develop the alternatives

    • Evaluate the alternatives

    • Select the best alternative

• Bounded rationality: process of making decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity.

• Intuitive decision making: unconscious process created out of distilled experience.

• Common biases and errors in decision making

  • Overconfidence bias: overconfident about our abilities and the abilities of others, usually unaware of it.

  • Anchoring bias: tendency to fixate on initial information, from which one then fails to adequately adjust for subsequent information.

  • Confirmation bias: tendency to seek out information that reaffirms past choices and to discount information that contradicts past judgements.

  • Availability bias: tendency for people to base their judgements on information that is readily available to them.

  • Escalation of commitment: increased commitment to a previous decision in spite of negative information.

  • Randomness error: tendency of individuals to believe that they can predict the outcome of random events.

  • Risk aversion: tendency to prefer a sure gain of a moderate amount over a riskier outcome might have a higher expected payoff.

  • Hindsight bias: tendency to believe falsely, after an outcome of an event is actually known, that one would have accurately predicted the outcome.

Influences on decision making: individual differences and organizational constraints

• Individual differences

  • Personality → personality influences our decisions.

  • Gender → women tend to spend more time than men analyzing decisions.

  • Mental ability → people with higher levels of mental ability are able to process information more quickly and solve problems more accurately.

  • Cultural differences → cultural background can definitely influence the way a decision is being made like in the selection of problems, depth of the analysis, etc.

• Organization constraints

  • Performance evaluation → managers are strongly influenced in their decision making by the criteria on which they are evaluated.

  • Reward systems influences decision makers by suggesting to them what choices are preferable in terms of personal payoff.

  • Formal regulations → rules that are set and need to be followed are definitely a constraint in the decisions that can or can not be taken.

  • System-imposed time constraints → decisions are often imposed with deadlines, they need to be made before a certain date.

  • Historical precedents → choices made today are therefore a result of choices made over the years.

What about ethics in decision making?

• 3 ethical decision criteria

  • Utilitarian criterion: system in which decisions are made to provide the greatest good for the greatest number.

  • Rights criterion: individuals to make decisions consistent with fundamental liberties and privileges, respecting and protecting basic rights of every individual.

    • Whistle-blowers: individuals who report unethical practices by their employer to outsiders.

  • Justice criterion: impose and enforce rules fairly and impartially so that there is an equitable distribution of benefits and costs.

    • Behavioral ethics: analyzing how people actually behave when confronted with ethical dilemmas.

Creativity, decision making and innovation in organizations

• Creativity: ability to produce novel and useful ideas.

• Three-stage model of creativity: proposition that involves three stages: causes (creative potential and creative environment), creative behavior and creative outcomes (innovation).

  • Creative behavior

    • Problem formulation: state of creative behavior which involved identifying problem or opportunity that requires a solution that is as yet unknown.

    • Information gathering: state when possible solutions to a problem incubate in individuals mind.

    • Idea generation: process of creative behavior that involves developing possible solutions to a problem from relevant information and knowledge.

    • Idea evaluation: process of creative behavior involving the evaluation of potential solutions to problems to identify the best one.

  • Causes of creative behavior

    • Creative potential: intelligence is related to creative behavior, expertise is the foundation of all creative work.

    • Creative environment: potential is not enough, you need to be in an environment where creative potential can be realized.

    • Creative outcomes (innovation): ideas or solutions judged to be novel and useful by relevant stakeholders.